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ANNUAL REPORT

2019

2 Bank Indonesia 2019 Annual Report

Remark of The Governor InstitutionalManagement

Bank IndonesiaTask Implementation

AboutBank Indonesia

Bank IndonesiaStrategic Direction

3Bank Indonesia 2019 Annual Report

Bank Indonesia’s Annual Financial Statement

Bank Indonesia Supervisory Board ReferencesSummary of Policy and Flashback

of Bank Indonesia’s Journey

The main cover of 2019 Bank Indonesia Annual Report displays the building of Bank Indonesia Representative

Office of the Yogyakarta Special Region Province, which has functioned as a museum and cyber library of Bank

Indonesia since 2012 . The building is located on Jalan Panembahan Senopati, Yogyakarta.

It was initially the office of Agentschap van De Javasche Bank te Djokjakarta or De Javasche Bank (DJB)

Yogyakarta branch first opened on 1 April 1879. As a financial institution, DJB chose the Neo Renaissance

architectural style or Eclecticism style, epitomizing glory and representing conservatism.

The design of this building was carried out by a leading architectural firm in the Dutch East Indies era, namely

N.V. Architecten-Ingenieursbureau Hulswit en Fermont te Weltevreden en Ed. Cuypers te Amsterdam.

The building was completed on February 15, 1915.

After nationalization in 1951, the DJB Office was taken over by the Government of the Republic of Indonesia and

became Bank Indonesia starting July 1, 1953.




AboutBank Indonesia


TOWARD AN ADVANCED INDONESIA

SYNERGY, TRANSFORMATION,AND INNOVATION





2019 was a challenging year. The global economy in 2019

was becoming less favorable. At the same time, financial and

economic digitalization was rapid, with all the benefits and risks.

To strengthen resilience and boost economic growth toward

an advanced Indonesia, amid worsening global economy and

increasing digitalization, Bank Indonesia responded with three

keywords: synergy, transformation, and innovation.

The keywords illustrate stronger Synergy of policy mixed

between the Government, Bank Indonesia, and other authorities

to maintain economic stability and the financial system as well

as to encourage economic growth momentum. It also represents

Bank Indonesia which continuously carry out its overall internal

Transformation and constant Innovation to perform its tasks in

achieving its vision and mission in the midst of dynamic change.

TABLE OF CONTENT

6 Bank Indonesia Annual Report 2019

Bank Indonesia Representative Office Province Bali

Institutional Management 88

Strategic Planning and PerformanceManagement

91

Organizational Transformation SupportingBank Indonesia’s Strategy

96

Bank Indonesia’s HR Transformation,Answering Challenges of the 4.0 Era

98

Financial Management In Maintaining BankIndonesia’s Financial Accountability andSustainability

102

Strengthening Governance, Risk Management and Internal Audit

106

Information System Toward Digital Era 115Procurement Function Effectiveness andOptimal Logistics Management

118

Effective Communications and SocialResponsibility of Bank Indonesia

119

Strengthening Education and ResearchEcosystem which Supports EconomicLeadership

125


128

Financial Highlights 131Statement of Responsibilities of The Board ofGovernors In Relation to The FinancialStatement of Bank Indonesia as at and forThe Year Ended 31 December 2019

132

Auditor Report on The Financial Statements 133Statement of Financial Position 136Statement of Surplus Deficit 137Notes to Financial Statements 138

Remark of the Governor 8

About Bank Indonesia 12

About Bank Indonesia 14Status, Objective, and Tasks 14Vision and Mission 15Board of Governor 16The Course of Laws Shaping Bank Indonesia’sTask and Authority

25

Organizational Structure of Bank Indonesia 28Working Area Map 30


32

Vision and Mission of Bank Indonesia 35Bank Indonesia’s Strategic Program 37Destination Statement 2024 40


44

Current Economy and Prospect 47Policy Synergy of Bank Indonesia With The Government and Relevant Authorities

65

Bank Indonesia Policy Mix 66

Summary of Policy and Flashback of Bank Indonesia’s Journey

188

Summary of Bank Indonesia’s Policies 191Flashback of Bank Indonesia’s Journey 200

Bank IndonesiaSupervisory Board

210

Remarks from the Bank Indonesia SupervisoryBoard Chairman

213

Organization of Bank Indonesia SupervisoryBoard

215

Profile of Bank Indonesia Supervisory Board Members

216

7Bank Indonesia Annual Report 2019

List of Working Unit Heads 220Glossary 224List of Abbreviations 230

References

List of TablesTable 1. Global Economic Growth 49Table 2. GDP on Expenditure 54

Table 3. GDP Growth Projection from Expenditures

62

Table 4. GDP Growth Projection from Sectors 62Table 5. OTC Derivative Market Reforms 81Table 6. 2019 Bank Indonesia Supervisory Board

Reviews215

List of Graphics

Graphic 1. Global Business Confidence 49Graphic 2. Global Economic Growth and

Trade Volume49

Graphic 3. Indonesian Export Commodity Prices Index (IHKEI) and Purchasing Manager Index (PMI) of Global Manufacturing

50

Graphic 4. Global Oil Price Development 50

Graphic 5. Exports and Global Trade Volume 52Graphic 6. Real Non-Oil and Gas Imports 54Graphic 7. Nominal Oil and Gas Imports 54Graphic 8. Capital and Financial Transaction 56Graphic 9. Current Account 56Graphic 10. Exchange Rate Change 57Graphic 11. Exchange Rate Volatility 57Graphic 12. CPI Inflation 58Graphic 13. Spatial CPI Inflation 58Graphic 14. Policy Rate and PUAB O/N 68Graphic 15. Bank Credit Rate 68Graphic 16. Consumer Complaints in 2019 80

List of Pictures

Picture 1. Policy Mix Framework of Bank Indonesia 66Picture 2. The Vision of 2025 Indonesian Payment System 71Picture 3. Payment System Before and After QRIS 75Picture 4. Cash Exchange Services 78Picture 5. Novation Mechanism in CCP 81Picture 6. The Budget Planning and Performance

Management System Framework91

Picture 7. Integrated Business Process through Value Chain

92

Picture 8. Value Chain Bank Indonesia 93

Picture 9. Flat Work Flow 96Picture 10. Work Flow Implementation in Bank Indonesia 97Picture 11. HR Composition Based on Generation

(Excluding MPP Employees, Sick Leave, Unpaid Leave, and Company Sponsored Graduate Studies)

98

Picture 12. Innovation in Employee Recruitment (Management Trainee)

99

Picture 13. Framework of Special Development Program Management

101

Picture 14. Planning and Mapping of Study Program Needs

102

Picture 15. Bank Indonesia’s Governance Framework 107Picture 16. Integrated Risk Based Internal Audit

Framework112

Picture 17. Mechanism of Reporting Integration through Joint Portal

117

Picture 18. News Development in Print and Online Media related to Bank Indonesia in 2019

122

Museum Bank Indonesia Padang




AboutBank Indonesia


REMARK OF THE GOVERNOR

Perry Warjiyo Bank Indonesia Governor

“Synergy, transformation, and innovation are keys to strengthen resilience and growth of Indonesia’s economy toward an Advanced Indonesia in the future”




AboutBank Indonesia


raise Allah SWT, God Almighty, who always surrounded us with blessing that Bank Indonesia could continue performing its task and authority in accordance with regulations in 2019. Bank Indonesia’s Annual Report

(LTBI) for 2019 has the theme “Synergy, Transformation, and Innovation: Toward Developed Indonesia”, which accurately describes the strategy in facing worsening global economy to strengthen resilience and boost national economic growth.

In 2019 five changes in the global economy continued and affected the dynamic in global economy. The changes were interrelated and affected global economic development in the past few years, including 2019. The changes were related to the behavior of economic structure, as much as policy response. First, inward looking policy was widespreading in many countries. Second, global capital flow volatility increased and triggered high uncertainty in the global financial market. Third, the role of digital expanded in many economic activities in the real and financial sectors. Fourth, the behavior and relationship between economic agents changed in line with rapid digital revolution in economic activities. Fifth, policy response pursued no longer focused on one policy, but was integrated in a policy mix.

We are thankful, amid a slowing global economy and high uncertainty, Indonesia’s economy performed quite well in 2019. The national economy remained stable, growth momentum continued. Overall economic growth in 2019 was good at 5.02%, although it was lower than the 2018 achievement at 5.17%. Indonesia’s Balance of Payments (NPI) showed strong external resilience, as reflected in the performance of 2019 NPI with a surplus of US$4.68 billion, a reverse from 2018 with a deficit of US$7.13 billion. Foreign exchange reserves also increased from US$120.7 billion to US$129.2 billion or equal to the payment of 7.3 months of import and government foreign-debt, above the international adequacy standard of 3 months of import. Current account deficit was manageable at 2.72% of GDP in 2019 and supported the surplus of 2019 NPI. Improving NPI in 2019 supported the Rupiah exchange rate which strengthened 3.58% point-to-point (ptp) at the end of 2019. Moreover, the volatility of Rupiah exchange rate decreased from 8.5% in 2018 to 7.0% in 2019. The stability of Rupiah exchange rate was supported by a deeper and efficient forex market structure, driven by increasing Domestic Non Deliverable Forward (DNDF) transactions. Inflation in 2019 remained low and controlled in the target range of 3.5+1%, with Consumer Price Index (CPI) Inflation at 2.72%. This development indicated inflation target was achieved for five consecutive years. Meanwhile, the financial system was stable

despite bank intermediary function needed attention because of low credit demand as corporates were consolidating. In line with the manageable financial system stability, payment system was well-controlled. The growth of Electronic Money (e-money) grew rapidly, in line with high public preference to use digital money.

The increase in Indonesia’s economy in 2020 is delayed. At the end of 2019, Bank Indonesia estimated the Indonesian economic growth in 2020 would increase in the range of 5.1-5.5%. The forecast was made in consideration of optimism on global economic recovery and improving commodity price that would support the improvement of export and investment. After the widespread of COVID-19 in China, in February 2020 Bank Indonesia estimated the prospect of domestic economic growth to decline to 5.0-5.5% in 2020. However, along with the widespread of COVID-19 to many countries, including Indonesia, Bank Indonesia revised down Indonesia’s economic growth prospect to 4.2-4.6%, which is expected to increase to 5.2-5.6% in 2021. Meanwhile, current account deficit is estimated to range between 2.5%-3.0% of GDP with a large surplus in capital and financial account to support the stability of Rupiah exchange rate. In line with that, inflation is estimated to be manageable in a lower target range of 3.0+1%. The financial system stability will remain resilient with improving intermediary function. The growth of credit and third-party funds is estimated to range between 6-8%. Economic stability is expected to remain stable, making inflation manageable at the target of 3.0±1%.

Improving Indonesia’s economic performance was a result of strong policy mix synergy between the Government, Bank Indonesia, and OJK. Policy response taken was aimed at driving the economy to increase toward its optimal trajectory. Bank Indonesia pursued accommodative policy mix to be optimal in managing economic stability and boosting economic growth. Monetary policy rate was reduced by 100bps to 5.0%, liquidity was loosened through the expansion of monetary operations and the reduction of Rupiah reserve requirements by 100bps to 5.5%, and Rupiah stabilization was continued. Macroprudential policy was also loosened. The effectiveness of accommodative monetary and macroprudential policy was strengthened with the acceleration of money market deepening both in Rupiah and forex, including driving infrastructure financing. Payment system policy was aimed at supporting electronification and efficiency in economic transactions while developing innovation in payment system to support digital finance and economy by launching the 2025 Indonesia Payment System Blueprint.





Internally, in 2019 Bank Indonesia continued thorough its transformation in various policies, organization, and work process, as well as human resources and work culture. Bank Indonesia’s Strategic Direction consistently became a reference for policy strategy in 2019. According to the vision and mission, Bank Indonesia pursued the strategy to guard stability and boost economic growth through policy mix, in synergy with the Government and other strategic partners. Various policies were outlined in strategic programs to realize the vision “to give real contribution to the national economy and to become the best among emerging markets.” The organization and work process continued to be improved to support Bank Indonesia’s policy in responding to the dynamic in strategic environment, including the use of information technology in the organization, finance, and human resources. The acceleration of HR development program continued to be increased, supported with work culture implementation. Overall, they were aimed at building a stronger and more credible Bank Indonesia.

The mix of accommodative policy will be continued in 2020. On monetary, Bank Indonesia will monitor the domestic and global economic development in managing inflation and external stability, while driving the national economic growth momentum. On macroprudential, accommodative policy will be expanded to support bank intermediation in economic financing through the development of MSME and priority sectors, including export and tourism. On payment system policy, besides expanding electronification, the policy will be focused on strengthening digital finance and economy

integration, including strengthening digital-based public infrastructure, as well as boosting synergy and collaboration between fintech, e-commerce, and MSME in regions.

Sinergy, transformation, and innovation are keys to strengthen resilience and Indonesia’s economic growth toward developed Indonesia in the future. Bank Indonesia strengthen this spirit in coordinating with the Government, OJK, Parliament especially Commission XI, banking, businesses, academicians, media, and the public. Synergy of macroeconomic and financial system policy is strengthened for national economic resilience and growth momentum stimulus. Economic transformation is improved to ensure a higher growth, while strengthening economic structure through the development of domestic source of growth, accelerating investment climate improvement and infrastructure development, as well as boosting export by accelerating downstreaming and opening up new markets. Digital innovation is aimed at supporting the integration of national digital finance and economy through the implementation of the Indonesian Payment System Blueprint 2025.. We push coordination to develop start-up and integrate ecosystem from merchant, e-commerce, fintech, and open banking to create national unicorns as a source of growth while driving financial and economic inclusion.

Finally, I would like to extend appreciation, gratitude, and honor to all strategic partners of Bank Indonesia, Members of the Board of Governors, work unit leaders, and all employees of Bank Indonesia for the cooperation, support, hard work, and dedication to Bank Indonesia.

Bank Indonesia Governor,

Perry Warjiyo




AboutBank Indonesia


ABOuTBANK INDONESIA

Perry Warjiyo Bank Indonesia Governor

“We build the spirit of synergy, transformation, and innovation, for task implementation in Bank Indonesia, and in partnership with stakeholders”





Bank Indonesia Representative Office Cirebon




About Bank Indonesia


ABOuT BANK INDONESIA

Bank Indonesia is authorized to implement these tasks: (i) setting and implementing monetary policy; (ii) managing and maintaining a smooth payment system; (iii) managing and overseeing banks.

At the end of 2013, the banking supervision and regulation function was transferred to the OJK. In that regard, to support the stability of Indonesia’s financial system, Bank Indonesia has an additional mandate in macroprudential policy, regulation, and supervision. This mandate is stipulated in the Law on OJK and is effective starting 1 January 2014.

Bank Indonesia in coordination with OJK can examine individual banks directly in the category of systemically important bank or others according to Bank Indonesia’s authority.

Bank Indonesia is the Central Bank of the Republic of Indonesia and is a legal entity that is authorized to commit legal actions. As a public legal entity, Bank Indonesia is authorized to determine regulations in execution of the laws which bind the public, according to the task and authority. As a civil legal entity, Bank Indonesia can act for and as itself inside or outside of the court.

Bank Indonesia has a single objective: to achieve and maintain the stability of Rupiah. Rupiah stability is measured by two aspects: the stability of currency value against goods and services as reflected in inflation and the stability of Rupiah exchange rate against other currencies. To achieve the objective, Bank Indonesia implements monetary policy continuously, consistently, transparently, and in consideration of the Government’s general policy in the economic sector.

The existence of a central bank in Indonesia has been mandated by the 1945 Constitution. Bank Indonesia as the Central Bank of the Republic of Indonesia entered a new chapter when Law No 23 of 1999 on Bank Indonesia was enacted on 17 May 1999 and has been amended with Law No 6 of 2009. The law gives Bank Indonesia status and position as an independent state institution in implementing its task and authority, free from intervention of the Government and/or other parties, and its performance can be supervised and held accountable.

As a central bank, Bank Indonesia realized the important role it has in maintaining Indonesia’s financial and economic stability. Bank Indonesia sharpened the 2018-2024 strategic direction to achieve the vision to become a central bank which gives real contribution to Indonesia’s economy and is the best among emerging markets. Policy mix is key which requires the synergy of Bank Indonesia’s policy to be strengthened with the Government’s policy and other strategic partners’ policy.

Bank Indonesia’s leadership consists of the board of governors with members comprising: Governor, Senior Deputy Governor, and four to seven Deputy Governors. Members of the Board of Governors (BoG) of Bank Indonesia will serve for five years and can be reelected for the same position for one more period. Bank Indonesia’s board members are proposed and appointed by the President of the Republic of Indonesia based on the approval of House of Representatives of the Republic of Indonesia. To get a proper and fit candidate, The House of Representatives holds a selection process to delve into the vision, experience, expertise, and integrity of a candidate.The Board of Governors of Bank Indonesia as of December 2019 consisted of: • Governor:PerryWarjiyo• SeniorDeputyGovernor:DestryDamayanti• DeputyGovernor:ErwinRijanto,Sugeng,Rosmaya

Hadi, and Dody Budi Waluyo

STATuS OBJECTIVE TASKS



of Bank Indonesia’s JourneyBank Indonesia’s Annual Financial Statement

To become a central bank that has real contribution to Indonesia’s economy and is the best among emerging markets.

VISION AND MISSION

1. To achieve and maintain Rupiah stability through monetary policy and policy mix of Bank Indonesia.

2. To participate in maintaining financial system stability through effective Bank Indonesia’s macroprudential policy and synergy with Financial Services Authority’s microprudential policy.

3. To participate in developing digital finance and economy by strengthening Bank Indonesia’s payment system policy and through synergy with the policy of government and other strategic partners.

4. To participate in supporting macroeconomic stability and sustainable economic growth through synergy of Bank Indonesia’s policy mix with fiscal policy and the government’s structural reform as well as other strategic partners’ policy.

5. To strengthen the effectiveness of Bank Indonesia’s policy and economic financing, including infrastructure, through the acceleration of financial market deepening.

6. To participate in developing sharia finance and economy in the national to regional levels.

7. To strengthen the international role, organization, human resources, governance and information system of Bank Indonesia.

In 2018, Bank Indonesia sharpened the strategic direction by refining the vision and mission. The changes in Bank Indonesia’s vision and mission were driven by external and internal strategic environmental changes which

VISION MISSION

significantly had direct impact to the implementation of Bank Indonesia’s mandate. Bank Indonesia’s vision and mission clearly describes the sectors that will become Bank Indonesia’s main attention in the future, and emphasizes on the importance of policy synergy between Bank Indonesia, the Government, and other strategic partners.




AboutBank Indonesia






Front row from left to right:

Perry Warjiyo Governor

Destry Damayanti Senior Deputy Governor

Second row from left to right:

Sugeng Deputy Governor

Erwin Rijanto Deputy Governor

Rosmaya Hadi Deputy Governor

Dody Budi Waluyo Deputy Governor






Perry Warjiyo was appointed as Bank Indonesia Governor based on the Presidential Decree of the Republic of Indonesia No 70/P of 2018, and took his oath on 24 May 2018 for the 2018-2023 period. Before he was appointed as Bank Indonesia Governor, Perry Warjiyo was the Deputy Governor for the 2013-2018 period.

Perry Warjiyo has a bright career at Bank Indonesia. Before becoming the Deputy Governor, Perry Warjiyo was the Assistant of Bank Indonesia Governor for formulating monetary, macroprudential, and international policy at Bank Indonesia, a position he held after being the Executive Director of Economic Research and Monetary Policy Department of Bank Indonesia since 2009.

Prior to his return to Bank Indonesia in July 2009, Perry Warjiyo held an important position for two years as the Executive Director at the International Monetary Fund. Representing 13 member countries grouped in the South-East Asia Voting Group. Perry Warjiyo has a long career in Bank Indonesia since 1984, particularly in monetary policy and economic research, international issue, organization transformation and monetary policy strategy, central banking research and education, foreign debt and reserves management.

Perry Warjiyo is also a lecturer of postgraduate study at the University of Indonesia in International Finance Economics and Monetary Economics, as well as guest lecturers in several universities in Indonesia. Perry Warjiyo has also written and published books, journals, and papers in economics, monetary, and international issues.

Perry Warjiyo was born in Sukoharjo in 1959. He graduated from the Gadjah Mada University in 1982. He received Master’s dan PhD in International Finance and Monetary from the Iowa State University, USA, in 1989 dan 1991.

THE BOARD OF GOVERNORS

18

Perry WarjiyoBank Indonesia Governor

Bank Indonesia 2019 Annual Report




Destry Damayanti was officially appointed as the Senior Deputy Governor of Bank Indonesia based on the Presidential Decree No 74/P of 2019 dated 29 July 2019 for the 2019-2024 period, and took her oath on 7 August 2019. Before being elected as the Senior Deputy Governor of Bank Indonesia, Destry Damayanti was a Member of the Board of Commissioners of Deposit Insurance Corporation for the 2015-2019 period.

Destry Damayanti started her career as Senior Economic Adviser for the UK Ambassador to Indonesia in 2000-2003. In 2005-2006, Destry became a researcher and lecturer at the School of Economics of the University of Indonesia. At the same time, Destry also held position as the Chief Economist of Mandiri Sekuritas for the 2005-2011 period. She then became the Chief Economist of Bank Mandiri in 2011-2015. In 2014, Destry Damayanti also served as the Head of Economic Resilience Work Unit of the State-Owned Enterprises Ministry until 2015. Acknowledging her integrity, in 2015 Destry Damayanti was appointed by the President of the Republic of Indonesia as the Selection Committee Team Chairman for Corruption Eradication Commission Leadership for 2015-2019.

Destry Damayanti was born in Jakarta in 1963. She received Bachelor in Economics from the University of Indonesia and Master of Science in Field of Regional Science from Cornell University, New York, USA, in 1992.

19

Destry DamayantiSenior Deputy Governor







Erwin Rijanto was appointed as the Deputy Governor of Bank Indonesia based on the Presidential Decree of the Republic of Indonesia No 39/P of 2015 and officially started his duty since 17 June 2015 for the 2015-2020 period. Then, through the Presidential Decree No 19/M on 16 March 2017, Erwin Rijanto was mandated as Member of the Board of Commissioners of Deposit Insurance Corporation (LPS) Ex-Officio Bank Indonesia.

Erwin Rijanto is an experienced central banker in banking supervision and regulation. Erwin Rijanto has also managed international and regional issues in his position as the Deputy Chairman of the Indonesian Debt Restructuring Agency and Head of Bank Indonesia’s Representative Office in Singapore.

Furthermore, Erwin Rijanto was trusted to be the Executive Director of Financial System Surveillance Department in 2013, a department formed in line with Bank Indonesia’s mandate in macroprudential supervision and regulation. This confidence completes Erwin Rijanto’s capacity and achievement. Before becoming the Deputy Governor of Bank Indonesia in 2015, Erwin Rijanto served as the Executive Director of Macroprudential Policy.

Erwin Rijanto was born in Yogyakarta in 1958, and received Bachelor’s of Economics from the Gadjah Mada University in 1983 and Master’s of Economics from the Illinois University, USA, in 1989.

Erwin RijantoDeputy Governor





Sugeng has served as the Deputy Governor of Bank Indonesia since 6 January 2017 based on the Presidential Decree of the Republic of Indonesia No 145/P of 2016. Sugeng will serve as the Deputy Governor of Bank Indonesia for the 2017-2022 period.

Sugeng’s career path in Bank Indonesia began in the Statistic and Economic Affairs in 1986. Sugeng served as a Staff of Bank Indonesia Governor in 1994-1998, then representing Bank Indonesia as Advisor Executive Director at the International Monetary Fund until 2001. In 2013-2015, Sugeng served as the Head of Bank Indonesia’s Foreign Office in New York.

In 2015-2016, Sugeng became the Executive Director of Bank Indonesia Institute. As the leader of Bank Indonesia Institute, Sugeng presided and built and developed a world-class research, study, and education institution through four pillars: (i) Learning, (ii) Research, (iii) Partnership, and (iv) Public Exposure. Sugeng also served as an Expert Staff of Bank Indonesia Governor before being elected as the Deputy Governor of Bank Indonesia.

Sugeng was born in Purworejo in 1958 and received Bachelor’s of Economics in Development Studies from the Gadjah Mada University in 1984. Then in 1991, Sugeng continued his postgraduate degree in William College, Massachusetts, USA in Development Economics. In 2012, Sugeng obtained his Doctorate degree in Economics from the Gadjah Mada University, Yogyakarta.

SugengDeputy Governor







Rosmaya Hadi was elected as the Deputy Governor of Bank Indonesia based on the Presidential Decree of the Republic of No 145/P of 2016, and took her oath on 6 January 2017 for the 2017-2022 period.

Rosmaya Hadi started her long career in Bank Indonesia since 1985, and has been assigned in several work units, including Payment System and Accounting as well as Internal Finance. In 2013, Rosmaya Hadi was appointed as the Head of Payment System Supervision and Policy Department. Further, Rosmaya Hadi served as the Head of Bank Indonesia’s Representative Office (KPwBI) of West Java Province for the 2014-2016 period.

Rosmaya Hadi has held important positions in international forums, such as the Working Committee on Payment and Settlement Systems. In the international forum, Rosmaya Hadi held as Co-Chair. Rosmaya Hadi also received awards as Bank Indonesia’s Best Change Leader for two consecutive years (2015 and 2016) as well as the “Perhumas Excellence Award 2016” in the category of Best Source by the Media and in the category of Social and Public Campaign which supported government program in the Cashless National Program.

Rosmaya Hadi was born in Bandung in 1959 and received Bachelor’s of Laws from the Padjadjaran University in 1984. Moreover, in 2004 she received Master’s in Social Politics from the University of Indonesia. In 2011, Rosmaya Hadi followed the Regular Education Program Class 46 of the National Resilience Institute (Lemhanas). To enhance her knowledge, Rosmaya Hadi also followed the Leadership Program in Stanford University, USA, and Oxford University, UK.

Rosmaya HadiDeputy Governor





Dody Budi Waluyo was elected as the Deputy Governor of Bank Indonesia on 14 April 2018 based on the Presidential Decree of the Republic of Indonesia No 69/P of 2018 for the 2018-2023 period. Dody Budi Waluyo was also mandated as Member of the Board of Commissioners of the Financial Services Authority, Ex-Officio of Bank Indonesia, based on the Presidential Decree of the Republic of Indonesia No 82/P on 3 September 2019.

Starting his career in 1988 as a Staff-Economist for Monetary Policy and Economic Research Affairs, he has extensive career in various work units in Bank Indonesia. Especially, in monetary sector which covered analysis of monetary-economics policy, monetary operation, foreign exchange reserves management, monetary and economic statistics, and international relations. Dody Budi Waluyo also supervised the institutional transformation process through the Bank Indonesia Strategic Functions Architecture. Then he was trusted to become the Head of Public Relations and Strategic Planning Department, Monetary and Economics Policy Department, and Governance and Strategic Management Department. Before being appointed as Deputy Governor, Dody Budi Waluyo was chosen as Assistant Governor for the formulation of monetary and economics policy.

In his career in Bank Indonesia, Dody Budi Waluyo has shown remarkable achievement, which is reflected in the memberships of domestic and international forums he participated in. In the national landscape, Dody Budi Waluyo acted as Secretary of Working Group 3 on National Economic Policy Package and Vice Chairman of Central Inflation Management Team since 2017. In the international level, Dody Budi Waluyo became Member of Working Group G20 of the Bank of International Settlement, International Monetary Fund, and World Bank, in Monetary and Finance. Dody Budi Waluyo also served as Member of FDI Statistics Working Group in ASEAN, EMEAP, and as Advisor to Executive Directorate of South East Asia Voting Group Office, International Monetary Fund, Washington D.C, USA.

Dody Budi Waluyo was born in Jakarta in 1961 and received Bachelor’s of Economics in 1980 from the University of Indonesia in Development Studies. He then continued his postgraduate degree in the University of Colorado, USA, and received Master’s of Business Administration and Finance in 1994.

Dody Budi WaluyoDeputy Governor







Mirza Adityaswara was appointed as the Senior Deputy Governor of Bank Indonesia according to the Presidential Decree of the Republic of Indonesia No 62/P of 2014 for the 2014-2019 period, extending his position as the Senior Deputy Governor for the 2013-2014 period.

Through the Presidential Decree of the Republic of Indonesia No 1/P of 2015 on 23 July 2015, Mirza Adityaswara was also mandated as Members of the Financial Services Authority’s Board of Commissioners, Ex-Officio of Bank Indonesia.

Before he was elected as the Senior Deputy Governor of Bank Indonesia, Mirza Adityaswara served as Member of the Board of Commissioners of Deposit Insurance Corporation (LPS) and since April 2012 was assigned as Executive Chairman of LPS as well as the Board of Commissioners.

Mirza Adityaswara started his career as a Dealer in Bank Sumitomo Niaga in 1989. Since 2002 to October 2005, Mirza Adityaswara was the Director, Head of Securities Trading & Research, Bahana Securities, then in November of the same year became Director, Head of Equity Research & Bank Analysis, in Credit Suisse Securities Indonesia. Between 2008–2010, Mirza Adityaswara served as Managing Director, Head of Capital Market, Mandiri Sekuritas, as well as the Chief Economist of Bank Mandiri Group.

Mirza Adityaswara was born in Surabaya in 1965. He received Bachelor’s of Economics from the University of Indonesia and Master of Applied Finance from Macquarie University, Sydney, Australia in 1995.Mirza Adityaswara

Senior Deputy Governor for the 2014-2019 Period





THE COuRSE OF LAWS THAT SHAPES BANK INDONESIA’S TASK AND AuTHORITY

1828 Bank Indonesia’s history began with the founding of De Javasche Bank N.V. by the Government of Dutch East Indies in 1828. De Javasche Bank functioned as a circulation bank with the duty of printing and circulating money.

1953 On 29 May 1953, the President endorsed Law No 11 of 1953 on the Establishment of Principal Law of Bank Indonesia, and since 1 July 1953 Indonesia has a central bank named Bank Indonesia. The Law specified the task of Bank Indonesia: to maintain Rupiah stability, to perform money circulation in Indonesia, to develop credit and banking affairs, as well as supervising credit affairs.

1968 Law No 13 of 1968 on the Central Bank stated the status and task of Bank Indonesia as a central bank, separated from commercial banks. In the Law, in addition to the three main duties, Bank Indonesia was required to assist the government as an agent of development by fostering smooth production and development as well as expanding employment opportunities to increase national living standards.

1951On 6 December 1951, Law No 24 of 1951 on the Nationalization of De Javasche Bank N.V. was endorsed and it was legalized on 15 December 1951. After the nationalization, De Javasche Bank (DJB) was no longer a circulation bank owned by the Dutch, but belonged to the Government of Indonesia. The considerance of DJB nationalization law stated that the Republic of Indonesia as an independent and sovereign country should have a national central bank.

1958In 1958 Law No 84 was issued concerning the Amendment of Article 16 and 19 of the Principal Law of Bank Indonesia which took effect on 31 December 1958 in regard to the change in measurement criteria of the amount of money to be circulated and in regard to the flexibility of down payments to the Government in extraordinary circumstances.

1945The 1945 Constitution was the start of Bank Indonesia’s history because Bank Indonesia’s name was stipulated in the Explanation of Article 23 of the 1945 Constitution that Bank Indonesia’s position in distributing and managing money circulation would be determined by the law.

1964Law No 32 of 1964 on Foreign Exchange Traffic Regulation gave Bank Indonesia authority to administer and manage foreign exchange in maintaining the people’s economy, increasing people’s welfare and state development.

1967 Law No 14 of 1967 on Banking Principles was issued to build the national economy. The banking system was improved to guarantee the existence of an authority/institution to regulate all banks in Indonesia and supervise the implementation of government’s monetary policy in banking. The Law gave Bank Indonesia mandate as a central bank to perform task in monetary and coordinate, develop, and supervise banking.


Bank Indonesia Annual Financial Statement








2004 1. Based on Law No 3 of 2004 on the Amendment of Law

No 23 of 1999, Bank Indonesia could give emergency loan facility which funding would become the government’s cost, in case of a bank having financial difficulty with systemic impact and potential.

2. Law No 24 of 2004 on the Deposit Insurance Corporation (or the LPS) was issued to support a healthy and stable banking system. Through the Law, Bank Indonesia with the Finance Ministry, the LPS, and Banking Supervision Agency became members of the Coordination Committee. The committee is in charge to decide on the settlement and management of a potentially-systemic Failed bank.

3. Law No 1 of 2004 on State Treasury regulates the storage of state funds in the state cash account in the central bank and the provision of interest and/or current account service for the Central Government’s funds placed in Bank Indonesia.

2002 1. The fourth amendment of 1945

Constitution strengthened the status of central bank as an independent monetary authority. Article 23D stated that “the Nation has a central bank, for which the structure, status, authority, responsibility, and independence are regulated by law”.

2. Based on Law No 24 of 2002, Bank Indonesia had a role to assist the Government in managing Government foreign debt by administering Government Bonds, auctioning Government Bonds and Securities in the Primary Market, and buying and selling Government Bonds in the Secondary Market.

1992Law No 7 of 1992 on Banking gave Bank Indonesia authority and responsibility to set banking license, development, and supervision as well as to impose sanctions to banks which did not comply with existing banking regulations. With the Law, banking development and supervision was expected to run effectively. The Law issuance revoked Law No 14 of 1967.

1998Law No 10 of 1998 was the improvement from Law No 7 of 1992 which aimed to strengthen the national economy by increasing the role of national banks in absorbing and disbursing public funds. The Law gave wide opportunities for the public to establish banks based on sharia principles and for foreign parties to participate in owning national banks in partnership with national parties.

1999 1. The Bank Indonesia Law was again

amended with Law No 23 of 1999. The law emphasized Bank Indonesia’s status as an independent state institution in performing its task and authority out of the Government. Moreover, the single objective of Bank Indonesia was established: to achieve and maintain Rupiah stability.

2. Law No 24 of 1999 on Foreign Exchange Traffic and Exchange Rate System gave Bank Indonesia authority to ask for information and data on foreign exchange traffic made by the public.

2003 Law No 17 of 2003 on State Finance affirmed Bank Indonesia’s authority in monetary sector and managed the coordination between Central Government and Bank Indonesia in setting and implementing fiscal and monetary policies.









2007 Law No 25 of 2007 on Investment s t i p u l a t e s c o o r d i n a t i o n b e t w e e n B a n k Indonesia and t h e G o v e r n m e n t i n d e v e l o p i n g t h e p o t e n t i a l o f i n v e s t m e n t in Indonesia to accelerate national economic growth.

20081. Government Regulation in Lieu of Law No 2 of

2008 on the Second Amendment to Law No 23 of 1999 on Bank Indonesia was issued to enhance national banking resilience in facing global crisis by broadening funding access for banks that experienced short-term liquidity mismatch.

2. Law No 19 of 2008 on Sharia Government Bonds was issued to develop sharia finance and economy by developing financial instruments based on sharia principles. The Law regulates Bank Indonesia’s role in administering Sharia Government Bonds.

3. Law of the Republic of Indonesia No 21 of 2008 on Sharia Banking regulates the role and authority of Bank Indonesia in regulating, licensing, and supervising sharia banking.

2009Government Regulation in Lieu of Law No 2 of 2008 on the Second Amendment to Law No 23 of 1999 on Bank Indonesia was enacted as Law No 6 of 2009. The Law regulates that Bank Indonesia can give sharia financing to banks to deal with short-term liquidity mismatch.

2010Law No 8 of 2010 on the Prevention and Eradication of Money Laundering Crimes was issued to prevent and eradicate money laundering crimes. According to the Law, Bank Indonesia has a role as the regulation and supervision institution for payment system service operators and foreign exchange trading business activity operators.

2016 Law No 9 of 2016 on the Financial System Crisis Resolution and Mitigation regulates the coordination between Bank Indonesia and the Finance Ministry, OJK and LPS in organizing the mitigation and resolution of financial system crisis.

1. Law No 21 of 2011 on the Financial Services Authority (or the OJK) states that since 31 December 2013, the function, task, and authority of regulation and supervision of financial service activities in banking is transferred from Bank Indonesia to OJK. With the Law, Bank Indonesia is mandated as the macroprudential supervision and regulation authority, while OJK acts as microprudential supervision and regulation authority.

2. Law No 3 of 2011 on Fund Transfers regulates Bank Indonesia’s role in the implementation of fund transfers, which is further regulated in Bank Indonesia Regulation.

3. Based on Law No 7 of 2011 on Currency, Bank Indonesia implements task in Rupiah management in coordination with the Government. The Law also states that Bank Indonesia is the only institution authorized to issue, circulate, and/or revoke or withdraw rupiah.

4. According to Law No 12 of 2011 as amended by the Law No 15 of 2019 on the Establishment of Legislation, regulations issued by Bank Indonesia are acknowledged and legally binding as long as they are ordered by higher Legislations or established by authority.

2011










ORGANIZATIONAL STRuCTuRE OF BANK INDONESIA31 DECEMBER 2019

BOARD OF GOVERNORS OF BANK INDONESIA

GOVERNOR

SENIOR DEPuTY GOVERNOR

MACROPRuDENTIAL PAYMENT SYSTEM AND RuPIAH MANAGEMENT

1. Macroprudential Policy Department

2. Financial System Surveillance Department

3. MSME Development and Consumer Protection Department

1. Payment System Policy Department

2. Payment System Operation Department

3. Currency Management Department

4. National Payment Gateway and Electronification Department

5. Special Unit for the Development of Currency Management Center, Data Center and Business Resumption Site

Remarks:*) Committee is the supporting organ of Bank Indonesia’s policy governance to assist the Board of Governors of Bank Indonesia in establishing principle and strategic policies, comprising: (i) Monetary Policy Committee; (ii) Financial System Stability Committee; (iii) Payment System Policy Committee; (iv) Foreign Exchange Reserves Management Committee; and (v) Human Resources Committee.**) Temporary Special Working Unit (which will be evaluated after three years).***) Temporary Special Working Unit until the project/event is completed.

1. Economic and Monetary Policy Department

2. Monetary Management Department

3. Foreign Exchange Reserves Management Department

4. Financial Market Development Department

5. Sharia Finance and Economy Department

MONETARY

28

4 DEPuTY GOVERNORS









POLICY SuPPORT ORGANIZATIONAL SuPPORT OFFICE NETWORK

1. International Department2. Statistics Department3. Banking Services, Licensing,

and Treasury Operations Department

4. Report Management and Compliance Department

5. Risk Management Department6. Communications Department

1. Strategic Management and Governance Department

2. Legal Affairs Department3. Human Resources

Department4. Information System

Management Department5. Finance Department6. Strategic Procurement

Department7. Internal Audit Department8. Logistic and Facilities

Management Department9. Bank Indonesia Institute10. Special Unit for Information

System Transformation

Domestic1. Regional Department (operating

at the Headquarters)2. 5 Coordinating Offices and

Representative Offices at Provincial Level

3. 29 Bank Indonesia Representative Offices at Provincial Level

4. 12 Bank Indonesia Representative Offices at City/Regency Level

Overseas1. Bank Indonesia Representative

Office New York2. Bank Indonesia Representative

Office London3. Bank Indonesia Representative

Office Tokyo4. Bank Indonesia Representative

Office Singapore5. Bank Indonesia Representative

Office Beijing

Committees*










Aceh Province

Lhokseumawe

North Sumatera Province

West Sumatera Province

BengkuluProvince

Banten Province

West Java Province

Special Region of Yogyakarta

SouthSulawesi Province

WestSulawesi Province

North Sulawesi Province

North Maluku Province

Maluku Province

West Papua Province

Papua Province

West Nusa Tenggara Province

Gorontalo Province

Jambi Province

South Sumatera Province

West Kalimantan Province

North Kalimantan Province

East Kalimantan Province

Balikpapan

CentralKalimantan Province

SouthKalimantan

ProvinceSouth EastSulawesi Province

CentralSulawesi Province

Lampung Province

Central Java ProvinceEastJava Province

Riau Province

Pematang Siantar

Riau Islands Province

Bangka BelitungIslands Province

Special Capital Region of Jakarta

CirebonTegal

PurwokertoKediri

MalangJember

Solo

Bali ProvinceTasikmalaya

North Sumatra Province (coordinator)

East Java Province (coordinator)

South Kalimantan Province (coordinator)

• Aceh Province • West Sumatra Province • Riau Islands Province • Riau Province • South Sumatra Province • Bengkulu Province • Lampung Province • Jambi Province • Bangka Belitung Province • Lhokseumawe• Pematang Siantar• Sibolga

• West Java Province • Banten Province • Special Region of Yogyakarta• Central Java Province • Special Capital Region of Jakarta• Tasikmalaya• Cirebon• Tegal• Purwokerto• Solo• Malang• Kediri• Jember

• West Kalimantan Province• East Kalimantan Province • Central Kalimantan Province • North Kalimantan Province• Balikpapan

• Bali Province • West Nusa Tenggara Province • East Nusa Tenggara Province

• North Sulawesi Province • Southeast Sulawesi Province • Papua Province • Maluku Province • Central Sulawesi Province • Gorontalo Province • West Sulawesi Province • North Maluku Province• West Papua Province

Sibolga

Bali Province (coordinator)

South Sulawesi Province (coordinator)

East Nusa Tenggara Province

SUMATRA COORDINATION AREA

JAVA COORDINATION AREA

SULAMPUA AREAKALIMANTAN

COORDINATION AREA

BALI NUSTRA AREA

Overseas Representative Offices

• London• New York• Singapore• Tokyo• Beijing

AREA MAP OF BANK INDONESIA REPRESENTATIVE OFFICES




Aceh Province

Lhokseumawe

North Sumatera Province

West Sumatera Province

BengkuluProvince

Banten Province

West Java Province

Special Region of Yogyakarta

SouthSulawesi Province

WestSulawesi Province

North Sulawesi Province

North Maluku Province

Maluku Province

West Papua Province

Papua Province

West Nusa Tenggara Province

Gorontalo Province

Jambi Province

South Sumatera Province

West Kalimantan Province

North Kalimantan Province

East Kalimantan Province

Balikpapan

CentralKalimantan Province

SouthKalimantan

ProvinceSouth EastSulawesi Province

CentralSulawesi Province

Lampung Province

Central Java ProvinceEastJava Province

Riau Province

Pematang Siantar

Riau Islands Province

Bangka BelitungIslands Province

Special Capital Region of Jakarta

CirebonTegal

PurwokertoKediri

MalangJember

Solo

Bali ProvinceTasikmalaya

North Sumatra Province (coordinator)

East Java Province (coordinator)

South Kalimantan Province (coordinator)

• Aceh Province • West Sumatra Province • Riau Islands Province • Riau Province • South Sumatra Province • Bengkulu Province • Lampung Province • Jambi Province • Bangka Belitung Province • Lhokseumawe• Pematang Siantar• Sibolga

• West Java Province • Banten Province • Special Region of Yogyakarta• Central Java Province • Special Capital Region of Jakarta• Tasikmalaya• Cirebon• Tegal• Purwokerto• Solo• Malang• Kediri• Jember

• West Kalimantan Province• East Kalimantan Province • Central Kalimantan Province • North Kalimantan Province• Balikpapan

• Bali Province • West Nusa Tenggara Province • East Nusa Tenggara Province

• North Sulawesi Province • Southeast Sulawesi Province • Papua Province • Maluku Province • Central Sulawesi Province • Gorontalo Province • West Sulawesi Province • North Maluku Province• West Papua Province

Sibolga

Bali Province (coordinator)

South Sulawesi Province (coordinator)

East Nusa Tenggara Province

SUMATRA COORDINATION AREA

JAVA COORDINATION AREA

SULAMPUA AREAKALIMANTAN

COORDINATION AREA

BALI NUSTRA AREA

Overseas Representative Offices

• London• New York• Singapore• Tokyo• Beijing

BANK INDONESIA STRATEGIC DIRECTION

Destry Damayanti Senior Deputy Governor

“Full transformation in policy, organization, and work process, as well as human resources is continuously increased and supported with the implementation of work culture program to build a stronger and more credible institution”

Bank Indonesia Representative Office Solo




AboutBank Indonesia


ank Indonesia Strategic Direction consistently becomes reference for policy

strategy in 2019. According to the vision and mission, Bank Indonesia

pursues strategy to maintain stability and boost economic growth through policy

mix, in synergy with the Government and other strategic partners.

To achieve the vision and implement the mission, 12 strategic programs were

designed. The first nine strategic programs are strategies of various Bank

Indonesia’s core policies, and the other three strategic programs are Bank

Indonesia’s institutional strategy. All of the strategic programs are set to achieve

Bank Indonesia’s 2024 vision to have real contribution to the national economy and

become the best central bank in emerging market. Bank Indonesia’s achievement

is measured by monetary stability, financial system stability, and payment system

stability. Monetary stability is signified by a stable and low Consumer Price Index

(CPI) inflation as well as a manageable exchange rate volatility. Financial system

stability is shown in a safe Financial System Stability Index (FSSI), balanced and

quality intermediation, and banking efficiency. Meanwhile, payment system

stability is indicated by a secure, reliable, and smooth payment system.







Formulation of Bank Indonesia’s Strategic Direction

Vision and Mission of Bank IndonesiaExternal and internal changes in strategic environment which significantly have direct impact to the implementation of Bank Indonesia’s mandate become the main consideration in formulating the vision and mission of Bank Indonesia.

Declining globalization trend and increasing digitalization become a major theme of external strategic environmental changes in the medium term which should be carefully monitored. Slowing global economy due to the impact of widening trade war, followed by anti-globalization policy, geopolitical risks, global financial market uncertainties, and rapid growth of digital economy with all of its risks and rewards, demand Bank Indonesia to quickly respond with relevant policies. Bank Indonesia realizes the need for a strong synergy with the Government and other strategic partners to implement its mandate as given by the Law. All of the considerations underlay the formulation of Bank Indonesia’s 2024 vision and mission as well as its implementing strategy.

The implementation of Bank Indonesia’s strategic direction requires improvement in the management of Bank Indonesia institution. Bank Indonesia’s organization should be adjusted to support the pace of Bank Indonesia in implementing its mission. Therefore,

Bank Indonesia performs thorough and supporting transformation: policy transformation, organizational transformation, and HR and work culture transformation.

Bank Indonesia’s vision contains two key phrases which illustrate the condition Bank Indonesia aims to achieve. The first key phrase, “to have real contribution to Indonesia’s economy” conveys a commitment that Bank Indonesia’s entire policies are not only aimed at maintaining stability, but also supporting economic growth. The second key phrase, “to become the best central bank among emerging markets”, shows Bank Indonesia’s commitment to further increase its capability to remain the best and is respected by central banks in its peer group.

In line with Bank Indonesia’s 2024 vision, seven missions of Bank Indonesia are formulated.

The first mission is to achieve and maintain Rupiah stability through effective monetary policy as well as policy mix of Bank Indonesia. The mission was made to answer challenges in managing inflation and exchange rate. Inflation in Indonesia is more affected by supply such as the availability of goods and services as well as smooth distribution channels. Therefore, one of the policies to synergize with the Regional Government through the




AboutBank Indonesia


Regional Inflation Control Team (TPID), is by running the 4K program: price affordability, availability of supplies, smooth distribution, and effective communication, to control inflation and manage inflation expectations. In managing exchange rate, short-term policy to reduce volatility includes strengthening analysis and monetary operations strategy, deepenig forex market, maintaining sufficient forex reserves, and monitoring market players compliance to monetary policy. In addition, Bank Indonesia with the Government strengthen international cooperation through the Global Financial Safety Net (GFSN) and the Local Currency Settlement (LCS). In the implementation, the mission will be supported with Strategic Program no. 01.

The second mission is to partake in maintaining financial system stability through effective Bank Indonesia’s macroprudential policy and synergy with Financial Services Authority’s microprudential policy. Taking part shows that the implementation of Bank Indonesia’s mandate in macroprudential supervision and regulation is an aspect of financial system stability, and a stable financial system is the result of synergy among authorities in particular between macroprudential and microprudential policies. In implementing the mission, Bank Indonesia strengthens macroprudential policy and surveillance and policy synergy between authorities. The implementation is supported by Strategic Programs no. 03 and 04.

The third mission is to partake in developing digital finance and economy by strengthening Bank Indonesia’s payment system policy and synergizing with policies of the Government and other strategic partners. Rapid development of digital finance and economy needs instant policy response. Synergy from all strategic partners will create accurate policy to take advantage of digital finance and economy development for continuous economic growth. In supporting digital finance and economy development, Bank Indonesia strengthens payment system policy which covers strengthening the infrastructure of financial market and payment system, accelerating payment electronification, and encouraging an ecosystem that supports the growth of digital finance and economy in Indonesia. In implementing task in payment system, Bank Indonesia continues to run an important duty to maintain the

availability of Fit Money across the Republic of Indonesia. The mission implementation is supported with Strategic Programs no. 05 and 06.

The fourth mission is to take part in supporting macroeconomic stability and continuous economic growth through the synergy of Bank Indonesia’s policy mix with the Government’s structural reform and fiscal policy as well as other strategic partners’ policies. Bank Indonesia supports the Government’s structural reform in creating quality and continuous economic growth which in turn can help control current account deficit, (CAD). The CAD is a challenge for Bank Indonesia whose task is to maintain exchange rate stability. The implementation is supported with Strategic Program no. 02.

The fifth mission is to strengthen the effectiveness of Bank Indonesia’s policy and economic financing, including infrastructure, through the acceleration of financial market deepening. To overcome the problems in the domestic financial market and to respond to the increasing volatility of global financial markets, financial market deepening needs to be accelerated. This mission is intended not only to effectively transmit monetary policy, but deepen financial markets also support the need for financing sustainable economic growth. The implementation of this mission is supported by Strategic Program no. 07.

The sixth mission is to partake in developing sharia finance and economy in the national to regional levels. The mission seizes the opportunity for Islamic economic and financial development in Indonesia, which is currently still the target of marketing halal products from other countries, to become an exporter of halal goods and services. This mission also encourages Indonesia to become part of the global halal value chain and become one of the strong sharia industry players. This is signified with Bank Indonesia’s initiative in designing core principles which are then adopted by supranational institutions as well as international sharia communities, such as zakat core principle and waqf core principle. Thus, social finance (zakat and waqf) can be optimized to be a source of economic financing. The mission is supported with Strategic Program no. 08.





The seventh mission is to strengthen the international role, organization, human resources, governance and information system of Bank Indonesia. This mission supports the achievement of all other prior missions. The challenges come from domestic, internal, and global forms. Apart from synergy and coordination with the Government and strategic partners, Bank Indonesia considers it necessary to fight for the interests of Bank Indonesia as well as supporting the interests Republic of Indonesia at international forums. All aspects of institutional management should be strengthened, which includes governance, organization, HR and work culture, information technology, finance, and asset management, communications, legal, risk management and internal audit. The implementation is supported by Strategic Programs no. 09, 10, 11, and 12.

Bank Indonesia’s Strategic Programs (PS)

The seven missions of Bank Indonesia are implemented through 12 strategic programs. The first nine programs are strategies from Bank Indonesia’s core policies, and the remainders are Bank Indonesia’s institutional strategy.

1. PS 01 “Strengthening the effectiveness of monetary policy and policy mix of Bank Indonesia to achieve Rupiah stability”. The strategic program is part policy strategy implementation that directly connects Bank Indonesia’s mandate to guard and maintain Rupiah stability. Through the program, Bank Indonesia consistently strengthen the effectiveness of monetary policy and policy mix to achieve Rupiah stability. It is the strategy to strengthen inflation control and exchange rate stability as fundamental. The policy mix is not only a mix of Bank Indonesia’s internal policies but is also carried out in collaboration with strategic partners. The main strategic partners in the strategic program are the Central Government through the Central Inflation Control Team and Regional Governments through the Regional Inflation Control Teams.

Policy synergy in maintaining Rupiah stability is closely related to successful coordination between BI and the Government in managing (PS 02). Moreover, the success of the strategic program’s implementation depends on the effort of Bank

Indonesia and strategic partners in deepening the conventional and sharia financial markets (PS 07 and PS 08). With deeper financial market, Bank Indonesia’s monetary policy transmission will be more effective to control inflation and exchange rate volatility. Moreover, deeper financial market can accelerate financing for sustainable economic growth.

2. PS 02 “Strengthening the synergy of Bank Indonesia’s policy mix with the Government’s fiscal policy and structural reform to manage CAD and boost sustainable economic growth”. The strategic program is part of policy synergy between Bank Indonesia and the Government. Through this program, Bank Indonesia encourages economic structure improvement and sustainable economic growth by managing the CAD, sufficient source of infrastructure financing and priority sectors, as well as policy synergy, in order to achieve economic growth target. In maintaining inflation and exchange rate volatility, Bank Indonesia’s efforts to synergize its policies will have an important role (PS 01), In line with the efforts made for deepening financial markets (PS 07 and PS 08).

3. PS 03 “Strengthening macroprudential surveillance and policy to take part in managing financial system stability”. As the macroprudential authority, Bank Indonesia encourages a balanced and quality banking intermediation function while still prioritizing prudential principles. . The policy strengthening is completed with policy to prevent liquidity risk considering the risk can enlarge other risks into systemic. With the strategic program, Bank Indonesia will take part in maintaining the stability and resilience of financial system, as well as fostering optimal economic growth through three objectives: strengthening resilience against systemic risk, balanced and quality intermediation, and efficiency. In the implementation, the strategic program’s success is closely related to harmonious coordination between Bank Indonesia, the Government, Financial Services Authority, and other strategic partners in the Financial System Stability Coordination Forum as stated in PS 04. Further, the implementation of PS 03 is in close




AboutBank Indonesia


synergy with PS 05 as related to digital finance and economic development and PS 07 as related to financial market deepening. The strategic program also places special focus on financial inclusion and consumer protection, both are important part of financial system stability.

4. PS 04 “Strengthening the synergy of Bank Indonesia’s macroprudential supervision and policy with Financial Services Authority’s microprudential supervision and policy to maintain financial system stability”. This is part of Bank Indonesia’s policy synergy with related strategic partners. The main strategic partners in the strategic program are the institutions grouped in Financial System Stability Coordination Forum (or FKSSK), which consist of Ministry of Finance, OJK, and LPS. The strategic program, Bank Indonesia execute its role to guard financial system stability by strengthening the synergy of Bank Indonesia’s policy with other authorities. It will also ensure synergy between macroprudential and microprudential supervision to prevent and handle crises, as well as to support sustainable and quality economic financing.

Coordination implemented in PS 04 is closely related to the quality of Bank Indonesia’s macroprudential supervision and policy in the PS 03 implementation as well as policies issued in PS 05, PS 07 and PS 08.

5. PS 05 “Strengthening payment system policy – Rupiah management and financial market infrastructure to accelerate electronification, digital finance and economy, and the availability of fit money in the Republic of Indonesia”. Bank Indonesia aims to create a payment system ecosystem in supporting an inclusive and sustainable economic growth, while ensuring the function of central bank in Rupiah management, monetary policy, and financial system stability. Bank Indonesia also strengthens the national The FMI framework to meet international standard. Financial Market Infrastructure (FMI) is an important pillar of financial system stability, hence it should be reliable, and international standard is a referral benchmark. Furthermore, Bank Indonesia also

strengthens the national retail Payment System framework that will be used to organize the retail payment system to respond to all payment needs of the general public in quick, simple, cheap and secure manner. In implementing its mandate to Rupiah management, Bank Indonesia also strengthens cash management framework to ensure the availability of fit money across the Republic of Indonesia.

6. PS 06 “Strengthening the synergy between Bank Indonesia, the Government’s, and the Finacial Services Authority’s policies to develop digital finance and economy”. Bank Indonesia gives policy response to answer challenges in the digital finance and economy era. It also develops digital finance and economy by strengthening the policy synergy with other authorities’ to support an inclusive and sustainable economic growth. To support the implementation of digital banking, Bank Indonesia encourages banks to adopt digital technology to accelerate collaboration between banking and financial technology. Bank Indonesia will also support the creation of digital ecosystem that supports the development of Micro, Small, and Medium Enterprises (MSME) by encouraging MSME digitalization. In 2024, the share of digital finance and economy is expected to increase in Indonesia’s economic growth.

The support of digital finance and economy implemented in PS 05 in synergy with the Government and Financial Service Authority will support the achievement of sustainable economic growth and declining current account deficit, which will be achieved through the implementation of policy coordination in PS 02.

7. PS 07 “Accelerating conventional and sharia financial market deepening to strengthen the effectiveness of Bank Indonesia’s policy transmission and source of economic financing, including infrastructure financing”. Bank Indonesia will continue to support the development of domestic financial market to create a deep, liquid, efficient, inclusive, and secure financial market to support the achievement of macroeconomic stability and sustainable economic growth. This





is a prerequisite for smooth transmission of monetary policy and financial system stability that supports economic growth. In addition, financing gap which cannot be fully met by banking system is expected to be filled by the financial market. A strong and credible financial market structure can only be achieved through high transaction volumes accompanied by maximum risk management guidelines, a broad and unconcentrated base of players, diverse choice of instruments, and reliable infrastructure and system.

Conventional financial market deepening should be supported with sharia financial market deepening (PS 08). A deep financial market will support the effectiveness of monetary policy transmission in controlling core inflation and exchange rate (PS 01). Moreover, the deep financial market will provide alternative of economic financing for sustainable economic growth (PS 02).

The strategic program’s implementation also needs tight policy synergy with the Government and OJK. The creation of Financial Market Deepening National Strategy is a result of collaboration between Bank Indonesia, the Finance Ministry, and OJK to accelerate programs for deep, liquid, efficient, inclusive and secure financial market deepening.

8. PS 08 “Developing Bank Indonesia’s policy in synergy with the policy of Sharia Finance National Committee (or KNKS), and other parties to support sharia finance and economy development”.

The strategic program implements the sixth mission which describe a strong commitment of Bank Indonesia to support the making of Indonesia as the global sharia financial and economic center. Thus it will enable an inclusive and sustainable national economic growth through the synergy of Bank Indonesia’s policy as authorities as well as other strategic partners. Bank Indonesia’s support is emphasized on three main pillars: sharia economy strengthening, sharia sector strengthening for financing, and research, assessment and education strengthening. To accelerate, expand, and develop

sharia finance and economy development, the three aspects are synergized with the Government through KNKS as well as relevant domestic and overseas institutions. The synergy with KNKS is made by joint drafting the long-term strategy of national sharia finance and economy development as a support to the first pillar, in particular to support halal supply chain strengthening, and the second pillar related to the strengthening of support for instrument supply and supporting infrastructure. For the third pillar, Bank Indonesia synergizes with the Islamic Development Bank (IDB) in conducting joint research on Zakat and Waqf Core Principle with the International Financial Service Board (IFSB) on the formulation of international sharia finance standard.

Indonesia’s success in building sharia finance and economy will impact the increase in Indonesian sharia money market and business growth that eventually will support the control of CAD (PS 02).

9. PS 09 “Strengthening the effectiveness of international cooperation to support Bank Indonesia’s core policy in achieving macroeconomic and financial system stability as well as to defend the interest of Bank Indonesia and/or Indonesia’s economy”. The strategic program is to optimize the role of international cooperation to support the making of macroeconomic and financial system stability as well as Bank Indonesia’s Vision. The program implements PS 01 to PS 08. All policies issued by PS 01 to PS 08 can impact the global interest. On the other hand, international policy issued by overseas institutions can have an impact to the interest of the Republic of Indonesia in particular to that of Bank Indonesia. The program enables Bank Indonesia to prepare international policy framework in form of diplomacy and international cooperation to defend the interest of Bank Indonesia as well as that of the Republic of Indonesia.

10. PS 10 “Strengthening organization, business process, HR management, and working facilities to support the strategy of Bank Indonesia”. This is a part of the institutional strategy to support the




AboutBank Indonesia


implementation of all strategic programs. To achieve its vision and mission, Bank Indonesia needs a streamlined organization and efficient work process, supported by reliable and noble human resources, as well as proper work facilities in the digital era that support the achievement of Bank Indonesia’s strategy. To achieve those, Bank Indonesia will make necessary organizational improvement while fulfilling and developing HR competence and strengthening Bank Indonesia’s work culture. In the next five years, Bank Indonesia will have an effective organizational structure, reliable HR with good capacity and work culture based on faith to God, as well as quality work facilities that support digital workplace by implementing modern office. As part of institutional strategy, the implementation of PS 10 is closely related to PS 11 which supports it from technology perspective and PS 12, which is the implementation of good governance principles.

11. PS 11 “Building Bank Indonesia’s information system in line with the digital era”. The strategic program is part of institutional strategy to support the implementation of all strategic programs from PS 01 to PS 12. Through the program, Bank Indonesia continues the development of quality, secure and reliable information system, in line with the development of digital era to support work efficiency and to achieve Bank Indonesia’s strategy.

12. PS 12 “Strengthening governance, risk management, and legal framework, as well as accountability and sustainability of Bank Indonesia’s finance”. It is the foundation in implementing all strategic programs. Through this program, Bank Indonesia ensures its task and authority implementation as governed, and in line with best practices to maintain its credibility. Moreover, Bank Indonesia will continue to strengthen its legal basis, maintain its financial sustainability and accountability, as well as improve policy communication so that it is easy to understand thereby increasing Bank Indonesia’s credibility.

Destination Statement 2024

Destination Statement is a reflection of ideal conditions in 2024 which translates into indicators of success. The performance indicators will be measured annually through Bank Indonesia’s main performance indicators to guide the implementation of annual strategy. The performance indicators are then designated into each strategic program used as a measure of success in 2024. Destination Statement is reviewed regularly by considering the development of current strategic environment and is adjusted as needed. Destination Statement of Bank Indonesia 2024 is as follows:

1. Stable and low inflation within the range of 3%±1% (yoy) as well as manageable exchange rate volatility. To achieve those, Bank Indonesia will continue maintaining Rupiah stability by strengthening effective monetary policy and policy mix of Bank Indonesia. The strategy is aimed at strengthening inflation control and exchange rate stability in line with the fundamental. (PS 01)

2. Achieving sustainable economic growth target and controlled CAD within five years. To achieve those, Bank Indonesia will pursue a mix of monetary and fiscal policies in synergy with the Government and strategic partners to maintain macroeconomic stability while promoting quality and sustainable economic growth, reducing current account deficit, boosting the availability of source for infrastructure financing and priority sectors, as well as supporting continuous structural reform. (PS 02)

3. Maintaining a secure Financial System Stability Index. To make it happen, Bank Indonesia also partake in maintaining stability guarding the resilience of financial system, and encourage optimal economic growth through three objectives: i) strengthening macroprudential surveillance, policy, and assessment, ii) increasing the role of balanced and quality financial institution intermediation, iii) boosting the increase of banking efficiency. (PS 03)





4. Harmonious collaboration and policy synergy between macroprudential and microprudential supervision, effective policy communication as well as crisis management protocol strengthening to maintain financial system stability. In that regard, Bank Indonesia will continue maintaining financial system resilience through coordination and communication in the Financial System Stability Committee (or the KSSK) including the crisis management protocol. (PS 04)

5. Indonesian Payment System that fulfills payment needs of all economic segments in a secure, smooth and efficient way both for domestic or cross-border payments in line with digital technology development. A fully available and reliable financial market infrastructure, which in line with financial market development and in accordance with internationally accepted principles to support payment and settlement. These are stated in the blueprint initiative of Indonesian Payment System (or the IPS) 2025 through the development of open banking, the strengthening of retail payment system configuration, the strengthening of financial market infrastructure, the development of public infrastructure for data, and the strengthening of regulatory, legal and supervision framework. Moreover, to support the fulfillment of money fit for circulation across the Republic of Indonesia in sufficient amount, appropriate denomination, and in timely manner, Bank Indonesia will protect money quality in the public through cash distribution that reaches all areas of the Republic of Indonesia including the foremost, remote, and outermost areas (so called 3T areas) by keep increasing efficiency in the distribution process. Bank Indonesia also continues to work closely with various related parties to prevent the circulation of counterfeit money in the community. (PS 05)

6. Support national digital finance-economy integration and banking digitization, including the creation of interlink between financial technology and banking, balance between innovation and consumer protection, integrity and stability as well as healthy business competition and national interest in interstate digital finance-economy. To achieve those, Bank Indonesia’s payment system policy will be aimed at encouraging

the creation of digital ecosystem through several IPS 2025 initiatives such as making working group with focus to support the growth of digital innovation in strengthening interconnection between economic agents to create an inclusive national economy. (PS 06)

7. A strong and credible financial market structure as reflected in high transaction volumes followed by optimal risk management signs, wide and non-concentrated player base, various instrument options, and reliable system and infrastructure. Financial market must also be a source of financing to support economic growth including infrastructure funding. In that regard, Bank Indonesia will continue supporting financial market deepening through stronger coordination with authorities and relevant institutions, one of which through the Development Financing Coordination Forum through Financial Market (or the FK-PPPK). The forum has a mandate to formulate the Financial Market Deepening and Development National Strategy (or SN-PPPK) to realize the vision in creating a deep, liquid, efficient, inclusive, and secure financial market. (PS 07)

8. The achievement of optimal sharia GDP share to the National GDP and optimal sharia financing share to total financing. In that regard, Bank Indonesia will continuously develop business model, instrument, mechanism and reliable policy recommendation related to sharia finance and economy in cooperation with the KNKS as well as domestic and overseas strategic partners. (PS 08)

9. The achievement of international interest of Bank Indonesia and the Republic of Indonesia in international forums and becoming one of the best five among 11 central banks in emerging markets. Through the representation of Bank Indonesia and the Republic of Indonesia in international policy diplomacy, and ensuring the representation of Bank Indonesia and the Republic of Indonesia in international institutions and forums. In that regard, Bank Indonesia continues to review, renew, and implement international policy framework in international cooperation and diplomacy and will increase representation in international institutions and reputation in various international forums. (PS 09)




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10. Excellent performance of Bank Indonesia supported by strong leadership, the right strategy, effective and efficient business processes, reliable and noble human resources, and digital-appropriate work facilities. In that regard, Bank Indonesia continues strengthening organization, improving business process, developing HR, and strengthening Bank Indonesia’s work culture by implementing the spirit of faith and obedience to God Almighty. (PS 10)

11. Digitalized business process which covers external financial services business process, HR management, assets/logistics finance, information processing and collection, collaboration and decision making, analytical, information distribution and management, as well as internal and external correspondence. The effort to digitalize business

process is aimed at boosting efficiency and increasing task implementation effectiveness. To achieve those, Bank Indonesia continues building an integrated Information System service, resilient against disruptions, and in line with technology development.(PS 11)

12. A s t a b l e i n s t i t u t i o n a l g o v e r n a n c e i n commitment, structure, and process including strategic management, risk management and internal audit, strong legal foundation, effective policy communication, compliance to all existing regulations, and accountable and sustainable financial management. To achieve those, Bank Indonesia continuously reviews and increases all aspects of institutional governance according to various regulations and best practices. (PS 12)

Mid Term Evaluation and Annual Work Meeting




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BANK INDONESIA TASK IMPLEMENTATION

Erwin Rijanto Deputy Governor

“Bank Indonesia pursues accommodative monetary and macroprudential policy mix to increase banking intermediation and economic financing”




Bank Indonesia Representative Office Province North Sumatera




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ndonesia’s economic growth in 2019 remained resilient amid a slowing global

economy. The achievement was a result of synergy between the Government,

Bank Indonesia, and other authorities. Policy synergy was implemented to push

economic growth momentum, maintain economic stability and financial system

stability, and strengthen economic structure.

Moreover, to support continuous economic growth, Bank Indonesia pursued

accommodative policy mix. The aim was to be optimal in maintaining economic

stability and pushing economic growth. In line with the policy direction, Bank

Indonesia loosened monetary policy by reducing the BI 7-Day Reverse Repo Rate

(BI7DRR) and Minimum Reserve Requirements. The policy was strengthened with

the exchange rate policy in line with the fundamental and market mechanism

direction as well as monetary operation strategy policy to maintain sufficient

liquidity and push policy mix transmission. Accommodative macroprudential policy

was pursued to boost credit as a source of financing. In addition, Bank Indonesia

also strengthened policies odf payment system, financial market deepening,

international relations, MSME, as well as sharia finance and economic development

to boost economic growth momentum.

BANK INDONESIA TASK IMPLEMENTATION




CuRRENT ECONOMY AND PROSPECT

The Strengthening of Five Shifts in Global Economy

Several shifts in the global economy continued and affected the economic dynamics during 2019. The shifts were interrelated and affected global economic development in the past few years. Those shifts were related to the behavior of economic structure, as well as policy response. They were triggered by four major issues, from inward looking orientation policies of many countries and increasing volatility of global capital flow, to the impact of rapid economic digitalization and changing behavior of economic agents in response to digital development. This development then led to complications in macroeconomic control, which were then responded to by strengthening the strategic role of the economic policy mix in mitigating emerging risks.

First, inward looking policy widened in many countries. The shift was characterized by the effort to protect domestic interest through international trade protections and other political policies. The trade tensions between US and China which widened to other countries reflected this shift. The 2019 development showed increasing tensions when each country implemented trade barriers by increasing tariffs on improted goods followed by retaliations. Furthermore, geopolitical acts, such as the Brexit also reflected domestic-oriented economic policy.

Second, the volatility of global capital flow increased which triggered high uncertainties in the global financial market. Such development was related to the strong integration in global financial market. in this condition, the changes in policy and perception on global economic prospects would easily trigger the sentiment of global financial market players and impact the change of capital flow into and out of emerging markets. Monetary policy direction of developed countries in form of liquidity injections and interest rate cuts also impacted the sentiment and dynamic in global financial market. Overall, the relations between financial market integration and global capital flow looked strong in 2019. The development in US-China trade negotiations, geopolitical risks, policy response in developed countries

which appeared in turn affected the sentiment of global financial market players. This condition then caused high uncertainties in the global financial market and eventually affected the volatility of capital flow and exchange rate in many countries.

Third, digital role widened in economic activities in the real sector and financial sector. Empirical studies show economic digitalization, on one side has boosted economic productivity. Rapid digital technology innovation in the financial industry has encouraged the development of financial technology (fintech) in payment system and financial services, including through crowd-funding, peer-to-peer lending, insurance, and wealth management. This development has promoted efficiency and effectivity in the economy. On the other hand, this development needed attention because new collaboration pattern between economic players through sharing economy could change the role of conventional financial institutions as intermediation institutions. Financial system stability could also be affected in line with growing activities of shadow banking, blooming issuance of digital money, and less-regulated activities of digital innovation players. This development eventually could affect and even change the character of monetary policy transmission.

Fourth, the behavior and relation between economic players continued to change in line with rapidly growing digital revolution in economic activities. Empirical studies showed the public consumption pattern had shifted toward shopping in digital platform with mobile, fast, and secure payment methods. Industrial relations between economic players also changed to a more modular pattern with the record of detailed data to individual level in digital footprint from digital economic activities. This development on one hand showed innovation in digital era could increase economic productivity and efficiency through better information access, which could give birth to new business model and source of economic growth. On the other hand, the development in digital era should be responded




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Bank Indonesia Headquarter, Jakarta

accurately to minimize risks of detailed data and business domination which could affect the continuity of economic resilience.

Fifth, policy respons pursued no longer emphasized on one policy, but was integrated in a policy mix. The shift in policy was a continued impact of the four shifts of aforementioned economic characters. Increasing uncertainty, both in the real sector due to inward looking policy or in the financial sector, had given challenges and increased complexities in maroeconomic control. Macroeconomic control became more complex because at the same time digital role in the economy was growing, which changed the behavior and relation among economic players. This development changed the channel of policy transmission and affecting the effectiveness of policy pursued. The shift then pushed many countries to take integrated policy mix. Synergy between fiscal policy and monetary policy was strengthened to mitigate risks on economic slowdown. Monetary policy was also strengthened by optimizing interest rate policy, exchange rate policy, liquidity related policy, and capital control

policy. Central banks’ policies were supported with macroprudential policy, payment system, and other supporting policies. Moreover, structural reform policy was strengthened to increase economic resilience amid a growing digital role.

Slowing Global Economy, High uncertainties

Domestic oriented policy which continued in many countries predominantly affected global economic dynamics in 2019. Trade tensions between the US-China in 2019 triggered such condition. Trade tensions also widened between the US and Japan, France, Germany, Mexico, Australia, India, Brazil, and Argentina, followed by retaliations from each country. Moreover, geopolitical risks that took turns added to unconducive global economy. The protracted Brexit deal as well as political issues and economic reforms in Mexico, Brazil, Lebanon, and Algeria increased geopolitical risks and affected global economic conditions. Protests and riots that dragged on in Hong Kong, Iran, Chile, and Iraq also disrupted economic recovery in 2019 in many emerging countries.




Source: Bloomberg, processed

Graphic 1. Global Business Confidence Graphic 2. Global Economic Growth and Trade Volume

Source: IMF, Consensus Forecast, CPB, processed

II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III

2012 2013 2014 2015 2016 2017 2018 2019

3

Global Trade Volume (Right Scale)

Global Economic Growth

Percent, yoyPercent, yoy

0

2

4

4

5 6

2 -2

IndexIndex

80 -30

90 -10

100 10

110 30

120 50

I II III IV I II III IV I II III IV I II III IV I II III IV

2015 2016 2017 2018 2019

Germany France European AreaUSA Italiy Japan (Right Scale)

Countries/Group of Countries 2015 2016 2017 2018 20191

World 3.5 3.4 3.8 3.6 2.9

Developed Countries 2.3 1.7 2.5 2.2 1.7

United States 2.9 1.6 2.4 2.9 2.3

Europe 2.1 1.9 2.5 1.9 1.2

Japan 1.2 0.6 1.9 0.3 0.7

Emerging Countries 4.3 4.6 4.8 4.5 3.7

Asia 6.8 6.7 6.6 6.4 5.6

China 6.9 6.7 6.8 6.6 6.1

India2 8.0 8.2 7.2 6.8 5.3

Latin America 0.3 -0.6 1.2 1.1 0.1

Eastern Europe 0.8 1.8 3.9 3.1 1.8

Middle East and Central Asia

2.6 5.0 2.3 1.9 0.8

Africa Sub-Sahara 3.1 1.4 3.0 3.2 3.3

Source: WEO IMF October 2019, WEO IMF Update January 2020, Bloomberg1 Based on release of each country until March 20202 Using fiscal year

Table 1. Global Economic Growth Percent, yoy

unconducive global conditions reduced global economic growth. Uncertainties in global trade prospects increased and dented the confidence of economic players in many countries (Graphic 1). Such condition then caused global trade volume in 2019 to contract 0.2%, the lowest since global financial crisis (Graphic 2). The unfavourable development made global

economic growth to slow equally both in developed and emerging countries. In 2019, the global economy only grew 2.9%, slowing from the 2018 growth at 3.6% and the lowest since global financial crisis (Table 1). Developed economies and emerging economies grew respectively 1.7% and 3.7% in 2019, slowing from the 2018 performance of 2.2% and 4.5% respectively.




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The impact of trade wars widened to the services and labor sectors. The tensions triggered weaker trade of global goods, as well as impacted other economic activities, such as the services sector and labor market. Such condition confirmed weaker economy to countries supported by both the industrial and services sectors. Moreover, worsening business sentiment and weakening economy affected declining employment and wage in several countries.

Due to the trade tensions, economic performance of the uS and China worsened in 2019 and followed by weak inflationary pressures. Developing trade tensions pressured US and China economies into a slow trajectory. US economic slowdown was also caused by the decline in fiscal stimulus impact of 2018. Meanwhile, China’s economy slowed compared to a decade ago as the consequences of economic rebalancing policy and financial system deleveraging. Trade tensions eventually hit trade and investment activities of both countries.

Slowing global trade volume and global economic growth impacted the decline in global commodity prices. Trade tensions affected sluggish investment and pressured global metal price. Fiscal stimulus through infrastructure development in China that was spurred in the second half of 2019 only had limited impact to global metal price. Coal price also weakened, affected by green economy campaign in several countries, which potentially reduced coal demand in the long term, including from China and Euro Area (Graphic 3). Moreover, global oil price was sharply corrected due to slowing global demand as OPEC member countries cut oil supply. The average global oil price in 2019 was USD65 per barrel, declining from the average price in 2018 of USD71 barrel (Graphic 4).

A slowing global economy has driven high uncertainties in the global financial market and affected the pattern of global capital flow. Uncertainties in the global financial market increased until the third quarter of 2019,

Source: IHS Markit

Graphic 4. Global Oil Price DevelopmentGraphic 3. Indonesian Export Commodity Prices Index (IHKEI) and Purchasing Manager Index (PMI) of

Global Manufacturing

Source: Bloomberg

%yoy %yoy

50.1

92.9

11055

54

53

52100

105

51

5095

49

4890

47

4685

4580II III IV

2015

II II III IV

2016

I II III IV

2017

I II III IV

2018

I II III IV

2019

IHKEI Global Manufacturing PMI (Right Scale) 2015

20

30

40

50

US Dollar per barrel

Brent Price

Quarterly Account

60

70

80

90

2016 2017 2018 2019




as reflected in several indicators of uncertainty and global risk, such as the volatility index (VIX)1 and economic policy uncertainty (EPU) index which increased up to 19 and 1947. The unfavourable development then triggered slowing foreign capital inflow to emerging countries. A strengthening US economy and attractive US yields also decreased capital flow into emerging countries as demand to US government bonds increased. This condition even triggered the inverted yield phenomena in the third quarter of 2019. Overall, these dynamics impacted the slowing foreign capital flow into emerging countries and pressured many emerging market currencies.

Many countries responded to the risk of economic growth slowdown by loosening monetary policy. Many central banks pursued accommodative global monetary policy by reducing policy rates. In developed countries, since July 2019, the Fed had cut the Fed Funds Rate three times with a total reduction of 75 bps to 1.50-1.75% at the end of 2019. The European Central Bank cut extra accommodative policy by loosening Deposit Rate to -0.5%. Emerging economies also loosened monetary policy. The Reserve Bank of India cut the benchmark interest rate five times or a total 135 bps in 2019. The People’s Bank of China (PBoC) also reduced various interest rate instruments, such as the Medium-Term Lending Facility Rate (MLF), Loan Prime Rate (LPR) and 7-day Reverse Repo Rate. Monetary policy loosening by central banks were followed by liquidity easing, such as through quantitative easing (QE), lending facility, and reserve requirements loosening.2

Expansionary fiscal policy was taken in many countries to support economic growth. Fiscal policy in China was strengthened, covering tax cut policy in continuity of the policy since end-2018, and infrastructure development by launching local government bonds. Fiscal stimulus in India covered corporate tax cuts, industrial subsidies, and infrastructure development. However, the fiscal stimulus was different from the previous period because

it was limited by financial risks in China and long-term fiscal reform in India. The US kept the expansionary fiscal policy after reaching agreements on spending cap and debt limit. Meanwhile, fiscal space in European Union countries, including in Italy and several periphery countries, was limited due to high debt burden. A similar thing was found in Japan to achieve the fiscal consolidation target for 2025.

Fiscal and monetary policy stimulus was also supported with structural reform policy. Structural reform in developed countries, such as the US, Europe, and Japan was aimed at increasing productivity and potential output, including through improvement in the labor sector. Reform in developing economies was aimed at achieving more quality growth, followed by taxation system and financial reform. Reform in China was aimed at continuing economic rebalancing policy and financial system deleveraging.

Several initiatives were taken by multilateral agencies. The Financial Stability Board (FSB) strengthened monitoring on shadow banking and risk assessment to maintain the stability of global financial system. Global initiatives were made to strengthen structural reform as well as to face digitalization. The Group of Twenty (G20) also strengthened policies related to digitalization, such as by utilizing data usage, facilitating free flow of data, and strengthening trust between consumers and businesses. Moreover, G20 together with the International Monetary Fund (IMF) also supported policy to overcome inequality and create an environment where each individual could unleash their potential amid the shift in global demographics. IMF also prioritized investment in clean energy in line with high cost of global economy due to climate change especially to low-income countries.

The policy response taken had positive impact to decreasing financial market uncertainties and increasing global capital flow into emerging countries in the fourth quarter of 2019. Interest rate cuts by

1 Volatility Index (VIX) is used to measure the volatility expectation of stock market players of S&P 500.2 In Euro Area, ECB launched Targeted Longer-Term Refinancing Operation III (TLTRO) and reactivated quantitative easing which was stopped at the end of 2018. Meanwhile, the Fed

stopped the normalization of central bank’s balance sheet quicker than the initial plan and purchased short-term government bonds. In China, the PBoC ensured sufficient liquidity by cutting the reserve requirement ratio rate, liquidity injection through Medium-Term Lending Faciity (MLF), increasing the quota of Standing Lending Facility (SLF).




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central banks of developed countries, including the Fed, pushed global investors to find higher yields, including in emerging economies. Capital flow into the financial markets of emerging countries increased, driven by increasing liquidity in line with monetary policies in developing economies. Such condition helped to appreciate emerging market currencies starting from the fourth quarter of 2019. Throughout 2019, currencies of Indonesia, the Philippines, and Thailand strengthened with decreasing volatility. Meanwhile, currencies of Turkey, Brazil, and South Africa were largely depreciated with the highest volatility compared to other market currencies.

Exports Decline, Domestic Demand Supports

A declining global economic growth impacted a weaker performance of Indonesian exports in 2019. Exports in 2019 contracted 0.87%, a reversal from the 2018 performance which grew 6.55% (Graphic 5). The decline in exports was quite deep in the first half of 2019 especially due to weaker manufacturing exports to developed countries. The growth of Indonesian main commodity exports, crude palm oil (CPO) and coal, also weakened due to the impact of policies from several trading partners, such as the CPO import tariff policy by India and the coal import limitation policy by China. For crude oil commodity, export contraction was caused by domestic policy to optimize the usage of crude oil for domestic interest.

Pressure on exports slightly decline in the second half of 2019, supported by increasing demand on several exported products. Export improvement mainly came from agriculture and mining commodities. In the agriculture sector, CPO exports improved due to increasing demand from China. The increase happened partly due to the implementation of equivalent import tariff of CPO to India from Indonesia and Malaysia as well as the impact of decreasing demand of soybeans due to US-China trade tensions. In the mining sector, export improvement was affected by strong coal demand from China as Indonesian coal price was more competitive than China’s domestic coal price, even though at the same time coal restriction policy was applied.

Export improvement in several commodities also happened due to diversification of export destinations and products, as wel as domestic policies. Exports of steel, automotive, pulp and waste paper, gold, and textile fiber showed positive performance in 2019, supported by good competitiveness, as reflected in the high 2019 Trade Balance Index (TBI) or 2018 Revealed Symmetric Comparative Advantage (RSCA). Export destinations also widened to products such as steel, which was exported to ASEAN (Association of Southeast Asian Nations) and Saudi Arabian markets. Besides diversifying export destinations and products, domestic policies also impacted the trend of export improvement. The nickel export ban policy implemented on 1 January 2020 caused nickel exports to increase in 2019. Other domestic policies such as the increase in copper ore export quota and the diversification of steel export products also spurred the increase in aforementioned product exports.

Amid declining export performance, private consumption, especially household consumption, still showed good growth. Private consumption in 2019 grew 5.16%, slightly increased from the 2018 performance. This development was supported by household consumption which grew 5.04%, nearly unchanged from the 2018 performance. The positive performance was supported by good purchasing power in line with stable income and low inflation, as well as stable consumer confidence. Several indicators showed stable income in the low-middle class, even improving, as reflected by the increasing real wage of farm workers and informal sector

Graphic 5. Exports and Global Trade Volume

Source: BPS and Bloomberg, processed

-10

-5

0

5

10

15

20

-2

-1

0

1

2

3

4

5

6

7Export of Goods and Services

Percent, yoy Percent, yoy

Global Trade Volume(right scale)

II III IVI II III IVI II III IVI II III IVI II III IV*I

2015 2016 2017 2018 2019




workers. With the condition, household consumption in quarterly dynamics still grew above 5% until the third quarter of 2019 and supported economic growth.

In a longer time span, several factors supported resilient household consumption in the past eight years. The first factor was related to the role of nontradable sector which strengthened following the end of high commodity prices. This condition was affected by labor mobility which shifted from the tradable to nontradable sectors, making household income remained good and independent to exports. Second, the number of population in the middle-income group in the range of USD2.97-8.44 per day also increased, especially since 2010. The income group generally had fixed income and jobs. Third, purchasing power remained stable in line with controlled inflation within the target range. Finally, rapid development of digital economy also supported a stable household consumption. Several digital economy activities, such as e-commerce, could provide various alternative goods at more efficient prices which helped maintain household consumption pattern.

Good private consumption was also supported by the impact of 2019 Elections which drove the increase of consumption growth of Non-Profit Institutions which served Households (or LNPRT). Data showed the growth of LNPRT consumption in 2019 increased to 10.62%. Quarterly dynamics showed LNPRT growth sharply increased until the third quarter of 2019, supported by Elections preparations and implementations. The increasing number of parties, legislative candidates, and campaign period caused high 2019 LNPRT growth and gave positive impact to household consumption until the third quarter of 2019.

Government consumption also shored up 2019 domestic demand, despite slowing from 2018. Slowing government consumption was caused by the decline in central government’s spending, mainly for goods expenditure and other expenditure which contracted respectively 3.9% and 30.4% in 2019. However, the decline was offset by the changes to other expenditures: spending for HR welfare, such as employee expenditure and social assistance. In 2019, the portion of employee expenditure increased from 23% to 25%, while social

assistance expenditure increased from 6% to 8% against total spending of the central government.

Construction investment performance also remained high and supported domestic demand. The 2019 construction investment grew 5.37%, almost unchanged from the 2018 growth of 5.41%. This development was mainly driven by infrastructure development related to the development of national strategic projects, and increasing performance of private constructions. Construction investment growth was also followed by increasing development for residentials and other facilities which supported positive sales of big developers in 2019.

Different development was seen in non-construction investment which had limited growth in 2019. Non-construction investment growth in 2019 was recorded at 1.80%, far lower than the 2018 growth which reached 10.31%. This development occurred due to the impact of contraction in mining sector export performance, including low coal price, which caused coal mining firms to halt heavy equipment investment. Non-construction investment was also restrained as business confidence was low in line with the global economic development. Slowing growth of non-construction investment was halted as the Government’s electricity projects continued in 2019, with development target of 3,940 MW power plants, 5,065 Kms transmissions, and 11,186 MVA substations. The target and realization development of power plants and transmissions were higher than 2018.

Slowing exports, limited non-construction investment, and several policy factors impacted contracting imports in 2019. The contraction in manufacturing industry exports impacted the decline in raw material imports, especially industrial raw materials which contracted 4.5%. Meanwhile, sharply declining non-construction investment growth affected imports of capital goods which contracted 8.28%. Import growth of consumer goods also contracted 8.13% (Graphic 6). Besides cylical factor, import contraction was affected by the import substitute policy in supporting the improvement in oil and gas trade account. The government’s policy in using domestic oil products for domestic needs and the B20 policy contributed to the contraction of crude oil imports of 37.73% (Graphic 7).




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With those developments, Indonesia’s economic growth generally remained resilient, reaching 5.02% in 2019. This development was supported by good domestic economy adjustments in responding to external shocks. Slowing imports could absorb external shocks, making quarterly growth above 5.0% until the third

quarter of 2019, before declining to 4.97% in the fourth quarter of 2019 (Table 2). Although lower than the 2018 performance at 5.17%, Indonesia’s economic growth was better compared to other emerging market economies in Asia, except for economic growth in China, India, and the Philippines.

Table 2. GDP on Expenditure

GDP Components 2015 2016 2017 201820191)

I II III IV Total

Domestic Demand 1) 4.94 4.39 5.13 5.62 5.18 5.34 4.44 4.16 4.76

Private Consumption 4.84 5.04 4.98 5.14 5.27 5.40 5.06 4.93 5.16

Households Consumption 4.96 5.01 4.94 5.05 5.02 5.18 5.01 4.97 5.04

Non-Profit Institutions serving Households (LNPRT) Consumption

-0.62 6.64 6.93 9.10 16.96 15.29 7.41 3.53 10.62

Government Consumption 5.31 -0.14 2.12 4.80 5.22 8.23 0.98 0.48 3.25

Investment 3.00 4.99 5.69 8.49 3.82 1.70 2.95 0.98 2.35

Gross Fixed Capital Formation (PMTB) 5.01 4.47 6.15 6.64 5.03 4.55 4.21 4.06 4.45

Construction 6.11 5.18 6.24 5.41 5.48 5.46 5.03 5.53 5.37

Non Construction 1.93 2.43 5.90 10.31 3.69 1.96 1.95 -0.13 1.80

Inventory Change* -0.59 0.23 -0.07 0.71 -0.29 -0.85 -0.37 -1.07 -0.65

Net Exports* 0.94 0.13 0.30 -0.94 1.21 1.01 1.77 1.69 1.43

Export -2.12 -1.66 8.90 6.55 -1.58 -1.73 0.10 -0.39 -0.87

Import -6.25 -2.41 8.07 11.88 -7.47 -6.84 -8.30 -8.05 -7.69

Gross Domestic Product 4.88 5.03 5.07 5.17 5.07 5.05 5.02 4.97 5.02

1) Domestic Demand is Consumer Expenditure (Private + Government) and Gross Domestic Fixed Capital Formation

Source : BPS Source : BPS

Graphic 6. Real Non-Oil and Gas Imports Graphic 7. Nominal Oil and Gas Imports

II III IVI II III IVI II III IVI II III IVI II III IVI

2015 2016 2017 2018 2019

Percent, yoy

-30

-20

-10

0

10

20

30

40

Capital Goods

Consumer Goods

Total Imports

Raw Materials

Percent, yoy

Processed Oil Crude Oil Gas Oil & Gas Import

-60

-40

20

0

20

40

60

80

II III IVI II III IVI II III IVI II III IVI II III IV I II III IVI

2015 2016 2017 2018 2019 2019

Percent

Source: BPS, processed

*Contribution to GDP




Positive development in consumption and construction investment in sectoral was supported by several tertiary sectors and construction sector. Strong consumption pushed up the performance of transportation, warehouse, information, and communication sector to grow 8.06%, higher than the previous year at 7.04%. Moreover, the construction sector remained strong in line with high construction investment, supported by the government’s infrastructure projects. A different condition was shown by a limited growth in secondary sectors. Manufacturing industry growth slowed to 3.80% in line with the declining performance of exports and non-construction investment. Moreover, primary sector growth, especially the mining sector, only grew 1.22% in 2019, affected by slowing global demand.

Spatially, the resilience of domestic economic growth amid a global economic slowdown was supported by interregional trade. Interregional trade supported a strong domestic private consumption, including through palm oil products trade related to the B20 program implementation and mining products downstreaming policy. The development supported rising economic growth in Sumatra from 4.55% (yoy) in 2018 to 4.57% (yoy) in 2019. Economic growth of Bali-Nusa Tenggara (Balinusra) also increased to 5.07% (yoy), among others supported by improving exports of copper and nickel ore. The same time occurred in Kalimantan’s economic growth, which was also supported by improving export of primary commodity, such as coal exports to China. Meanwhile, economic growth of Java dan Sulampua (Sulawesi-Maluku-Papua) slowed, mainly due to declining exports, as well as problems in copper production in Sulampua. Overall, in 2019, 14 out of 34 provinces had a higher growth from the previous year.

Stable domestic economic growth in 2019 had positive impact to the people’s welfare. The trend of declining poverty rate since 2015 continued and was recorded at 9.22% in September 2019. The reduction occurred evenly, in cities and villages. Inequality also dropped as reflected by the decline in gini ratio in September 2019 which reached 0.38, lower than the ratio in September 2018. The decline was supported by the improvement in output distribution of low-middle group and the impact of social

aid distribution, both in cities and villages. In parallel, open unemployment in 2019 also dropped from 5.34% in August 2018 to 5.28% in August 2019. Meanwhile, the workforce participation level also grew 67.49%, higher than the participation level in 2018. Formal workforce absorption also increased, while informal workforce absorption decreased.

Stable Macroeconomy

A resilient domestic economy was supported by external resilience in line with surplus in the 2019 Indonesia’s Balance of Payments (BoP). The 2019 (BoP) booked a surplus of USD4.68 billion, a reversal from 2018 which saw deficit of USD7.13 billion. Foreign exchange reserves also increased from USD120.7 billion to USD129.2 billion or equal with 7.3 months of imports and government foreign debt, and above the international adequacy standard of three months of imports. Improving external resilience was also reflected by a safe and controlled external foreign profile, with the foreign debt to GDP ratio above the average of peer countries. External debt composition was healthy as reflected by a more dominant long-term foreign debt ratio of 84.4%.

The surplus in balance of payments BoP came from increasing surplus of capital and financial account and narrowing current account deficit. Foreign investors’ optimism on the domestic economic prospect and yield attraction of domestic assets pushed high foreign capital inflow, especially in form of portfolio investment and direct investment (Graphic 8). In addition, narrowing CAD was the impact of improving non-oil and gas exports especially in the second half (Graphic 9). In the third quarter of 2019, BoP booked a deficit of USD46 million, far lower than deficit in the previous quarter of USD 1.98 billion. BoP improvement continued in the fourth quarter of 2019, which reversed from deficit to surplus of USD4.28 billion.

The increase in capital and financial account continued improving from time to time. In the first half of 2019, the capital and financial account surplus was recorded at USD16.5 billion, significantly increased from the previous year. The increase in TMF surplus was supported by portfolio investment inflow in form of bonds or shares.




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Source : Bank IndonesiaSource : Bank Indonesia

Graphic 9. Current AccountGraphic 8. Capital and Financial Account

*temporary figure **very temporary figure

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017* 2018* 2019**

50,000

40,000

30,000

20,000

10,000

0

-10,000

-20,000

-30,000

-40,000

-50,000Current Account

3

2

1

0

-1

-2

-3

-4

Goods Trade BalanceTB/PDB

PercentMillion USD

Services Balance

Primary Income BalanceSecondary Income Balance50,000

40,000

30,000

20,000

10,000

0

-10,000

-20,000 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017* 2018* 2019**

-4

Direct InvestmentOther InvestmentPortfolio InvestmentCapital and Financial Transaction

Million USD

*temporary figure **very temporary figure

TMF surplus continued in the second half of 2019 which increased to USD19.8 billion. The increase was supported mainly by portfolio investment in the Indonesian financial market, especially in government bonds which reached USD11.27 billion in 2019. The foreign capital inflow was affected by stable economic prospects and attractive domestic asset yields as well as declining global uncertainties and accommodative monetary policy by developed countries. Global uncertainties declined especially in response to trade agreements between the US-China and the Fed’s accommodative policy which pushed VIX reduction from 16.7 in 2018 to 15.3.

A manageable current account deficit also drove the 2019 BoP surplus. In 2019, current account deficit was recorded at 2.72% of GDP, declining from the level in 2018 of 2.94% of GDP. This development was affected by improvement in non-oil and gas exports, especially in the second half of 2019. Imports were lower in line with domestic adjustments in response to decreasing export performance and restrained non-construction investment, which reduced import demand for raw materials and capital goods. Moreover, imports declined due to the implementation of policy on optimizing domestic oil production usage and the expansion of B20 policy on oil and gas sector. The CAD was controlled as affected by the improvement in secondary income account, mainly from the increase in number and income of Indonesian migrant workers.

Improving 2019 BoP supported a stronger Rupiah exchange rate with reduced volatility. On average, the Rupiah exchange rate strengthened 0.76% to Rp14,139 per USD, from Rp14,246 per USD in 2018. On point-to-point (ptp), the Rupiah also strengthened 3.58% and was closed at Rp13,883 per USD at the end of 2019. The Rupiah strengthened together with Peso and Baht amid the weakening of several other emerging market currencies (Graphic 10). Furthermore, the volatility of Rupiah exchange rate also decreased from 8.5% in 2018 to 7.0% in 2019, and lower than the average regional volatility especially Lira, Real, and Rupee (Graphic 11).

The stability of Rupiah exchange rate was also supported by a deeper and more efficient forex market structure. Forex transaction volume, both in the spot and derivative markets, grew 4.4% annually on average in the past five years. In 2019, the daily average volume of derivative transactions increased 5% from 2018 in line with hedging needs of market players, including to fulfil the requirement of provisions for the Application of Prudential Principles. Of total external debt reporting, in the second quarter of 2019 89% had met hedging for the next 0-3 months and 93% had met hedging for the next 3-6 months. Meanwhile, forex market efficiency was illustrated in the average 2019 bid-ask spread which was not much changed to around Rp8.8 per USD compared to the average spread in 2018 of Rp7.6 per USD. Moreover,




3 Implied yield is the cost needed to do hedging.

SGD

MYR

THB

INR

PHP

IDR

KRW

TRY

BRL

ZAR

0 2010 305 2515 35

5.0

4.5

5.4

6.1

6.2

7.0

8.7

16.1

17.0

18.1

20182019

Percent

Graphic 11. Exchange Rate VolatilityGraphic 10. Exchange Rate Change

Source : Bank Indonesia Source : Bank Indonesia

TRY

ZAR

BRL

KRW

INR

MYR

SGD

IDR

PHP

THB

-20 -15 -10 -5 0 5 10

Percent

4.18.7

1.83.7

0.83.6

-1.11.2

-2.51.0

-2.8-2.3

-5.6-3.9

-7.3-3.6

-8.12.6

-14.4-11.0

EOP Rerata

the implied yield3 also showed a decline in 2019 to 5.1% from 6.5% in 2018.

Domestic Non Deliverable Forward (DNDF) took part in increasing efficiency in the forex market. It is reflected in the more convergent movement between DNDF and Non Deliverable Forward (NDF) as supported by increasing liquidity in the DNDF market. The daily average of DNDF transactions consistently increased to around USD56 million per day, with the DNDF position reaching USD700 million as of December 2019. Liquidity increase was in line with the implementation of DNDF transaction policy relaxation through the issuance of PBI 21/7/PBI/2019 on the Improvement of Bank Indonesian Regulation No.20/10/PBI/2018 in May 2019. Moreover, the number of domestic non-bank parties which performed DNDF sale transactions also increased from two non-bank institutions in April 2019 to 13 non-bank institutions in December 2019. The volume of DNDF sale transactions by non-bank institutions also increased from USD1.4 million in April 2019 to USD34.5 million in December 2019.

Macroeconomic stability was also supported with low and controllable inflation. Consumer Price Index (CPI) inflation in 2019 was recorded at 2.72%, declining from 2018 which reached 3.13%. The development brought CPI inflation within the target range of 3.5 ± 1%, continuing the result of last four years which consistently fell within the target range. Based on components, core and administered prices (AP) inflation was lower than the

previous year at 3.02% dan 0.51%. Meanwhile, Volatile Food (VF) inflation was 4.30%, higher than 2018, due to import and weather issues (Graphic 12). Spatially, 2019 CPI inflation was controllable in all provinces, with majority recording CPI inflation of below bottom target range of 2.5%. Regions with CPI inflation of above upper target range were North Sulawesi (3.52%) and South Kalimantan (4.01%), due to inflation of air transports and VF, such as tomato, vegetables, chilis, and fresh fish (Graphic 13).

Low 2019 CPI inflation was affected by stable domestic demand and appreciating exchange rate. Stable domestic demand directed non-food core inflation (exluding gold) to remain low. Meanwhile, appreciating Rupiah exchange rate drove non-food traded core inflation to slow from 3.00% to 2.82%, which then could dampen the impact of increasing global food prices against core inflation. The positive development was also supported by expectation of economic players toward controllable inflation within the target range of 3.5+1%. Throughout 2019, consensus forecast on inflation remained on a downward trend, from 3.3% at the end of 2018 to 3.1% at the end of 2019.

Controllable CPI inflation was also affected by low inflation of AP category. AP inflation reached 0.51% in 2019, lower than 2018 which reached 3.36%. The development was affected by strategic commodity price, energy, which deflated in line with low growth of




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4 Transportation Minister Decree No. 160/2019 on the Upper Limit Tariff for Economic Class Passengers of Scheduled Commercial Air Transports Domestically. 5 Finance Minister Regulation No 152/2019 in October 2019.

Source: BPS, processed

Graphic 12. CPI Inflation Graphic 13. Spatial CPI Inflation

Source: BPS

I II III IV I II III IV I II III IV I II III IV I II III IV

2015 2016 2017 2018 2019

0 -6

1

-12

43

9

4

14

5

19

6

7

8CPI

Percent

Inflation Target Range

AP (Right Scale)Upper Range of Inflation Target

Percent

VF (Right Scale)

Core

Sout

h K

alim

anta

nN

orth

Sul

awes

iLa

mpu

ngB

ante

nD

KI J

akar

taW

est J

ava

Ben

gkul

uG

oron

talo

Cen

tral

Jav

a Y

ogya

kart

aN

orth

Sul

awes

iB

abel

Kal

teng Bal

iW

est K

alim

anta

nRi

auSo

uth

Sula

wes

iN

orth

Sum

ater

aC

entr

al S

ulaw

esi

East

Jav

aM

aluk

uSo

uth

Sum

ater

aK

epri

Nor

th M

aluk

uW

est P

apua

W

est N

usa

Teng

gara

NA

DW

est S

umat

era

East

Kal

iman

tan

Nor

th K

alim

anta

nW

est S

ulaw

esi

Jam

biEa

st N

usa

Teng

gara

Papu

a

-8 -800

-7 -700

-6 -600

-5 -500

-4 -400

-3 -300

1 100

-2 -200

2 200

-1 -100

3 300

5 500

0 0

4 400

6 600

bpsPercent

December 2019 Difference with December 2018 (right scale)

global oil price in 2019. Meanwhile, a continued declining trend of air transports inflation supported a low level of AP inflation. The government’s policy also halted the inflation rate of air transports, after increasing since 2018 due to fuel cost.4 Nevertheless, AP inflation was pressured by cigarettes post-announcement of tobacco excise increase to be implemented in 2020.5

Low inflation was also affected by structural improvement. The role of inflation expectations in forming inflation was bigger and anchored in inflation target, in line with the consistency of Bank Indonesia in controlling inflation as targeted. It was in line with estimates which indicated the increasing role of forward looking expectations in forming inflation. Moreover, the impact of exchange rate pass-through also declined due to response by producers to hold the impact of increasing price of raw material imports, which reduced the risk of rising price of final products to consumers. The decline in exchange rate pass-through impact due to the central bank’s policy in managing exchange rate stability was in line with fundamentals. Both developments held producers from abruptly increasing the price of final products should exchange rate changed.

Another structural factor supporting decreasing inflation was the positive impact of synergy in the Government and Bank Indonesia’s coordination in

controlling food inflation. The development drove VF inflation to a declining trend since 2015. Amid high horticulture inflation, some non-horticulture commodities, such as rice, chicken meat, eggs, and cooking oil, saw low inflation in 2019 which dampened a higher increase of VF inflation. The development was supported by the government’s policy in the central level to control food inflation. The policy was taken through four steps. First, strengthening regulations through some policies. Second, strengthening coordination together with Regional Governments, related institutions, and business players, including the Central and Regional Inflation Controlling Teams (or the TPIP and TPID), related to stock fulfilment, food price evaluation, and price control policy. Third, the Government monitored and supervised staple stuff stabilization across Indonesia. Fourth, special moves to penetrate the market in form of bazaar ahead of Religious and National Holidays.

Stable Financial System, Credit a Concern

Resilient economic growth was supported by a stable Indonesian financial system. Throughout 2019, the Financial System Stability Index (FSSI) remained in the normal zone, supported by good performance of financial institutions and financial market. On banking capital, the capital adequacy ratio (CAR) was manageable at 23.31% in December 2019, far above the prudential requirement.




6 The first phase of trade deal covers major issues as follows: (i) intellectual property; (ii) technology transfer; (iii) food products and agriculture trade; (iv) financial services; (v) exchange rate policy; (vi) trade expansion; and (vii) legal enforcement.

The nonperforming loans (NPL) also remained in a safe level, at 2.53% (gross NPL) and 1.18% (net NPL). Meanwhile on liquidity, banking could maintain sufficient liquidity with the ratio of liquid assets against third party funds at 20.86%. The achievement by banks to maintain positive performance amid global uncertainties, was followed with good efficiency and profitability. They were reflected by efficiency and profitability indicators, which are the operating expense to operating income ratio and the ROA ratio, at 79.58% and 2.44%, respectively.

A resilient financial system stability was supported by good transmission of monetary policy easing. Liquidity in the money market and banking was sufficient, as reflected by the high daily average of interbank money market volume of Rp19.0 trillion. The condition supported interest rate transmission in the money market, as reflected in a one-week interbank rate cut of 115 bps to 5.03% and the one-week Jakarta Interbank Offered Rate (JIBOR) rate of 119 bps to 5.05% since July 2019. Transmission to bank rates also continued, although was not optimal. The weighted average of deposit rate in December 2019 was 6.31%, down 52 bps since end of June 2019 before the BI7DRR began to be cut in July 2019. The rate of working capital loans decreased 18 bps since June 2019 to 10.09% in December 2019.

Amid a resilient financial system stability, the banking intermediary function became a concern. Bank lending growth in 2019 was 6.08%, far lower than the 2018 growth of 11.75%. Several factors from supply and demand affected the less encouraging credit development. On demand side, corporates tended to halt loan demand in line with declining exports performance and non-construction investment activities. On supply side, banks were being prudent in channeling loans by considering global uncertainties which could affect the performance of domestic corporates. A deeper loan decline was offset by bank financing to the MSMEs at 7.6%, especially to the domestic-oriented agriculture and manufacturing sectors. In line with credit development, third party funds as the main source of bank funds also slowed to 6.54%.

Low credit growth impacted the growth of M2 money supply which did not see strong increase. M2 growth was recorded at 6.5% in 2019, nearly unchanged from the 2018 growth of 6.3%. Based on components, the development was mainly affected by a less strong growth of quasi money at 6.1%, in line with a less strong intermediation process. Meanwhile, the growth of M1 money supply increased from 4.8% in 2018 to 7.4%, mainly driven by deposits which grew 9.5%, while Circulated Banknotes declined to 6.0% in 2019, lower than 7.8% in the previous year.

In line with stable financial system, the payment system remained smooth. Cash growth stayed positive amid the rapid innovation and growth of non-cash instruments. Meanwhile, non-cash payment transactions using ATM, debit card, credit card, and electronic money (E-Money) per December 2019 grew 2.45% (yoy), dominated by ATM/debit card instruments with a share of 92.92%. E-Money transactions significantly increased to 188.31% (yoy) which indicated strong public preference to use digital money.

COVID-19 Halts Global Economic Recovery in 2020

Various global economic indicators and developments until 2019 once sparked optimism on the prospect of domestic economic recovery in 2020. The recovery prospect was supported by effective macroeconomic policies taken by many countries in 2019. Moreover, the progress on first stage trade deal between the US-China at the end of 2019 also provided optimism on global economic recovery in 2020.6 The condition drove increasing economic activities in developed and emerging countries in the past two months of 2019, even continued in January 2020. Several early global indicator indexes, such as the manufacturing, export, order, production, and confidence indexes also showed improvement. Economic growth in developing countries also showed potential to be higher, including in China, India, and Brazil, despite several domestic issues in the countries were dealt with the authorities. With the condition, Bank Indonesia at the end of 2019 forecast global economic growth in 2020 to increase to 3.1%.




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7 Brexit uncertainties subsided at the end of 2019 after the winning of Conservative Party in the UK which decided to execute the Brexit on 31 January 2020.

Optimism on global economic recovery at the end of 2019 decreased global financial market uncertainties and increased foreign capital flow into emerging countries. Until January 2020, capital flow to emerging countries increased, in form of shares, bonds, or direct investment. The positive development drove appreciation in many emerging market currencies. The optimism even reduced several political risks that surfaced such as the US-Iran conflict on oil supply, the Korean Peninsula tension, and deal negotiation between the UK and European Union.7

In the development, global economic recovery process was halted after the COVID-19 widepreaded in China since the end of January 2020. COVID-19 began to spread in Wuhan, China and has different characteristics with the Severe Acute Respiratory Syndrome (SARS). COVID-19 has faster spreading level with longer incubation period. The faster spread level happened as the virus appeared close to the Lunar new year, during high traffic of people in China. Meanwhile, COVID-19 incubation period was longer and asymptotic.

Faster spread of COVID-19 directly impacted China’s economic slowdown. Data until March 2020 showed early indicators of China’s goods and commodity markets post-Lunar new year sharply decreased. Slowing economic activities were also reflected in the decline in urban mobility, total public passengers, and coal daily consumption by electricity producers. Due to COVID-19, China’s economic growth was expected to sharply decline in the first half of 2020, before recovering in line with policy responses by the Chinese Government. As China plays a large role in the global economy which reaches 16% of world GDP, and proportion of 11% of total global trade, this development is expected to disrupt the continuing global economic recovery. Bank Indonesia, in February 2020, reduced global economic growth projection in 2020 from 3.1% to 3.0%.

Further development saw COVID-19 widespreading to many countries outside of China. Until 18 March 2020, COVID-19 spreaded to 159 countries, and took more than 4,000 lives. The spread was not only in Asia such as South Korea, Singapore, and Iran, but reached Europe, with

the highest spread in Italy, and the US. The World Health Organization – United Nation on 11 March 2020 stated that COVID-19 as pandemic which required serious attention. The number of COVID-19 spread outside China which grew 13 times and the number of impacted countries which tripled within two weeks, became consideration for WHO to determine COVID-19 as pandemic. The last pandemic set by WHO before COVID-19 was the H1N1 influenza which spreaded to 214 countries and took more than 18,000 lives in 2009.

The widespread of COVID-19 could reduce global economic growth to lower than the 2019 growth through several channels. The impact of COVID-19 pandemic obstructed global economic activities mainly through several sectors: tourism, trade and investment. Slowing economic activities were caused by the COVID-19 handling strategy in many impacted countries in form of lockdown. Widespreading COVID-19 to countries outside China caused a bigger impact to global economic growth than previously expected. The travel restriction on workers or tourists from impacted countries led to a decline in global tourism. Limited economic activities due to COVID-19, especially on trade partners, also disrupted demand on domestic products and reduced exports performance. Travel restriction on workers from impacted countries may reduce investment realization due to stalled development of new industries which need foreign workers. The unfavourable development will eventually affect global economic growth through demand, supply, and confidence of economic players. With the quickly changing dynamics, Bank Indonesia forecast the 2020 global economic growth could become lower at 2.5% and followed by bigger downside risk.

A lower economic growth prospect again increased global financial market uncertainties. Data until mid-March 2020 showed COVID-19 triggered global capital flow adjustment from developing countries to safer commodities and financial assets. On one hand, stock prices in many countries sharply dropped, including in developed countries, while bond yields of developing countries sharply increased. But on the other hand, investors shifted liquidity to safe haven assets such as




US Treasury Bonds which drove down the yields sharply, caused gold price to increase rapidly, and made the Dollar index (DXY) to appreciate. The developments eventually pressured global currencies with high volatility. In the future, the impact of COVID-19 should be monitored considering that until this report was prepared, the spread of COVID-19 continues so that it has the potential to reduce global economic growth deeper, including the potential impact on the Indonesian economy.

The Increase in 2020 Domestic Economic Delayed

At the end of 2019, Bank Indonesia forecast Indonesia’s economic growth in 2020 to rise between 5.1-5.5%. The forecast was influenced by optimism on global economic recovery and commodity price improvement which were expected to support the improvement in exports and investment, especially non-construction investment. Improving exports performance will impact rising consumption due to rising income, which drives the economy to grow higher. Exports improvement will also drive the growth of non-construction investment due to rising needs of capital goods to increase output. Moreover, the growing and dominant portion of middle-income population will positively impact a resilient performance of household consumption and support the domestic economic growth.

Post-outbreak of COVID-19 in China, in February 2020, Bank Indonesia forecast the prospect of domestic economic growth to decline slightly to 5.0-5.5% in 2020. The prospect was affected by direct and indirect impact of China’s economic decline. The big role of Chinese economy in Indonesia’s economy, especially via tourism, exports, and investment, affected the forecast. The COVID-19 effect did not come from direct impact through China’s economy, but also indirect impact through spillover effect to other countries and the overall global economy which would slow. The COVID-19 spread then triggered uncertainties in the global financial market, which then caused portfolio adjustment.

Revised projection in February 2020 was based on the forecast that COVID-19 impact would reduce tourism performance and halt Foreign Direct Investment (FDI)

from China. From the tourism sector, declining tourism will reduce forex income due to lower number of foreign tourists from China which are recorded as the highest contributor for Indonesia’s tourism, more than Australia, Singapore, Malaysia. The 2019 data shows the share of Chinese tourist visits almost reached 13% of total foreign tourists to Indonesia, with forex income of 14% from the total. Based on monitoring of the main entrances, in February 2020, foreign tourist vists dropped 21.9% (yoy) and are expected to continue.

Foreign direct investment with Chinese Workers is expected to halt due to COVID-19. Chinese FDI significantly increased in the past five years, especially in Java dan Sulampua. Increasing Chinese investment was mainly in the secondary sector: base metal industry. Increasing investment, especially in Sulampua, was based on the consideration to approach the source of raw materials, mainly nickel concentrate. The increase in Chinese FDI was followed with increasing number of Chinese workers. As a result of the COVID-19 outbreak, several Chinese FDI companies in Indonesia and the local government took a number of steps to mitigate the risk of spreading the virus, including stopping the recruitment of new foreign workers from China and delaying the return of Chinese foreign workers after the Lunar New Year celebration to Indonesia. These conditions in turn has the potential to hamper the realization of Chinese corporate investment in Indonesia.

Widespreading COVID-19 to many countries, including Indonesia, gives bigger pressure to the domestic economy prospect. Limited production activities and economic activities in the countries impacted by COVID-19, including Indonesia, are caused by limited supply of goods between countries for productions, and restriction on economic activities to mitigate the spread of COVID-19. This can cause spillover effect in declining labor demand and delayed income and consumption, thus reducing domestic demand. Weakening confidence of economic players to economic growth prospect will lead to adjustment of people’s consumption behaviour in form of consumption delay, especially in visiting tourism destinations and public spaces. Unrecovered




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Based on components, exports are estimated to halt in 2020 due to lower global economic growth than previously estimated. Exports are estimated to contract around 5.2-5.6% in 2020 due to weakening global economic growth, declining trade volume, and low commodity prices. Disruption in global supply chain due to COVID-19 is also estimated to affect Indonesian exports with unavailability of materials produced in other countries. Export contraction is estimated mainly from the mining sector as the demand for main export commodities, especially from China, declines. Besides export of goods, export of services is also expected to halt due to contracting tourism visits because of COVID-19.

Investment performance is halted due to declining export performance. Investment growth is halted and expected to grow between 3.1-3.5% in 2020, lower than 2019. Export contraction holds back investment growth, especially non-construction investment. In addition, the widespread of COVID-19 causes the Government to mitigate the spread by restricting workers who come from countries impacted by COVID-19. The restriction of foreign workers from China to Indonesia also halts investment growth in the short term, especially investment from China which is generally followed by foreign workers from the country. Nevertheless, continued constructions of government infrastructure projects are expected to maintain investment growth

Component 2019 2020 Projection

2021 Projection

Gross Domestic Product 5.0 4.2-4.6 5.2-5.6

Private Consumption 5.2 4.6-5.0 5.0-5.4

Government Consumption

3.3 2.1-2.5 2.9-3.3

Gross Fixed Capital Formation

4.5 3.1-3.5 5.9-6.3

Export of Goods and Services

-0.9 -5.6--5.2 6.0-6.4

Import of Goods and Services

-7.7 -9.3--8.9 4.6-5.0

Component 2017 2020 Projection

2021 Projection

Gross Domestic Product 5.0 4.2-4.6 5.2-5.6Agriculture, Forestry, and Fisheries 3.6 3.1-3.5 3.4-3.9Mining and Quarrying 1.2 0.0-0.4 1.4-1.8Manufacturing 3.8 3.3-3.7 4.1-4.5Electricity, Gas and Clean Water 4.3 4.0-4.4 5.1-5.5Construction 5.8 4.4-4.8 6.3-6.7Trade, Hotel, and Restaurant 4.8 4.1-4.5 5.5-5.9Transportation and Communication

8.1 7.4-7.8 8.0-8.4

Finance, Real Estate and Corporate Service

7.1 5.6-6.0 6.2-6.6

Services 6.8 4.9-5.3 5.8-6.2

Table 3. GDP Growth Projection from Expenditures

Source : BPS and Bank Indonesia

Table 4. GDP Growth Projection from Sectors

Percent Percent

global conditions will reduce investor appetite to make investment in Indonesia in line with weakening global demand on domestic products and limited domestic demand. Increasing uncertainties cause investors to make portfolio adjustment and cause capital outflows from emerging markets, including Indonesia, and give pressure to the Rupiah. Bank Indonesia forecasts COVID-19 will pressure Indonesia’s economic growth in the short term, to then recover in an increasing trajectory. With the risks, Bank Indonesia revised down the 2020 Indonesian economic growth prospects to 4.2-4.6%

level, especially contruction investment. The plan to reduce sectors in the Negative Investment List (DNI) and changing the term into the Positive Investment List (DPI) is expected to drive the realized foreign investment. Bank Indonesia’s accommodative monetary policy also drives the reduction in cost of investment and gives incentive for investment increase by business players.

Private consumption is expected to reduce in 2020 in the range of 4.6-5.0%. Worries over COVID-19, the government’s call to reduce mobility, and declining confidence of future economic growth affect the pattern of public consumption behaviour. The people tend to increase consumption on basic needs and delay




other consumptions. Consumptions such as clothes, transports, household goods, and leisure are expected to be negatively impacted. Meanwhile, consumption of basic needs, especially staple foods, is espected to remain stable amid worries over COVID-19 spread. Although growth is limited, consumption growth remains resilient. The growing and dominant portion of middle-income population creates positive impact to a resilient household consumption. Middle-class population generally works in the formal sector and have fixed income, therefore COVID-19 has minimal impact to the income level of that group.

Government consumption is expected to have a positive growth with better spending quality amid an expected slowing government revenue. Government consumption in 2020 is expected to grow between 2.1-2.5%, with fiscal policy aimed at accelerating competitiveness through innovation and human resources quality strengthening. In relation with COVID-19, the fiscal stimulus program is focused on these main priorities: increasing the resilience of sectors impacted by COVID-19, safeguarding people’s purchasing power, and maintaining business continuity. The policy then spurred Ministries and Institutions as well as Regional Governments to accelerate spending especially in the first quarter of 2020 as a move to reduce pressure on economic growth due to COVID-19. The Government will also realocate budget to concentrate on the health sector and social aid from low-priority goods and capital spending.

The Government also strengthens policy to minimize the impact of COVID-19 to the economy. In mid-March 2020, the Government has announced stimulus which in overall is estimated to reach Rp33.3 trillion or around 0.2% of GDP, as a move to mitigate the COVID-19 impact to the economy. The stimulus consists of stimulus phase I (amounting Rp10.4 trillion or 0.06% of GDP) and phase II (amounting Rp22.9 trillion or around 0.19% of GDP) focused on health, social safety net, as well as the improvement of people’s economy and businesses. Stimulus phase I announced on the early COVID-19 outbreak was aimed at providing incentives for businesses impacted by COVID-19 by supporting consumption. Along with the widespread of COVID-19, the Government announced stimulus phase II through tax relaxation to boost spending and purchasing power, non-fiscal relaxation to boost trade traffic, and food policy to ensure supply. Bank Indonesia appreciates

the Government’s fiscal stimulus move in minimizing the COVID-19 impact, which is expected to prop up economic growth prospect.

Import growth is halted due to weak domestic demand and export performance, which is expected to contract in the range of 8.9-9.3% in 2020. Weak non-construction investment causes import of capital goods to stall. Import substitution policy in form of B30 program acceleration and other policies, such as the revision of import duty limit, helps decrease import growth. Moreover, the Local Content Requirement Optimization policy, both in electricity projects as well as other sectors, potentially halts higher import growth.

The prospect of 2020 BoP is estimated to remain stable supported with declining current account deficit. CAD is expected to range between 2.5-3.0% of the GDP in 2020. The prospect is affected by improving net exports in line with slowing imports that are deeper than slowing exports. Export diversifications to non-traditional markets can hold export performance amid a world GDP slowdown. Import substitution policy, import duty limit revision, and optimization of local content requirement also support a controllable CAD. Nevertheless, increasing uncertainties due to the COVID-19 pandemic reduce investor appetite to do direct investment. This causes declining foreign capital inflow into Indonesia, holding the capital and financial account surplus.

Inflation in 2020 is expected to remain under control in the target of 3.0±1%. Controlled inflation is supported by steady core inflation amid increasing VF and AP inflation. Anchored inflation expectations and weak demand will create stable core inflation. VF inflation is estimated to increase in line with weather disruption and limited food distributions due to limited mobility in the COVID-19 mitigation. Moreover, the updated 2018 Living Cost Survey using the geometric mean method and effective as of January 2020 also contributes to the decreasing fluctuation of inflation. Spatially, inflation prospects in most regions are expected to support the achievement of national inflation target, propped up by stronger cooperation between regions through TPID.

Bank intermediation faces challenges due to the COVID-19 impact. Credit growth is estimated to range between 6.0-8.0% in 2020, while the growth of bank’s third party funds is estimated to reach 6.0-8.0% with sufficient liquidity.




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A lower credit growth projection compared to previous estimates is in line with stalled domestic economic activities and unsupportive global growth conditions. Meanwhile, financial market financing is estimated to halt due to portfolio adjustment by investors in facing uncertainties caused by COVID-19.

Global and domestic economic prospects in 2020 much depend on the handling process and economic recovery post-COVID-19. The risk of continued spread of COVID-19 in a longer period and wider scope can cause a slowdown of global GDP growth and global trade volume, which then can decrease commodity prices deeper. This can correct the prospect of Indonesia’s economic growth to be lower. With connected trade channels and financial system between countries nowadays, the impact of global economic decrease can be quickly transmitted to other countries. Ineffective and inefficient handling by impacted countries can cause global and domestic economic growth prospects to be lower than expected.

Domestic Economic Prospect to Improve in 2021

The 2021 global economic growth is expected to increase along with global economic recovery post-ending of COVID-19 pressure. Stimulus policy by the Chinese Government and authorities in other countries is aimed at mitigating the impact of COVID-19 spread to economic growth. Accommodative global monetary policy in 2020 will support investment growth and have positive impact to economic growth in the next periods, including 2021. Stronger coordination between countries and international agencies in mitigating the impact of widespreading COVID-19 also contributes. With the estimates, global economic growth in 2021 is estimated to increase around 3.7%, supported by the improvement of trade, tourism and investment. In line with that, global trade volume and commodity prices are expected to grow better along with increasing global demand.

The prospect of global economic recovery after the end of COVID-19 supports the 2021 economic growth which is estimated to increase to 5.2-5.6%. improving global economic growth and commodity prices in line with returning production activities and global investment post-ending of COVID-19 pressure, which boost domestic economic recovery. Improving global conditions will increase demand to Indonesian commodity exports. Domestic policy in form of increasing copper export quota, downstreaming, and industrial zones development, also causes positive impact to exports improvement. Diversification of export products and destinations will also continue, especially to emerging countries which will be a backbone global economic growth in the future. Improving exports in turn will boost investment, especially non-construction investment. Investment improvement is also supported by the Government’s move to fix investment climate through the omnibus law proposal on Job Creation and Taxation Facilities for Economic Strengthening. Moreover, Bank Indonesia’s accommodative policy boosts economic financing which will have positive impact to economic growth in the next periods. Private consumption is expected to remain resilient, supported by increasing income especially from exports improvement.

Economic stability remains resilient, making inflation under control at the target of 3.0±1%. The prospect is affected by anchored inflation expectations, manageable demand, and improving external conditions, making core inflation to remain under control. The prospect of volatile food inflation remains under control, supported with stable food inflation prospects in most regions. The prospect is supported by stronger regional cooperation in maintaining food supply through TPID which takes part in achieving national inflation target.




POLICY SYNERGY OF BANK INDONESIA WITH THE GOVERNMENT AND RELEVANT AuTHORITIES

A resilient Indonesia’s economy amid global economic slowdown was a result of policy synergy by the Government, Bank Indonesia, and relevant authorities. Policy response was aimed at driving the economy to recover toward its optimum trajectory. The 2019 economic dynamics indicated that Indonesia’s economic growth and credit growth should be driven toward their optimum capacity. The drive was to increase the economic growth level, as well as shortening the growth slowdown cycle to quickly return to the optimum level. The policy response could be taken because at the same time economic stability remained resilient, giving room for accommodative policy to increase economic growth without creating impact that could disturb stability.

In the implementation, policy synergy was aimed at driving economic growth momentum, maintaining economic stability and financial system stability, as well as strengthening economic structure. In this regard, the Government in 2019 increased fiscal policy stimulus to boost economic growth, by safeguarding fiscal continuity. Fiscal policy was implemented through three main strategies: mobilizing income by keep strengthening investment climate, increasing spending quality to be more effective and productive in supporting priority programs, and driving efficiency and creative financing. The three strategies supported a sustainable fiscal prospect with the realized 2019 budget deficit under control below 3%, at 2.2% of GDP. The development in overall caused the government’s debt in 2019 to remain healthy at 30.2% of GDP.

Structural policy was pursued as part of policy synergy to accelerate the transformation of Indonesia’s economy to become a developed country. The implementation of National Medium Term Development Plan 2020-2024 is very strategic to achieve Indonesia’s vision to become developed country as targeted in the National Long Term Development Plan as the final phase of the 2005-2025 plan. In this regard, the Government has set five main strategies to accelerate economic transformation. The five strategies cover HR development by increasing expertise competence and mastering science and technology, infrastructure development to support industry connectivity and tourism, regulation simplification through omnibus law focused on the enactment of Law on Job Creation and Law on Taxation Facilities for Economic Strengthening, bureaucracy

simplification, and policy to reduce economic dependence on natural resources toward competitive and added-value manufacturing and services industries. Economic transformation is supported by policy synergy between Bank Indonesia, the Government, the OJK, and relevant authorities consistently to continue structural reform.

Bank Indonesia pursued accommodative policy mix to be optimal in maintaining economic stability and driving economic growth. Policy direction was taken after reviewing the good condition of economic stability amid economic and credit growth below their optimium trajectory. The condition gave room for easing for Bank Indonesia’s policy to boost economic growth momentum, without giving disruption to economic stability. Bank Indonesia was confident the policy mix taken, from monetary policy, macroprudential policy, and payment system policy, to other supporting policies, had complementary and strengthening relationships to support economic growth sustainability.

Selecting instrument options and timing of accommodative Bank Indonesia’s policy mix takes into account the dynamics of the global financial market. High uncertainties in the global financial market in the first half of 2019, became Bank Indonesia’s consideration in holding the policy rate BI7DRR. Amid unfavorable global conditions, Bank Indonesia consistently focused on the effort to maintain sufficient banking liquidity to control financial system stability. The step was taken by strengthening monetary operations strategy and maintaining the Rupiah exchange rate stability. Policy response was seen to further maintain economic stability and give room for monetary policy easing to boost economic growth momentum. However, considering high uncertainties in the global financial market until June 2019, Bank Indonesia chose to ease monetary policy by reducing the Rupiah Minimum Reserve Requirements in June 2019. The room for monetary policy easing through the BI7DRR policy rate was taken by Bank Indonesia in the second half of 2019 after global financial market uncertainties post-FFR reduction in July 2019. Furthermore, accommodative Bank Indonesia’s policy mix was supported by other Bank Indonesia policies such as macroprudential policy, payment system policy, and other supporting policies.




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BANK INDONESIA POLICY MIX

8 Warjiyo, Perry. (2016). Policy Mix of Central Bank: Principal Concept and Bank Indonesia’s Experience. BI Institute Central Banking Series No. 25.9 Warjiyo, P., & Juhro, S.M. (2016). Central Bank Policy: Theory and Practice. PT Raja Grafindo Persada.

Foreign Capital Flow

(Forex Reserves Sufficiency)

Balanced Intermediation

(Optional Loans)

Efficiency and Inclusion

(Financial Market Deepening)

Trilemma Macroprudential

Policies

Trilemma Monetary

Policies

Exchange Rate Stability

(Consistent with fundamental and according

to market mechanism)

Price Stability (Considering sustainability

of economic growth)

Financial System Stability

(Sistemic Risk - cross section and time series)

Picture 1. Policy Mix Framework of Bank Indonesia

Source: Wajiyo dan Juhro (2016)9

As mentioned previously, the domestic economy in 2019 was indicated to be below its optimum trajectory in business and financial cycle. Economic growth did not increase, reaching 5.02% due to declining exports, which then affected the declining non-construction investment and stalled household consumption. The condition caused economic activities to move below its potential capacity. In accordance, credit growth also declined due to interactions of weakening demand and reduced supply. The 2019 credit growth was recorded at 6.1%, far lower than the 2018 result of 11.8%. The development also indicated the same thing: Indonesia’s financial cycle still moved below its optimum level.

At the same time economic stability remained under control, with an indication to improve. Price stability remained under control with declining inflationary pressure. The 2019 CPI inflation remained within the target range at 2.72%, down from 2018 of 3.13%. External stability was also under control supported by the surplus in Indonesia’s BoP in line with increasing foreign capital inflow and decreasing current account deficit. Increasing foreign capital inflows were affected by highly competitive domestic financial assets and good domestic economic prospects, as well as reduced global financial market uncertainties at the end of second half of 2019. The development then drove the strengthening of Rupiah exchange rate which averaged 0.76%. Moreover, financial system stability remained manageable, supported with high CAR, which reached 23.31%, sufficient liquidity, and low credit risk with gross NPL reaching 2.53%.

Bank Indonesia took policy mix to be optimal in maintaining economic stability and driving economic growth. Policy mix was made to find balance between managing monetary stability and financial system stability in supporting economic growth sustainability. Bank Indonesia’s policy mix concept was based on complementary and strengthening close relationship between macroeconomic stability and financial system stability.8 In this regard then on one hand, monetary policy was aimed at optimizing the effort to maintain price stability, exchange rate stability, and capital flow. Price stability was managed to be consistent with sustainable economic growth. Exchange rate stability was maintained in line with the fundamental

by maintaining market mechanism process, with good management of capital flow to guard external resilience. On the other hand, macroprudential policy was directed to ensure good financial system stability, balanced and healthy intermediary function, and efficient and inclusive financial sector role could grow fast (Picture 1). For the last aspect, the role of financial market deepening was important to achieve a more efficient and inclusive financial market.9

Bank Indonesia adopted an accommodative policy in 2019 by considering the dynamics and prospects of the economy and consistent with the policy mix framework. Policy direction was taken after reviewing the stable economic conditions while economic and credit growth were below their optimum trajectory. The condition gave room for easing for Bank Indonesia’s policy to drive economic growth momentum, without disturbing economic stability. In line with the policy direction, Bank Indonesia eased monetary policy by cutting the BI7DRR and Minimum Reserve Requirements. The policy was strengthened with exchange rate policy in line with the fundamental and moving market mechanism as well as monetary operations strategy policy to maintain sufficient liquidity and support policy mix transmission.




Accommodative macroprudential policy was taken to boost credit as a source of financing. In addition, payment system policy and financial market deepening policy, as well as international, MSME, and sharia finance and economy development policies were strengthened to boost economic growth momentum.

Monetary Policy

Bank Indonesia pursued accommodative monetary policy in 2019 by optimizing various policy instruments. As mentioned previously, the accommodative monetary policy remained consistent with the effort to maintain economic stability and drive economic growth momentum. Bank Indonesia was confident monetary policy easing would not pressure economic stability as at the same time inflation prospect was low, foreign capital inflow potentials were large, and financial system stability remained strong. The condition gave room for monetary policy easing which could drive economic growth, but maintaining economic stability.

Bank Indonesia implemented accommodative monetary policy by reducing the Minimum Reserve Requirements and policy rate. The room for monetary policy easing was utilized by taking into account low inflation forecast and attractive yields of domestic financial assets investment. Moreover, monetary policy easing was a pre-emptive measure by Bank Indonesia to drive domestic economic growth momentum amid slowing global economic conditions.

In the development, the strategy of instrument options to support accommodative policy direction would take attention of sufficient bank liquidity and global financial market uncertainties. In June 2019, Bank Indonesia reduced its minimum reserve requirement by 50bps to 6.00%. The reduction came after considering high uncertainties in the global financial market, making monetary policy easing through the reduction of minimun reserve requirements as the optimal option. The reduction added bank liquidity of Rp25.3 trillion, as an additional for economic financing. Bank Indonesia utilized the room for policy rate easing in July 2019 by cutting 25bps of the BI7DRR to 5.75%. After taking into account reduced uncertainties in the global financial market post-FFR cut. Along with more conducive conditions in the global financial market and still-competitive domestic financial assets, Bank Indonesia continued cutting BI7DRR by 25bps respectively in August, September, and October

2019 to 5.00% at the end of December 2019. Finally, Bank Indonesia reduced the minimum reserve requirement by 50bps respectively in November 2019 to 5.5%.

Bank Indonesia also continued strengthening monetary operations strategy to ensure sufficient liquidity in the money market and accelerate monetary policy transmission. In the first half of 2019, monetary policy was focused on strengthening monetary operations strategy to maintain sufficient liquidity. Bank Indonesia implements monetary operations by redistributing liquidity on both sides, absorption and injection. The two-sided monetary operation was held through regular and scheduled auctions, with variable rate tender method based on market mechanism. Moreover, Bank Indonesia strengthened monetary operations by matching open market monetary operation instruments through the implementation of government bonds reverse repo for all tenors from seven days to 12 months. To ensure sufficient liquidity in the money market, coordination of all levels between Bank Indonesia, the Finance Ministry, and banking continuously strengthened.

Bank Indonesia consistently pursued exchange rate policy to keep Rupiah according to its fundamental value by maintaining market mechanism. The Rupiah stabilization policy was taken to mitigate excessive volatility to support expectations of economic players and ease decision making by economic players. In this regard, Bank Indonesia pursued the stabilization policy through triple intervention strategy, both in the spot market, DNDF market, or purchase of the Government Bonds from the secondary market. To support the effectiveness of exchange rate policy, Bank Indonesia also continued optimizing monetary operations to ensure market mechanism and sufficient liquidity in both the money market and forex market.

Monetary policy easing in 2019 can generally be transmitted well and with adequate bank liquidity adequacy. Easing liquidity can maintain sufficient liquidity on the money market and banks to remain adequate, as reflected in the high daily average of interbank money market volume of Rp19.0 trillion as well as the big Liquid Assets against Third Party Funds ratio of 20.9%. Interest rate transmission in the money market went well, as reflected in the decline of one-week interbank money market rate by 115 bps to 5.03% and one-week JIBOR rate by 119 bps to 5.05% since July




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Source : Bank Indonesia Source : Bank Indonesia

Graphic 14. Policy Rate and PuAB O/N Graphic 15. Bank Credit Rate

2016 2017 2018 2019

8.25

7.75

7.25

6.75

6.25

5.75

5.25

4.75

4.25

3.75I II III IV I II III IV I II III IV I II III IV

LF Rate

5.75

5,00

4,25

BI7DRR(After 19/08/16)

O/N Interbank Money Market Rate

DF Rate

BI Rate

2016 2017 2018 2019

15

14

13

12

11

10

9

8 I II III IV I II III IV I II III IV I II III IV

Consumer Loans

Weighted average lending rate

Investment Loans

Working Capital Loans

2019 (Graphic 14). Bank rate transmission continued, but not yet optimal. The weighted average of deposit rate in December 2019 was 6.31%, down 52 bps since end of June 2019 before BI7DRR was cut in July 2019. Interest rate of working capital loan declined 18 bps since June 2019 to 10.09% in December 2019 (Graphic 15). The

decline in bank interest rates was followed by the decline of corporate bonds and one-week Government Bonds by 72 bps and 126 bps, respectively, since July 2019.

Macroprudential Policy

Amid a sustained stability, Bank Indonesia pursued accommodative macroprudential policy. In 2019, macroprudential policy was focused on driving economic financing in line with the financial cycle which showed room to increase intermediation capacity. The effort was made by changing the target range of the Macroprudential Intermediation Ratio (RIM) from 80-92% to 84-94%. In line with the move to strengthen intermediation, banking capacity was strengthened by expanding by expanding the loan components accepted by banks, which is calculated in the RIM formula.

In addition to improving RIM, in 2019 Bank Indonesia re-loosen its provision regarding Loan to Value/Financing to Value (LTV/FTV) ratio for Property and Down Payment for Automotive by relaxing around 5-10% from existing regulations. The relaxation has considered a need to boost the property and automotive sectors, while monitoring the backward and forward linkages. The improvement of LTV/FTV for Property and DP for Automotive was also aimed

at supporting a sustainable development. An adjustment was made by adding an additional 5% reduction for green financing of Property and Automotive to reduce potential disruption to financial system stability which came from environmental damage.

Macroprudential policy was improved by maintaining prudential principles. Bank Indonesia continuously maintained that the effort to boost bank intermediation would not disrupt financial system stability. In RIM improvement, total disincentive parameters for banks with below target RIM were measured based on the bank’s resilience and risk levels. The requirement was implemented by calculating credit risk and capital of banks. Therefore, banks with low risk levels and resilience were expected to do higher intermediation, while banks with relatively high credit risk and/or minimal capital were given leeway to make initial improvements. Prudential requirements were also implemented to bank loans which would be recognized as RIM component, including through the type and period of loans. Meanwhile, the relaxation in easing the LTV/FTV ratio for Property and DP for Automotive, could only be implemented by banks with credit risk below a certain level.

Several accommodative macroprudential policies positively impacted the performance of financial system. With the increased of bank capacity, the effort to boost intermediation through RIM showed positive result. Although intermediation from bank lending was relatively moderate in 2019 (at 6.1%, compared




to that of 2018, 11.7% yoy), bank financing which met RIM prudential requirement through the purchase of corporate bonds, could grow 15.4% (yoy). This also impacted the increasing number of banks within RIM target range. Rising intermediation coming from the purchase of corporate bonds was in line with the initial objective of RIM implementation, which is to increase the role of banks in supporting financial market deepening but still maintaining intermediation quality. However, the relaxation of policies on LTV/FTV for Property as well as DP for Automotive, were not fully reflected in the credit growth of both sectors, hence needing longer time to evaluate the impact of policy easing. But the sustained and improving credit risk of property and automotive sectors at the end of 2019 was expected to prop up the performance of both sectors in the future.

Macroprudential supervision strengthening completed the macroprudential policies. Bank Indonesia continuously strengthened supervision to identify instability potential that could create systemic risk to the financial system. Therefore, supervision continued to be strengthened by increasing surveillance to banking and related sectors, as well as integrated and completed monitoring in macroprudential, monetary, and payment system. Monitoring was supported by accurate and complete data and information.

Macroprudential supervision was strengthened in crisis mitigation and resolution through the Crisis Management Protocol (CMP). The thematic National Crisis Simulation was initiated at the end of 2019, completing previous simulation schemes, both bilateral or full dress in the Financial System Stability Committee framework. Crisis simulation was an important thing in strengthening Bank Indonesia’s CMP. The activity was aimed at testing the readiness of guidance implementation, SOP, instruments, and other organizational tools during rising pressure to the financial system.

The crisis simulation was themed “Intermediary Bank”, carried out to test the effectiveness of coordination between Bank Indonesia and LPS in the licensing of Intermediary Banks as one of the resolution instruments. The simulation was also coupled with the Bank Indonesia Payment System to test the weekend resolution process. As a follow-up of crisis simulation, the independent observer team which monitored the

intermediary bank simulation process had created a comprehensive evaluation report. The result was used to improve the intermediary bank establishment process in Bank Indonesia including the need for improvement and strengthening legal aspect in the intermediary bank establishment process.

Policy mix between financial sector authorities also contributed to maintain the domestic financial system stability. In 2019, coordination and cooperation with other financial authorities in safeguarding stability were strengthened. As a part of strengthening financial sector crisis mitigation and resolution, multilateral coordination between the Finance Ministry, OJK, LPS in the the KSSK was renewed. On a bilateral basis, the need to maintain the momentum of domestic economic growth, amid global economic uncertainty, become the focus of macroprudential and microprudential policy synergies in 2019.

In 2019, macroprudential and microprudential coordination works in harmony. Policy synergy was focused on the need to maintain domestic economic growth momentum amid various global economic dynamics. Coordination mechanism both in technical and high levels created macroprudential and microprudential policies which could maintain the financial system, following the effort by Bank Indonesia and OJK to always coordinate in every formulation of regulatory instrument. Joint effort in maintaining financial system resilience was made through: coordination on bank examination, both in planning and evaluation of examination results, coordination in implementing joint stress test of banking, and coordination in updating systemic banks as mandated by the Law on Financial Sector Crisis Mitigation and Resolution.

Synergy among financial sector authorities was completed by strengthening data and information infrastructure through integration of bank reporting. At the end of 2019, Bank Indonesia, OJK, and LPS agreed to integrate reporting from banking sector through one portal mechanism called Pelaporan.id. The integration was built to minimize redundant and inconsistent information while increasing efficiency in banking operations considering banking previously submit reports to the three authorities through different applications. In addition, the reporting integration was aimed at creating One Banking Data to realize banking data access




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and exchange needed anytime by each authority while increasing the quality of reporting data. In the future, it is expected that the need of authorities in the financial sector to obtain data in a quick and comprehensive way could be fulfilled through the integration, thereby supporting decision and policy making processes.

Throughout 2019, Bank Indonesia was active in supporting sustainable financing initiatives. Besides green financing-oriented macroprudential policy, a form of support was made through memberships in international forums. On 6 November 2019, Bank Indonesia officially became a member of the Network for Greening the Financial System (NGFS). It is a coalition on a voluntarily basis of central banks and supervisors for exchange information, best practices, and contribution of environment/climate risk management development in the financial sector, as well as fund mobilization toward sustainable growth. Bank Indonesia’s involvement in NGFS was made through contribution on two major issues: (i) analysis framework development to perform risk assessment related to environment and the impact and transmission on macroeconomy and financial system, and (ii) strategy in increasing the share of green finance in the financial system, including strengthening the role of central banks and supervisors as green finance supporting institutions, such as developing green financing instruments and placement of forex reserves in green financing instruments. Besides NGFS, active participation from Bank Indonesia in supporting green financing was made via participation in the Interest Group on Sustainable Finance – EMEAP WGBS and with other ASEAN Central Banks initiated the formation of Task Force on the Role of Central Banks in Addresing Climate and Environment-Related Risks, in addition to participations in international forums with similar themes.

Bank Indonesia will keep pursuing accommodative macroprudential policy as countercyclical measures, by upholding prudential principles. Macroprudential policy in 2020 will be expanded to support financing in the productive sector with good performance, including for the development of MSME and priority sectors, especially export and tourism. Macroprudential policy will be taken by strengthening coordination with related authorities, to achieve intermediary function by maintaining financial system stability. Growing confidence on future economic

prospect, as well as increasing corporate confidence, are estimated to increase the performance of bank intermediation.

Payment System Policy

In 2019, Bank Indonesia consistently strengthened payment system policy to boost economic growth, especially digital finance and economy development, by maintaining financial system stability through prudent risk management. Payment system infrastructure strengthening and development, both large value or retail, were made to maintain and increase a smooth, secure, reliable, and efficient payment system.

On non-cash, the payment system policy in 2019 was directed to the effort to support electronification and efficiency of payment for economic transactions. In that regard, the non-cash payment system policy was also directed to support the effectiveness of government programs, including the distribution of social aid program. On cash, Bank Indonesia’s policy was directed to maintain the availability of fit money across Indonesia evenly, in Indonesia’s wide geographics. Bank Indonesia’s payment system policy direction in 2019 was also oriented to respond to rapid digitalization development in Indonesia. In that regard, Bank Indonesia issued the 2025 Indonesian Payment System Blueprint as a move to build a healthy ecosystem for the development of digital finance and economy in Indonesia.

A. Non-Cash Payment System Policy

Issuance of 2025 Indonesian Payment System Blueprint

Facing policy challenges in a complex digital era, central bank is expected to understand the shifts, new opportunities, and risks that could appear in maintaining the quality of public services. This is important considering the current digitalization flow can limit competitions, kill innovations, trigger economic inefficiencies, and increase concentration risks. In payment system, digitalization also drives the risk of natural monopoly practice due to the economic of scale effect and positive network effect from payment system infrastructure provision by the private sector. The condition then drives Bank Indonesia to formulate the 2025 Indonesian Payment System Blueprint. The 2025 blueprint is fully oriented in




Picture 2. The Vision of 2025 Indonesian Payment System

The 2025 Indonesia Payment System (or IPS) supports national digital economic-finance integration to guarantee central bank’s function in the process of money distribution, monetary policy, and financial system stability, as well as supportingfinancial inclusion

1

The 2025 IPS supports digitalization of banking as the main institution in digital economy-finance through open-banking or utilization of digital technology and data in the financial business2

The 2025 IPS guarantess interlink between fintech and banking to avoid risk of shadow-banking through digital technology regulation (such as API), business cooperation, or corporate ownership3

The 2025 IPS guarantess balance between innovation and consumer protection, integrity and stability as well as healthy business competition through the implementation of KYC & AML-CFT, requirement of data/information/public business disclosure, and implementation of regtech and suptech in reporting requirement, regulation and supervision

4

The 2025 IPS guarantess national interest in cross-country digital economy-finance through the requirement of processing all domestic transactions locally and cooperation of foreign operators with domestic parties, by ensuring reciprocal principle

5

*) IPS aspects include instruments, mechanisms, institutions, infrastructure, and cross-border, including institutional synergy and coordination

the effort to build a healthy ecosystem as a guidance for digital finance and economy development in Indonesia. Through the 2025 blueprint, Bank Indonesia also offers new concept of economic-financial inclusion through the utilization of digital solutions as well as digitally-recorded granular data and information to achieve the economic-financial inclusion. The 2025 blueprint will become Bank Indonesia’s contribution in creating a healthy digital ecosystem as well as guaranteeing the implementation of Bank Indonesia’s task and authority as a central bank. Moreover, the 2025 blueprint will weave a huge effort of Indonesia’s economy structural reform toward digital transformation which integrates the role of all economic players, big and small, in the central and regions, in an inclusive digital ecosystem.

Five visions of the 2025 Indonesian Payment System is formulated and becoming the end-state of Bank Indonesia’s long-term policy. The new vision of 2025 Indonesian Payment System (or IPS) (Picture 2) will weave the transformation process of future Indonesia’s economy toward digital that will be realized through five initiatives. Five initiatives of the 2025 blueprint will be implemented directly by Bank Indonesia according to its task and authority as well as through productive

collaboration and coordination with related ministries or institutions and industries through three approaches: industrial, regulatory, and collaborative approaches. The five initiatives are: (i) developing Open Banking, (ii) strengthening retail payment system, (iii) strengthening financial market infrastructure, (iv) developing public infrastructure for data, and (v) strengthening regulation, licensing, and supervision. The five initiatives will be implemented in parallel by five Working Groups (WGs). The scope of work and deliverables of the WGs will mutually strengthen each other in realizing the vision of 2025 IPS.

Strengthening Payment System Infrastructure

In 2019, the performance of Bank Indonesia payment system was good. This could be seen from the system

availability according to the service level determined and there was no system down, guaranteeing the service of national payment system transactions which continued seeing increasing volume and transaction value. The good performance was seen by all SPBI infrastructure covering Bank Indonesia Real Time Gross Settlement (BI-RTGS), Bank Indonesia Scripless Securities Settlement System (BI-SSSS), and Bank Indonesia National Clearing System (SKNBI).




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Consistently, Bank Indonesia continued to strengthen infrastructure, both for payment system and settlement as well as other financial market infrastructure. Bank Indonesia continued to increase the reliability of BI-RTGS, BI-SSSS, SKNBI, and BI-Electronic Trading Platform (BI-ETP). The development of those four infrastructures referred to stakeholder needs, best practice and international standard. The infrastructure development also considered the latest development trend globally including technology. The development was also aimed at strengthening risk management aspect in the payment system, especially the one operated by Bank Indonesia.

Improvement of Operational Policy of Bank Indonesia National Clearing System

Rapid digitalization development drove Bank Indonesia to increase the quality of its payment system service, especially for retail payment. One things that was executed in 2019 was the development and improvement of SKNBI operational policy. The improvement of SKNBI operational policy was aimed at fulfilling public needs for transaction settlement in larger amount, faster, and efficient while increasing service to customers in using SKNBI. The improvement consisted of:

1. Adding the settlement period of SKNBI in Fund Transfer Service from five times per day to nine times per day and Regular Payment Service from two times per day to nine times per day;

2. Accelerating the service level agreement for Electronic Financial Data transmission of Fund Transfer Service and Regular Payment Service from respectively no later than two hours to respectively no later than an hour;

3. Accelerating the service level agreement for fund forwarding to customers for Fund Transfer Service and Regular Payment Service from respectively no later than two hours to respectively no later than an hour;

4. Changing the capping of Fund Transfer Service and Regular Payment Service transactions from Rp500 million to Rp1 billion; and

5. Changing the transaction fee of Fund Transfer Service imposed by Bank Indonesia to banks from Rp1,000 to Rp600 per Electronic Financial Data, and from banks to customers from maximum Rp5,000 to Rp3,500 per transaction.

The Implementation of Anti-Money Laundering and Terrorism Funding Prevention

Since 1 July 2018, Indonesia has been stated as the Observer Financial Action Task Force (FATF). As a consequence of the Observer status, Bank Indonesia will take further phase in the FATF membership process: Mutual Evaluation (ME). It is a procedure to evaluate the compliance level of a country to 40 FATF Recommendations and 11 Immediate Outcomes, before it sees the status increased as Member in FATF.

In 2019, Bank Indonesia as one of the Regulatory and Supervisory Institution and the Money Laundering Crimes Committee Member performed some preparations to face the ME FATF, which started in September 2019. In preparing for the ME FATF, Bank Indonesia implemented three strategies: (i) strengthening risk-based Anti-Money Laundering and Terorrism Funding Prevention (or APU PPT) implementation; (ii) communication and coordination; and (iii) face to face meeting with the Assessor Team.

One of the efforts to strengthen APU PPT implementation was realized by expanding international cooperation in APU PPT. In April 2019, Bank Indonesia and the Bank of Thailand (BoT) agreed to sign a Memorandum of Understanding in Chiang Rai, Thailand. The agreement became a positive move by Bank Indonesia in supporting Indonesia’s Government to become member of the FATF, while showing Bank Indonesia’s commitment to fight against money laundering and terrorism funding as well as complying with FATF’s recommendations and guidance. The MoU adds the number of APU PPT cooperations, with Banko Sentral Ng Pilipinas (2018) and Bank Negara Malaysia (2013).

The signing of Memorandum of Understanding has three objectives: first, strengthening cooperation in payment system to realize a fast, secure, efficient, and reliable payment system; second, promoting financial innovation; and third, strengthening implementation of APU PPT policy. The MoU becomes the basis of Bank Indonesia – BOT cooperation for the present and future. The cooperation will be conducted through some activities such as policy dialog, information exchange, innovation collaboration, and capacity building.




Strengthening Electronification Program

Expansion of Family Hope Program and Non-Cash Food Aid

Since the implementation of non-cash social aid in 2016, Bank Indonesia has continuously supported the Government in implementing the Family Hope Program (Program Keluarga Harapan/PKH) and Non-Cash Food Aid (or BPNT). In 2019, Bank Indonesia continued supporting the expansion of BNPT distribution given to 15.6 million beneficiary families in 514 regencies/cities as well as PKH distribution in non-flat scheme to 10 million KPM in 511 regencies/cities. The distribution of PKH and BNPT social aid was integrated in one card, the Prosperous Family Card (Kartu Keluarga Sejahtera/KKS), which can be used as PKH and BNPT fund distribution media for beneficiary families. Furthermore, the families could use KKS to make transactions in e-warong.

Expansion of Transaction Electronification in Regional

Governments

The expansion of Regional Governments’ electronification transactions is part of the Non-Cash National Movement (GNNT) to increase financial inclusion through technology utilization, product innovation and distribution channels, as well as promoting electronic financial transactions in Regional Governments. The program was directed to realize better financial governance and increase regional income potentials. The electronification program of Regional Governments’ transactions in 2019 was focused on the facilitation, monitoring, and evaluation of online Fund Disbursement Warrant (or SP2D Online) implementation and payroll implementation in Regional Governments or Non-Regional Governments (Regional Public Service Agencies and Regional-Owned Companies). Transaction electronification in Regional Governments was prioritized in expenditures (capital spending, goods and services, employee spending, as well as social aid). Meanwhile on revenue, generally it was initiated on electronification of automotive tax and market retribution.

In this regard, Bank Indonesia continuously tried to promote the implementation of transaction electronification program in Regional Governments by coordinating with related Ministries/Institutions (Home Affairs Ministry, KPK, BPK and OJK) to overcome main challenges for implementation, particularly limited infrastructure and diverse capability of banks administering Regional General Cash Account.

Coordination was also made to agree upon the electronification program expansion which covered financial access increase, corruption prevention, and accountability and transparency increase. Bank Indonesia also facilitated all Regional Governments in drafting strategy and roadmap of Regional Governments’ transaction electronification by involving 46 Domestic Representative Offices.

In 2019, electronic financial transactions were implemented in the Province, City and Regency levels. All Provinces, 93 Cities and 415 Regencies have owned financial and information system that supports non-cash transactions and have made direct and indirect spending cashless. In supporting the implementation of transaction electronification, most Regional Governments have supporting regulations. In the future, coordination and synergy will be strengthened to encourage the acceleration of electronification and the setting of more measurable targets to facilitate facilitation, development and monitoring of implementation progress.

Expansion of Transportation Sector Electronification

Bank Indonesia continues promoting electronic payments in the transportation sector, including payment integration on transportation mode, in expanding non-cash ecosystem and financial access. This is done to increase time and cost efficiency and simplify people in making transactions. The effort is made through the facilitation of business aspect fulfilment/operator cooperation with the Payment System Service Providers (or PJSP) according to prevailing regulations and technical aspect fulfilment to ensure payment instrument interoperability.

One of Bank Indonesia’s activities is to support electronification of integrated transportation mode payment in Greater Jakarta area according to the Presidential Regulation No. 55 of 2018 on the 2018 – 2029 Greater Jakarta Transportation Masterplan. Transportation mode integration covers Kereta Commuter Indonesia (KCI), MRT Jakarta, LRT Jakarta, and Transjakarta. Moreover, Bank Indonesia and the Transportation Ministry agreed a synergy in expanding electronification of land, crossing, and sea transportation modes, including intermodal transportation.

Bank Indonesia also continues strengthening payment electronification in toll roads. One of which is by supporting initiative of developing alternative payment




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10 Priority tourism destinations are Toba Lake in North Sumatra, Riau Islands, Thousand Islands in Jakarta, Borobudur in Central Java, Banyuwangi in East Java, Bromo Tengger Semeru in East Java, Bali, Mandalika in West Nusa Tenggara, and Labuan Bajo in East Nusa Tenggara.

method to adopt new technology, such as contactless technology, allowing faster toll road payment through the implementation of Single Lane Free Flow (SLFF) and/or Multi Lane Free Flow (MLFF). In that regard, Bank Indonesia with the Public Works and Public Housing Ministry have performed monitoring and coordination to ensure the SLFF trial is in line with existing regulations.

Further synergy of Bank Indonesia and Ministries/Institutions in the implementation of payment electronification in the transportation sector is aligned with points of agreement of the Central and Regional Coordination Meeting. The synergy program in specifics will cover: (i) formulating strategy for the implementation of contactless technology for toll road payment through the Multi Lane Free Flow (MLFF) implementation, (ii) expanding electronification, including land, crossing, and sea transportation modes integration, (iii) making assessment or study on business model development, including intermodal integration as electronification reference in transportation mode nationwide, and (iv) establishing the National Working Group to accelerate the formulation of national transportation strategic plan and regulations to support payment electronification implementation in the transportation sector.

Electronification in Nine Tourism Destinations

In boosting forex revenue and reducing CAD, Bank Indonesia continues intensifying payment system services in nine priority tourism destinations10. Payment system services are intensified by factoring the security and convenience of foreign tourists’ retail transactions in Indonesian tourism destinations. Payment system services are intensified by: (i) providing payment infrastructure to accommodate tourist needs, (ii) expanding non-cash payment system ecosystem in tourist destinations through the development of business model in tourist destinations and social acceptance; and

(iii) digitalization of tourist transactions to boost online non-cash transactions, not only in tourist destinations.

In 2019, Bank Indonesia designed the short-term and medium-term program stages for payment system services intensification in tourism destinations. Bank Indonesia also continued program socialization and intensification stage of payment system services, QR Code payment instrument pilot in tourism destinations, and facilitation of banking and marketplace cooperation. The program was supported by strengthening consumer protection aspect through information provision on the ban of surcharge and cash swipe, and call to eliminate the minimum limit of non-cash transactions on credit cards to increase non-cash payment acceptance. Non-cash transactions are also encouraged through digitalization of tourist transactions, such as website and mobile apps development for entrance ticket purchase.

In 2019, electronification was implemented in nine priority tourism destinations in form of non-cash instruments for ticket payment in tourism destinations, shopping transactions in shops and restaurants, parking and transportation mode integration. Payment channels were also expanded using QRIS and online booking. Some examples of implemented activities included: (i) E-Ticketing Borobudur (Yogyakarta) through Electronic Data Capture (EDC) and automatic gate; (ii) E-Ticketing Grand Watu Dodol (Banyuwangi) through EDC using Card-Based Payment (APMK), server-based E-Money and QRIS, and (iii) E-Payment on Kampung Ujung Culinary Center (East Nusa Tenggara) using closed loops E-Money and QRIS. Electronification in tourist destinations were also supported by: (i) implementation of education and outreach, in collaboration with tourism destination operators, banks and local governments, (ii) availability of electricity telecommunications infrastructure, and payment channels that operate optimally, and (iii) sufficient fit-for-circulation money in all priority tourism destinations.




STANDARDIZATION OF QuICK RESPONSE CODE (QR CODE) PAYMENT

As part of the efforts to achieve the 2025 Indonesian Payment System vision, in particular related to the second initiative of retail payment system development, Bank Indonesia initiated a move to support the innovation of digital payment service based on Quick Response Code (QR Code). On 17 August 2019, Bank Indonesia launched a national standard for QR Code payment or QRIS (QR Code Indonesian Standard) to be used in facilitating payment transactions in Indonesia. QRIS was developed by Bank Indonesia in collaboration with the industry to boost transaction efficiency, accelerate financial inclusion, develop MSME, which eventually would drive economic growth, for an Advanced Indonesia. With QRIS, consumers can do transactions easier because it can create interoperability between all payment system service operators (Picture 3).

QRIS’ tagline is UNGGUL, which means: universal or inclusive which means for all levels of society and can be used domestically or overseas; GampanG (Easy) which means transactions can be made easy and secure on one hand;

Untung (Beneficial) or efficient which means one QR code for all applications; and Langsung (Direct) which means fast and instant transactions, supporting a smooth payment system. QRIS implementation began with the static and dynamic Merchant Presented Mode (MPM) held from 17 August 2019 and overall would be implemented starting January 2020.

In QRIS implementation, socialization plays an important role to make the public understand the advantages of QRIS and how to use it in transactions. Therefore, QRIS socialization was continuously held. Since the grand launching of QRIS on 17 August 2019 until the end of 2019, there were 406 socialization activities across Bank Indonesia’s representative offices. Besides socialization, QRIS implementation has been expanded into 34 provinces at the end of 2019. Bank Indonesia has facilitated QRIS implementation in 26 traditional markets, nine universities, 58 religious places, 14 tourism destinations, and five regional retributions through all domestic representative offices. The effort will continuously be made to further increase public understanding and use of QRIS.

Picture 3. Payment System Before and After QRIS

75

MERCHANT

APJSP

User 1 User 2

BPJSP

User 3

CPJSP

User 4

DPJSP APJSP

User 1 User 2

BPJSP

User 3

CPJSP

User 4

DPJSP

BEFORE

Merchant must have many QR dan open an account in Many PJSP

APJSP

BPJSP

CPJSP

DPJSP

AFTER

Users can scan QR from all Payment SystemService Operator

APJSP

BPJSP

CPJSP

DPJSP

MERCHANT

On Us --- Off Us - Merchant only need to cooperate with 1 PJSP

* Through switching

Users can only scan QR from 1 Payment System Service Operator

Launching of Quick Response Code Indonesian Standard (QRIS)








AboutBank Indonesia


B. Cash Payment System Policy

Standard of Eligible Rupiah Across NKRI, Includes 3T areas: Large and Small Denominations

Bank Indonesia is the only institution authorized to issue, circulate, and withdraw Rupiah. It ensures the availability of quality Rupiah currency by planning the needs, holding procurement/printing, withdrawing and revoking unfit money. In that regard, Bank Indonesia held survey on the Rupiah fitness circulated in the public. The survey was held twice a year in 82 cities/regencies and five areas of Bank Indonesia ‘s cash custodians, including the foremost, outermost, and remote (or 3T category), in Gunung Sitoli, Natuna, Atambua, Tahuna, and Biak. The respondents were households and traders/MSMEs. Based on the survey result, the eligibility level of Large Denominations was at 11 and Small Denominations at 8. These were far above the target set of 8 and 6 respectively.

Rupiah Distribution Network

The task of Bank Indonesia to maintain the availability of Rupiah currency in sufficient amount, appropriate denominations, timely manner and fit quality, is to distribute Rupiah across Indonesia. The mechanism of Rupiah Currency distribution is made from Bank Indonesia’s Headquarters to the Domestic Representative Offices by factoring efficient distribution channels and available transportation modes.

To ensure smooth cash distribution, Bank Indonesia continues increasing cooperation with transportation providers such as PT. Kereta Api Indonesia, PT. Pelayaran Nasional Indonesia and PT. Silkargo Indonesia. Furthermore, Bank Indonesia coordinates with the Indonesian National Police and Indonesian Military – Navy in the escort and security of cash distribution channels and cash services across Indonesia.

The strategy to accelerate money distribution is by factoring transportation schedules and treasury capacity. Furthermore, to increase cost efficiency of money distribution, Bank Indonesia sends money simultaneously using passenger ships and sending the currency using Bank Indonesia’s trucks.

Cash Custodian Expeditions: Bank Indonesia exists in Every Purpose of Indonesia

Cash Custodians are held to serve public cash needs by approaching public spaces. Through Cash Custodians, public is able to obtain fit money in accessible areas. Cash Custodians are present both in cities, as well as in remote areas without banking services. This is to ensure the availability of quality Rupiah and it shows that Bank Indonesia exists in every purpose of Indonesia by always being present in the community.

Therefore, in cash services and distribution in islands especially 3T areas, Bank Indonesia considers the need to cooperate on the distribution and security of Rupiah with Indonesian Navy which has large sea voyage access across Indonesia, from Sabang to Merauke.

The 2019-2025 Rupiah Currency Management Framework

In realizing Bank Indonesia’s destination statement, the Rupiah currency management in Bank Indonesia has a policy direction to provide fit money in appropriate denominations, just in time, and central bank driven by focusing on efficiency and national interest. Therefore, all of its currency management policies should be in line with the policy direction of non-cash payment system instruments.

The policy direction is stated in the 2019-2025 Rupiah Current Management Framework consisting of three main pillars: (i) Providing Quality and Trusted Rupiah Currency, (ii) Currency Distribution Efficiency and Prime Cash Service System, and (iii) Sufficient and Technology-Based Rupiah Currency Management Infrastructure. These three pillars are supported by the provisions and strengthening of human resources and governance.

In the context of framework implementation, the currency management framework is based on these principles:

1. Governance with measurable risk mitigation. 2. Money quality, integrity as well as money processing

to be the best among emerging markets. 3. The policy taken is based on data and information and

uses technology with less human intervention, and4. Efficiency in time, process and cost.




Issuance of Regulation on Rupiah Currency Management

To increase governance and quality of businesss process in Bank Indonesia in managing Rupiah Currency as well as a follow-up of the implementation of 2019-2025 Currency Management Framework, Bank Indonesia improved regulations related to Rupiah Currency management by issuing Bank Indonesia Regulation (or PBI) No 21/10/PBI/2019 on Rupiah Currency Management. The regulation is effective since 30 August 2019 and replaces the previous regulation, PBI No 14/7/PBI/2012 on Rupiah Currency Management.

The PBI is an implementation of Law No 7 of 2011 on Currency which stipulates Bank Indonesia’s authority in managing Rupiah Currency covering planning, printing, issuing, circulating, revoking and withdrawing, as well as eradication of Rupiah Currency.

One of the regulated issues is the Rupiah Currency Processing Service Operators (or PJPUR) or Cash in Transit (CIT). Banks are allowed to use PJPUR services in the processing of Rupiah Currency, including:

1. Rupiah Currency distribution;2. Rupiah Currency storage in treasury;3. Rupiah Currency processing; and/or4. filling, withdrawal, and/or monitoring of Rupiah

Currency sufficiency in automated teller machine, cash deposit machine, cash recycling machine, and/or other Rupiah cash transactions machines approved by Bank Indonesia.

The PBI regulates PJPUR activity categories, minimum capital requirements, requirements of members of the board of directors and commissioners, reporting submission duty and supervision mechanism.

Infrastructure Preparation for a Centralized Rupiah Currency Management (or Command Center): “Control, Supervision and Coordination of Implementation in Fast, Proper, and Accurate Manner”

Bank Indonesia established Command Center for Rupiah Currency Management with the main aim to control, supervise, and coordinate the implementation of cash distribution, cash service, and cash processing. The Command Center has a strategic function set policy and

regulations on Rupiah currency management nationwide, especially related to cash distribution and cash service. In operation tactical role, the Command Center monitors cash sufficiency, cash processing and distribution process, as well as taking cross-working area decisions. In overall, the function of the Command Center is as follows:

• Providing data, information and statistics of PURactivities centrally covering regional and national;

• AnalyticaltoolsindecisionandpolicymakingpfPURin a fast and accurate manner;

• Risk mitigation of the overall implementation ofRupiah Currency Management activities;

• Policy feedback based on tracking of PUR policyimplementation.

The role of Command Center has been effective since 2019, but in the second quarter of 2019 an integrated infrastructure was formed. During several natural disasters such as earthquake in Palu, NTB, and floods in Java Island on 1 January 2020, the Command Center played an important role coordinate cash services. Realizing that the need of cash would increase post disasters, the Command Center performed the BCP (Business Continuity Plan) procedure through the nearest Bank Indonesia’s Domestice Representative Offices and Regional Governments to fulfill public cash needs.

Currency Management Command Center Room




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RuPIAH, OuR GOOD FRIEND: CASH NEEDS FuLFILLMENT STRATEGY FOR CHRISTMAS

AND END-2019 PERIOD

Towards Christmas and the end of the year, there is generally an increase in the need for cash and payment system services. To fulfill cash needs, Bank Indonesia cooperated with banking to anticipate such increase of cash distribution and availability in 1,902 points of exchange, increasing cash services to stakeholders through exchange service in center of activities, as well as intensifying cooperation with transportation providers for land (trains), sea (passenger ships and freights), and air (airlines).

Bank Indonesia took strategic steps to fulfll cash needs as follows:• Providing exchange service actively through all

networks of Bank Indonesia and banking under the theme “Rupiah, Our Good Friend”;

• Maintainingcashavailabilitynationwide;• Optimizing the role of Cash Custodian for cash

distribution;• Requestingbanks tooptimizecashmanagementand

maintain cash availability in all ATMs; and• Monitoring cash sufficiency in all cash work units

through the Command Center.

Cash outflow from Bank Indonesia during the Christmas and end of 2019 (December) period reached Rp112.5 trillion or an increase of 14.9% from the previous year of Rp97.9 triliun. The outflow was affected by several factors: budget realization of the government/regional governments/private sector, religious and new year holidays coinciding with school holidays, and additional points and frequencies of exchange by Bank Indonesia or in cooperation with banking. Bank Indonesia would continue cooperation with banks and other institutions in fulfilling cash needs in religious holidays period, both in total value or denominations.

Point of Exchange in Christmas and End of 2019

Picture 4. Cash Exchange Services

Representative Office of Prov. Aceh

Representative Office of Lhokseumawe

Representative Office of Prov. North Sumatera

Representative Office of Prov. North Kalimantan

Representative Office of Prov. West Kalimantan

Representative Office of Prov.

Representative Office of Prov. Central Kalimantan

South Kalimantan

Representative Office of Balikpapan

Representative Office of Prov. East Kalimantan

Representative Office ofPematang Siantar

Representative Office ofProv. Riau

Representative Office ofProv. Riau Islands

Representative Office ofProv. Jambi

Representative Office of Prov. Banten

Representative Office of Prov. West Sumatera

kPw Sibolga

Representative Office of Bengkulu

1 Point

74 Points

85 Points

24 Points

1 Point

7 Points

66 Points

28 Points

28 Points

115 Points

10 Points

Representative Office of Prov. Bangka Belitung

72 Points

1 Point

61 Points

159 Points

Representative Office of Prov. West Java

Representative Office of Tasikmalaya Representative Office of Purwokerto

Representative Office of Cirebon

Representative Office of Prov. DI Yogyakarta

Representative Office of Solo

Representative Office of Kediri

Representative Office of Tegal

1 Point1 Point

35 Points

20 Points

53 Points

138 Points

Representative Office of Prov. North Sulawesi

Representative Office of Prov. West Papua

Representative Office of Prov. North Maluku

Representative Office of Prov. Maluku

Representative Office of Pov. Papua

Representative Office of Prov. Central Sulawesi

Representative Office of Gorontalo

Representative Office of Prov. West Sulawesi

Representative Office of Prov. South Sulawesi

Representative Office of Prov. Southeast Sulawesi

105 Points28 Points

1 Point

9 Points19 Points

26 Points

18 Points

4 Points

15 Points

44 Points

Representative Office of Prov. East Nusa Tenggara

Representative Office of Prov. West Nusa Tenggara

Representative Office of Bali

Representative Office of Jember

Representative Office of Malang

Representative Office ofProv. East Java

23 Points

11 Points90 Points

37 Points

68 Points

81 Points

134 Points

Sebaran Points penukaran uang periode 19.31 Desember 2019

Representative Office of

Representative Office of Prov. South Sumatera

1 Point

Representative Office of Prov. Lampung

30 Points 27 Points

Representative Office of Prov. Central Java 24 Points

37 Points

1 Point

1 Point

The distribution points of cash exchange in the 19-31 December 2019 period




AboutBank Indonesia





Payment System Consumer Protection

The development of financial innovation as well as rapid digitalization of financial service products and/or services should be followed with the effort to increase public financial literacy in order to minimize risks on consumer protection, and guard public confidence level in the financial sector. Bank Indonesia continues promoting the implementation of consumer protection principles by payment system service institutions regulated and supervised by Bank Indonesia.

As Bank Indonesia’s commitment in strengthening the consumer protection function of Bank Indonesia, the Board of Governors (BoG) Meeting of Bank Indonesia has approved principal changes of consumer protection aspect. The RDG decision has been followed up with the settlement of legal review process to the draft of Bank Indonesia Regulation (or the PBI) on Bank Indonesia’s Consumer Protection. The implementation of PBI on Consumer Protection will be a reference for operators regulated and supervised by Bank Indonesia in implementing consumer protection principles.

Bank Indonesia also actively handles consumer complaints of Payment System Services to Bank Indonesia. The scope of consumer complaints includes instruments of fund transfer and/or fund withdrawal (Cheque and BG, Fund Transfer including RTGS and SKNBI), Card-Based Payments using ATM/Debit Cards and Credit Cards, Electronic Money, and Rupiah Provision and/or Deposit.

Complaint handling of Payment System Service Customers to Bank Indonesia is dealt through Education, Consultation, and Facilitation. Education is in form giving awareness to customers about Payment System products through media. Consultation is held by giving understanding to customers and operators if problems arising in using Payment System Services through face to face meeting, phone calls, email, letters or other media. Facilitation is an effort to resolve customer complaints with civil legal dispute by summoning, meeting, hearing, and motivating

operators with customers. In 2019, the number of customer complaints followed up by Bank Indonesia reached 3,200. The complaints were dominated by Credit Card issues totaling 2,149 (67% of total complaints), then ATM/Debit Card issues of totaling 458 (14% of total complaints). All of the complaints received have been followed up by Bank Indonesia.

Education function is strengthened to increase consumer literacy, such as through creating the Consumer Protection and Education Strategy by Bank Indonesia. The strategy is aimed at increasing customer power and as reference for (internal and external) stakeholders on the policy direction of a planned, measured, continuous and collaborative consumer protection education. The consumer complaint handling and education function in Bank Indonesia’s Representative Offices is also strengthened by improving organization in Bank Indonesia and formulating Guidelines of consumer complaint handling to make complaint handling standards uniform across domestic representative offices.

Furthermore, Bank Indonesia strengthens the consumer protection supervision function through market conduct approach which is expected to complete supervision on the compliance of Operators to consumer protection principles implemented.

In developing consumer protection policy to anticipate challenges and innovation of products/services under Bank Indonesia’s authority, Bank Indonesia has been approved as member of the International Financial Consumer Protection Organisation (FinCoNet). FinCoNet is a non-profit international organization with members of central banks and associations which aims to increase awareness of Consumer Protection in the financial sector through education and effective supervision. With FinCoNet membership, Bank Indonesia expects to obtain latest insight on Consumer Protection worldwide, in order to support consumer protection strengthening in Indonesia.




AboutBank Indonesia


Financial Market Deepening Policy

The effectiveness of accommodative monetary and macroprudential policies was strengthened with acceleration of financial market deepening. The acceleration of financial market deepening was focused on developing financial market instruments, infrastructure, and credibility, as well as coordination with related authorities in the Development Financing Coordination Forum through the Financial Market (FK-PPPK). Bank Indonesia continued the effort to develop financial market instruments to boost the increase of transaction volume and use various forex and money market instruments, including the DNDF, interest rate swap (IRS), overnight index swap (OIS), and Commercial Papers. Bank Indonesia also continued the development of financial market infrastructure by issuing regulations on market operator, such as electronic trading platform (ETP). Bank Indonesia also issued regulations on clearing infrastructure, the central counterparty (CCP) for interest rate derivative transactions and over the counter (OTC) exchange rate which would be completed with other infrastructure strengthening. In strengthening financial market credibility, Bank Indonesia improved market conduct to increase the competence and integrity of market players as well as promoting healthy business competition among market players in the money market and forex market. Bank Indonesia also formed

the Indonesia overnight index average (IndONIA) and strengthened the Jakarta interbank offered rate (JIBOR) effective from early January 2019, as part of moves to establish the credibility of money market benchmark rate.

Together with the Government and other relevant authorities, Bank Indonesia continues to encourage the development of financial instruments for innovative financing of infrastructure. The policy to boost infrastructure financing innovation was focused on the effort to promote the role of private sector in financing, enrich financing instrument innovation, and accelerate financing through facilitation and assistance program. In the move to boost the role or private sector in financing, Bank Indonesia in coordination with the Government and other related authorities pushed the signing of private financing for 21 infrastructure projects with total value of USD13.6 billion in October 2018. Various infrastructure financing innovations were also developed to fulfill diverse needs of issuers and investors. Infrastructure financing innovations were developed for nine potential instruments for infrastructure financing, including sharia-based financing instruments.

Bank Indonesia will consistently continue to encourage the accelaration of financial market deepening. The policy to accelerate financial market deepening was focused on the development of financial market instruments, infrastructure, and credibility, as well as coordination with related authorities in FK-PPPK to optimize the role of financial market as a source of development financing. Bank Indonesia continued to develop financial instruments, including the forex to Rupiah transactions to boost digital economic activities. Bank Indonesia also continued strengthening efficient forex market structure, such as by improving the Local Currency Settlement (LCS) regulations to increase the use of local currencies in the settlement of trade transactions with partner countries. Financial market infrastructure was continued to be developed, especially related to market operator, such as ETP and CCP for exchange rate and interest rate derivative transactions. Financial market credibility was also strengthened by improving the JISDOR provisions to strengthen the credibility of market rate reference.

Graphic 16. Consumer Complaints in 2019

Fund Transfer

Debet Card

6%

1%Money

1%OJK

1%Mobile Banking

Electronic Money8%

14%Credit Card

67%

Source : Bank Indonesia




STRENGTHENING THE FORTRESS OF STABILITY THROuGH THE ESTABLISHMENT OF CENTRAL COuNTERPARTIES

The need to develop CCP for derivative OTC transactions is part of global derivative OTC market reform post-2008 global financial crisis. One main cause of the crisis was high volume of derivative OTC transactions that were unmonitored and unregulated by relevant authorities, hence the transactions were not prudent. Therefore, in September 2009, G20 state leaders met and agreed to change the paradigm of regulation and supervision in derivative OTC market known as OTC Derivative Market Reforms.

Table 5. OTC Derivative Market Reforms

Mandate

All standard derivative OTC transactions

1. Transactions are required to be conducted via the stock exchange or ETP.

2. Clearing is required to be conducted via CCP.

All derivative OTC transactions

3. Must be reported to Trade Repository (TR)

Contracts which are not cleared via CCP

4. To be imposed a higher capital fee.

5. To be imposed a higher margin fee.

The focus of OTC Derivative Market Reforms is to increase transparency and risk management on derivative OTC transactions. This is realized through policy that requires standard derivative OTC transactions to be made via ETP or the stock exchange and be cleared via CCP institutions. Moreover, all derivative OTC transactions must be reported to TR institutions. As incentive/disincentive on mandates related to CCP, standard derivative OTC transactions which are not cleared via CCP will be imposed higher capital and margin fees.

CCP is an institution that runs clearing by taking over the counterparty risk from transactions among market players through novation11 process and perform multilateral netting on exposure of market players’ transactions. By placing itself between transaction players - buyers and sellers – the initial bilateral contract between buyers and sellers are replaced with two new contracts (novation): (i) contract between buyers and CCP and (ii) contract between sellers and CCP. Under

the mechanism, CCP establishment is expected to reduce interconnectedness, cut credit risk, strengthen transparency, and increase transaction efficiency.

The development of CCP for derivative OTC in Indonesia is on the stage of CCP institutional regulation with the issuance of Bank Indonesia Regulation, PBI 21/11/PBI/2019, on the Establishment of Central Counterparty for Interest Rate Derivative Transactions and Over-The-Counter Exchange Rate. The PBI covers: (i) requirements that must be fulfilled by institutions acting as CCP for exchange rate and interest rate derivative OTC transactions in line with international standards (Principles for Financial Market Infrastructure - PFMI)12; (ii) licensing process that must be fulfilled by institutions acting as CCP for exchange rate and interest rate derivative OTC; (iii) Bank Indonesia’s supervisory framework on CCP institutions; as well as (iv) reference related to crucial business aspect of CCP institutions such as novation and close-out netting.

The next stage of CCP development is issuing implementation rules of the PBI on exchange rate and interest rate derivative OTC CCP through the issuance of PADG in May 2020. In addition, future CCP development will cover regulations on derivative instruments that are required to be cleared via CCP and the operational mechanism, as well as financial market infrastructure (FMI13) supervision framework, including CCP. The regulation on the formation of the CCP is an effort to create a deep, transparent and safe domestic financial market, to support the stability of the Indonesian financial system.

11 Novation is the process to end initial contract between buyers and sellers then replace it with two new contracts: between CCP and buyers and CCP and sellers.12 CPSS-IOSCO – Principles for Financial Market Infrastructures – April 2012.13 FMI is a multilateral system that covers many institutions, including operators of the system, used for clearing, settlement or payment administration of bond transactions,

derivative or other financial transactions (source: IOSCO-CPMI).

Picture 5. Novation mechanism in CCP

A

$10

$6$8

$5 $7 $3+$1

-$3 -$2

BILATERAL TRADING

C B

NOVATION

MULTILATERAL NETTING

C B

CCP

A








AboutBank Indonesia


International Policy

International Policy is continuously strengthened to increase economic resilience and to support growth momentum. International policy of Bank Indonesia is focused on strengthening the Global Financial Safety Net (GFSN) cooperation, including innovating policies in the form of financial cooperation with other state authorities for the purpose of liquidity management in managing foreign exchange reserves, as well as LCS and payment system cooperations. In 2019, Bank Indonesia expanded the LCS cooperation with BNM and BOT from covering trading transactions per se into covering direct investment and remittance. The cooperation will give positive contribution to effort of Bank Indonesia in maintaining the stability of Rupiah exchange rate and reducing the dependency on US Dollars. Bank Indonesia is collaborating on a payment system and digital financial innovation with BNM, and will expand to a number of partner central banks. In addition, the linkage of Investor Relations Unit (IRU) at the central, regional and foreign levels to support investment, tourism and trade also continues to be strengthened. International policy is also directed to increase the reputation of and build perception toward Indonesia by being active in policy making in international institutions.

International policy will be directed to strengthen positive perception toward Indonesia and be active in policy making in international institutions. To maintain the momentum of stronger perception and appetite from other countries to forge trade relations, investment, and tourism with Indonesia, Bank Indonesia will continue strengthening coordination on international policy, expansion and strengthening of local currency use cooperation in the settlement of trade transactions and international financial safety net, investment financing rise especially for infrastructure development, digital finance and economy development, and sharia economy and finance. Moreover, Bank Indonesia will continue to increase its role in international institutions and cooperations (such as IMF, Financial Supervisory Board/FSB, Bank for International Settlement/BIS, G20, Islamic Financial Supervisory Board/IFSB, International Islamic Liquidity Management/IILM), regional cooperation (such as ASEAN and CMIM), or cooperation between central banks. In this regard, Bank Indonesia, in coordination with the government, will continue giving real contribution in

active role in many programs to boost Indonesian tourism and investment through the Investor Relation Unit (IRU) and Bank Indonesia’s involvement in the Free Trade Agrrement (FTA)/Comprehensive Economic Partnership Agreement (CEPA).

Rating

A stable and good economic growth prospect amid various external challenges received acknowledgement from global rating agencies (Moody’s, S&P, and Fitch). This was reflected from their affirmation on Indonesia’s credit ratings that stayed on investment grade. Even in May 2019 one of the rating agencies, Standard & Poor’s (S&P) increased Indonesia’s ratings from BBB- to BBB. Besides the three rating agencies, the JCR assessment resulted in an improvement in outlook rating to positive on BBB/positive outlook and the R&I assessment affirmed on BBB/stable outlook.

The Positive perception management activities in 2020 will be directed to maintain the IG status and ensure that investors maintain positive perceptions. Amid unconducive external condition, Indonesia should ensure foreign stakeholders still consider Indonesia as a favorable place for investment. Therefore, engagement with investors and rating agencies will be strengthened by utilizing the presence of Bank Indonesia’s laeadership in international events or forums in cities with investor base and rating agencies location or by increasing the intensity of policy communication with investors to strengthen disseminations on economic conditions and new policies taken by authorities.

MSME Policy

The MSME cluster development program is expanded to support inflation stability, reduced current account deficit, and inclusive economic growth. Bank Indonesia continued the MSME cluster development for inflation control, with focus on strategic food commodities in regions, such as rice, red chilis, shallots, garlic, and cow. To support reduced current account deficit, Bank Indonesia continued promoting the development of export-ready MSME, with focus on export-potential and tourism-supporting regional leading commodities, such as cloths, crafts, and coffee. Bank Indonesia’s assisted MSME cluster is always invited to participate in national and international exhibitions. The Indonesian Creative




Works Exhibition (Karya Kreatif Indonesia Exhibition/KKI) held annually shows that Bank Indonesia’s assisted Leading MSMEs are becoming more successful, and many have applied Go-Export and Go-Digital. Bank Indonesia will continue to encourage MSME development to support inflation stability, CAD reduction, and inclusive growth.

Policy coordination in inflation control from supply side through the development of volatile food MSMEs. The development of Bank Indonesia’s MSMEs is held to support inflation control through supply side improvement. Bank Indonesia expands MSME development using cluster approach focused on five strategic food commodities which influenced volatile food inflation. MSME development is held end to end to achieve cluster independence, supported by cooperation and synergy with the Government and relevant institutions.

To sharpen implementation strategy and strengthen coordination mechanism in the development of food cluster internally or with external parties, on 16 October 2019 Bank Indonesia issued internal provisions on improved food cluster development. The provision becomes guidelines for the implementation of food cluster development in all Bank Indonesia’s Representative Offices.

Food cluster development to guard continuous food production, especially shallots and chilis, is strengthened with the formulation of business model and cluster development strategy. Bank Indonesia also identified best practices of food cluster development which could be replicated in other clusters. In 2019, Bank Indonesia managed to replicate the shallot and chili commodity clusters. As in 2018 the rice and garlic commodities have also been replicated then Bank Indonesia has managed to replicate four out of five strategic food commodities which affects volatile food inflation. The replication of best practices for those food clusters has driven the increase of cluster productivity surpassing the 10% target.

To promote innovation or replication of best cluster program developed by Bank Indonesia or Ministries/Regional Governments/other institutions, Bank Indonesia assessed cluster performance for cluster championship. Cluster championship was also held to give motivation and appreciation to clusters which have supported

food supply stability. Based on the assessment, 9 (nine) best clusters were chosen, each 3 (three) clusters from the category of food plants, horticulture, and farming/fisheries. Bank Indonesia Governor, witnessed by the President of the Republic of Indonesia, has given the Bank Indonesia Award to representatives of first best cluster of each subsector, in the 2019 Bank Indonesia Annual Meeting on 28 November 2019.

Overall, until the third quarter of 2019, Bank Indonesia already developed 226 clusters across Indonesia, comprising 186 food clusters which produced volatile food commodities, and 40 other food clusters. Bank Indonesia’s assisted food cluster utilized land of 10,983 hectare, involving 18,533 farmers, and absorbed 31,165 workers. Bank Indonesia routinely monitored assisted clusters in regions, using indicators and instruments for guidelines on cluster development stage mapping, toward the independence of assisted food cluster.

Policy coordination in increasing exports and supporting tourism through the development of Digital and Export MSMEs. Considering the potential of MSME in various economic sectors and as a new source of growth, in line with the move to reduce CAD, Bank Indonesia focuses on the MSME development in digital era through the development of Digital and Export MSMEs. Bank Indonesia developed the MSME upscaling roadmap from the category of potential MSME (L1), successful MSME (L2), digital MSME (L3) and export MSME (L4). The determination of MSME category uses criteria of institutional and HR, finance, production and marketing.

Digital MSME is developed through the MSME onboarding program in e-commerce platform. The coaching pattern emphasizes on back office digitalization, e-commerce utilization, market analytic, and digital payment. Export MSME development emphasizes on the strategy to sell value and uniqueness of a product because it has cultural value, and heritage element, and is hand made. The commodities are focused on export-potential and tourism-supporting regional leading products such as cloths, crafts, coffee and processed foods and beverages. The coaching pattern emphasizes on increasing product quality, implementing certification and curation, facilitating export documents, and promoting trade. It is also supported with the formulation of business model and export MSME development guidelines.




AboutBank Indonesia


The promotion of quality products crafted by assisted and partner MSMEs as well as education to the general public related to export complications and MSME digitalization was held through the national strategic exhibition The Indonesian Creative Works (KKI) 2019, on 12-14 July 2019. KKI 2019 was theme “Driving Economic Growth through Go Export and Go Digital MSME” opened by the President of the Republic of Indonesia. KKI 2019 covered exhibitions, fashion show, talkshow, workshop, business matching, and business coaching. It attracted 18,911 visitors, increasing 73.5% compared to the previous year. The KKI 2019 resulted Rp22.09 billion in direct sales and business matching of Rp66.6 billion. The business matching was attended by 183 people, consisting of Bank Indonesia-assisted MSME, banking, aggregators/importers, ministries/institutions, and associations.

Through the KKI 2019 exhibition, Bank Indonesia has driven assisted and partner MSME across the archipelago to continuously innovate, improve product quality according to market taste and export oriented, and utilize digital platform, in order to penetrate international market. The success of KKI was the result of synergy between Bank Indonesia and the Government and support from associations, exporters, importers or aggregators, financial institutions, financial technology firms, e-commerce and other private sectors. Products and development programs of assisted and partner MSMEs are documented in the Buku Kain Nusantara book published by Bank Indonesia in 2019 as a promotional tool for wider stakeholders. Trade promotion to access international market went through cooperation between Bank Indonesia and Indonesian Embassies/Consulate Generals in trade partner countries.

MSME export acceleration requires easy access to information, and capacity building, supported by synergy and coordination between Ministries/Institutions and other stakeholders in the central and regions. Continuing the coordination in 2018, in 2019 Bank Indonesia with the Indonesian Export Financing Agency (or LPEI)initiated the pilot project focal point or Export Shared Office in the South Sumatra Province with coffee as the leading commodity. The launching of virtual office of Export Shared Office in the South Sumatra Province was

implemented by Bank Indonesia in synergy with LPEI, Eastern Sumatra Customs and Excise District Office, Regional Governments, and other stakeholders.

The pilot project focal point export has facilitated MSMEs selling coffee and cloths and crafts of South Sumatra in the curation, and participation in international exhibition such as Café Asia 2019 in Singapore and New York Now 2019 in New York, the US. Marketing access to tourists in the domestic marker is also expanded through the opening of coffee house Rumah Kopi Sumsel in Palembang.

Furthermore, to strengthen the development of tourism supporting MSME, Bank Indonesia drafted the business model of tourism supporting MSME. The business model becomes a reference for Bank Indonesia in increasing product quality and capacity of tourism supporting MSME, that helps to increase Indonesian tourism attraction and foreign tourist visits.

Sharia Finance and Economy Policy

Bank Indonesia continues promoting sharia finance and economy development as a new source of growth for Indonesia’s economy. The development of sharia finance and economy continues to be supported with the development of halal value chains ecosystem and sharia financial market deepening. The implementation of halal value chains is strengthened through the development of Islamic boarding school’s economy, sharia MSME to industries especially foods, fashion, cosmetics, tourism and phramacies, and halal industry campaigns. Sharia financial market deepening is continuously accelerated to strengthen liquidity management and sharia finance development, which in turn will strengthen national sharia banking. The optimization of sharia social financing in zakat and waqf is promoted to increase an inclusive sharia financing. Moreover, the effort to make Indonesia as the main reference in the global sharia finance and economy is continuously supported. The successful series of international events Indonesia Sharia Economic Festival (or the ISEF) preceded by the Sharia Economic Festival (or The FESyar) in three Indonesian regions will routinely be hold every year as a joint platform in promoting sharia finance and economy in Indonesia.




Who would have thought that the formal-looking Karawo embroidery and is usually used by Gorontalo elderlies, can reach the world-class catwalk? A fabric of Gorontalo identity for a long time, Karawo was not considered as a main commodity prior to 2011. It was only made by older artisans, with highly complicated making process; it requires five stages of process starting from drawing the pattern or motive, cutting the thread on cloth, taking out the already-cut thread, tying the thread, and finally doing the embroidery, that to finish one motive takes more than two months of work.

Seeing the potential of Karawo to be developed, Bank Indonesia through the Representative Office of Gorontalo Province is developing the MSME and empowering the

economy of local community through Karawo cluster assistance. Beginning 2011, the Karawo Festival is set as a ‘party’ for artisans, designers and business players in the sector.

Artisans were given equipments, motive or pattern making training, and glasses since most artisans were old. As time went by, many innovations were displayed using Karawo cloth. The cloth that once was seen as ”only used by elderlies and for formal events” is no longer stuffy.

Various patterns, colors, and collaborations with other Indonesian fabrics are displayed by Karawo makers, even now many young adults are using the ’old’ embroidery thanks to the touch of millenial artisans and designers. The

KARAWO EMBROIDERY GOES WORLDWIDE

85

Karawo Festival in Gorontalo








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impact is bigger with increasing awareness and interest of people in Gorontalo and other regions to Karawo cloth.

“In Gorontalo nowadays, from kids, teenagers to adults are proud to use their Karawo. What’s more pleasing is they prefer to use the best quality of Karawo made by artisans,” said Agus Lahinta who owns Rumah Karawo assisted by Bank Indonesia Representative Office of Gorontalo Province.

In 2017, Karawo began to emerge in National and International events. Without doubt, Bank Indonesia Representative Office of Gorontalo Province confidently brought its assisted leading MSME, Rumah Karawo, in cooperation with the Gallery of Indonesia, to come forth in one of the world’s fashion centers. The International Event “Couture New York Fashion Week” in the United States was the first step on the catwalk for Karawo embroidered clothing, as a follow-up to the participation in the Indonesia Fashion Week 2017.

Couture New York Fashion Week was chosen as the event was considered appropriate with good preparation, and New York is a fashion city visited by many people from around the world. This was in line with Bank Indonesia’s vision in developing Karawo embroidery: “Karawo Goes Worldwide”. Before ’selling’ Karawo in New York, Bank Indonesia invited a curator from Los Angeles, US, to curate tens of MSME across Indonesia, with the end result of 12 recommended MSMEs.

New York fashion city became a historic place to introduce Karawo fashion show because there the eyes of the world was opened to the fact that there was Indonesian unique fabric besides Batik. Bank Indonesia’s support to the desire of Karawo going worldwide is felt by MSME players.

Bank Indonesia’s commitment in developing Karawo embroidery also received positive response from the Gorontalo Provincial, Regency and City Governments.

Until now the development of Karawo craft has never diminished. Bank Indonesia continuously develops Karawo embroidery to mark extraordinary achievement in 2019. Karawo embroidered craft was again invited to participated in the largest fashion event in Indonesia, the Indonesia Fashion Week 2019, and was present in the fashion show event visited by the chairman of Dekranas, Mrs. Mufidah Jusuf Kalla, to Gorontalo. Furthermore, Karawo embroidery was selected as the attire of committee in the Bank Indonesia’s Annual Meeting 2019 attended by the Head of State, ministers, ambassadors, all regional leaders, academicians, SOE chairs, banks, media, and multinational firm chairs. In the 2019 Indonesia Creative Work as the largest annual craft event in Indonesia the sales of Karawo embroidery increased up to 80% (ytd).

The achievements of many programs, promotions and shows of Karawo make it more attractive, both for the middle-upper class and the middle-lower class. It is proven by the increase sales frequency from MSME Rumah Karawo which saw an increased turnover from Rp40 million a month to more than Rp200 million and an increased production from 30 Karawo-motive pieces of clothing a month to 400 pieces.

With the extraordinary achievements, Bank Indonesia continues promoting Karawo embroidery consistently to penetrate the export market. Export is expected to increase economic growth in the Gorontalo Province sustainably which eventually can support national economic growth.




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AboutBank Indonesia


INSTITuTIONAL MANAGEMENT

SugengDeputy Governor

“To support digital economy and finance, Bank Indonesia develops innovation in the payment system by launching the 2025 Indonesian Payment System Blueprint”




Bank Indonesia Representative Office Province Aceh




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he achievement of Bank Indonesia’s 2024 vision and mission is inseparable

from from the support of institutional management strategy. Bank

Indonesia’s management strategy is designed by considering stakeholder

needs, strategic environment dynamics, organizational readiness, including

HR and technology, while maintaining good governance as foundation in the

implementation of Bank Indonesia’s task and authority.

In 2019, the institutional management strategy was implemented in the scope of

PS 10 to PS 12. The three strategic programs are implemented in integration with

other programs to achieve each target. Some strengthening were made, such as

the improvement of strategic planning process and performance management,

HR management and organization in line with strategy, information system

management in line with the digital era, more effective communications, more

optimal logistics management, more accountable financial management, and the

strengthening of research and education ecosystem which supports economic

leadership.

Some results were achieved. The achievement further strengthens Bank Indonesia’s

position to become the best central bank among emerging market. In the future,

the institutional management strategy will be continuously made, supported with

good governance foundation to support Bank Indonesia’s credibility.

INSTITuTIONAL MANAGEMENT




STRATEGIC PLANNING AND PERFORMANCE MANAGEMENTTo ensure accountability in the implementation of task and authority, Bank Indonesia applied the Budget Planning and Performance Management System (or SPAMK). The system ensures that all stages, from strategy and budget formulation to performance evaluation, are implemented through a thorough and accountable process. In overall, the SPAMK cycle covers the formulation process of medium-term strategy, annual planning, annual planning implementation, monitoring and evaluation, and performance evaluation.

As part of the implementation of Bank Indonesia’s strategic direction, Bank Indonesia’s 2019 annual planning translated the Destination Statement 2024 into strategy, measure of success, target, and annual work program. The whole process was performed in the framework of 12 Strategic Programs. Therefore, all of the planning, implementation, to performance evaluation processes can be monitored effectively and sustainable.

of Accounts (CoA). The achievement of Destination Statement through end-to-end and value chain-based 12 Strategic Programs was also strengthened with internal control through integrated risk management and internal audit. This provided an added value to ensure the success of Bank Indonesia 2024 vision achievement.

The overall process of planning management to the implementation of performance assessment and evaluation is held in a corridor mandated by the laws in prioritizing accountability and transparency. Bank Indonesia submits the task implementation plan including policies that will be taken to the House of Representatives and Government, which will be published to the public at the beginning of a year. The planning process is made by monitoring current strategic environment to produce accurate policy response based on Bank Indonesia’s vision. Furthermore, to maintain governance in strategic planning, the performance indicators and work program details are inserted in the Work Unit Performance Contract and Strategic Program Contract.

All work programs, performance indicators, and targets in both contracts were monitored and evaluated in detailed. Dynamic external conditions faced in 2019 implicated the strategy taken by Bank Indonesia. Hence, the fine tuning of planning should be made when facing conditions different from previous expectations in order to achieve the determined targets. In that regard, debottlenecking was taken to find solutions to the factors hampering the implementation of 12 Strategic Programs. Therefore, monthly and half-yearly performance evaluation and monitoring process was an important pillar in Bank Indonesia’s planning cycle. Quarterly, the policy and result of task implementation were submitted to and evaluated by the House of Representatives. The report was published to the public as a form of central bank’s transparency.

Organizational Transformation through Value Chain Implementation

The launching of Vision, Mission, Destination Statement 2024, and 12 Strategic Programs of Bank Indonesia signified a thorough transformation in Bank Indonesia. Policy transformation through 12 Strategic Programs becomes a drive for other transformations: organizational transformation as well as HR and work culture transformation. As a strategy focused organization, this is a logical consequence. To implement a strategy needs

Picture 6. The Budget Planning and Performance Management System Framework

As part of the organizational transformation, Bank Indonesia strengthened its planning management with the implementation of value chain approach in 2019. With the approach, planning at the organizational and work unit level is strengthened so that it is able to provide a complete picture to achieve its targets. Clear contribution of all work units in Bank Indonesia in the central, domestic, and foreign representative offices was also mapped to clarify accountability. The linkage was supported by the budgeting system integrated with planning through the implementation of Chart

Directing organizational strategy through performance improvement, effectiveness of work programs and finance, as well as good governance

VISI - MISI

Strategic Values

SMPAK Executors: DG, PAMK Forum, Work unit Leaders, PM

OBJE

CTIV

ECY

CLE

PRIN

CIPL

ES

Strategy Formulation

Monitoring and Evaluation

Annual Planning

Annual Planning Implementation

Performance Assessment

1. Oriented to vision and mission achievements

2. Prioritizing good governance3. Harmony

Public Accountability

VISION – MISSION

4. Effectiveness5. Objectivity6. Continuity

7. Autonomy in authority of budget management




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the support of functions, organization, work process, and infrastructure in line with the strategy. HR is also demanded to have the capability in articulating and implementing strategy, as well as work culture which motivates performance achievement in line with the determined Vision and Mission.

In organization, one of the transformations made is by increasing the effectiveness and efficiency of work process. An effective and efficient work process is very important for Bank Indonesia, with three supporting reasons. First, to ensure all activities could achieve the quality of results in line with the Destination Statement 2024. Second, to ensure all resources are allocated accurately and used optimally. Third, to assist Bank Indonesia as a public institution in holding its mandate in an accountable and measured manner.

One initiative made to increase the effectiveness and efficiency of work process in Bank Indonesia is by implementing a Value Chain approach. Value chain describes a process linkage from preparing resources (input), activities to produce output, to achieving the expected outcome. Not only linked, every activity in the process chain must create added value to activities in the next stage. With value chain, organization can identify and focus attention to critical activities, the activities which can generate maximum impact in every process chain toward the expected target.

A systematic and comprehensive work process management as implemented through the value chain approach is considered appropriate with Bank Indonesia’s transformation needs. First, An end-to-end and goal and result oriented value chain approach has similarities with the philosophy of Bank Indonesia’s 12 Strategic Programs in which each Strategic Program is a shared house of all cross-work unit activities with the same focus of success area. In that context, an effective and efficient synergy becomes a keyword to ensure all activities are well-managed to achieve the same goal. Second, the approach can be used to manage Strategic Program as a whole starting from the stage of planning, implementation, monitoring and evaluation, to assessment of success. Third, besides managing Strategic Program, value chain can be used to integrate four pillars of Bank Indonesia’s governance process - strategic planning, strategic budgeting, strategic risk, and strategic risk based internal audit – in guarding

and realizing the achievement of Destination Statement 2024. The integration of four pillars is considered to increase the effectiveness of strategy achievement by monitoring budget efficiency and appropriate budget allocation. Furthermore, the strategic planning will be integrated with risk management and audit to manage risks on strategic business process which can hamper the achievement of Bank Indonesia’s strategy, including through internal control.

Strategic Planning

Strategic Risk BasedInternal Audit

Strategic Risk

DestinationStatement

Va

lue Chain 12 PS

1

23

4

Strategic Budgeting

Picture 7. Integrated Business Process through Value Chain

The implementation of value chain in Bank Indonesia is begun by implementing fixed flow of process chain. In this regard, each Strategic Program in Bank Indonesia will be categorized into four layers of activity, starting from the stage of data processing/management (input) to the implementation in achieving outcome. Based on the layering of activities many things can be arranges, from details of activities that will be implemented by work units including the budget. To support this, the main task of all work units is adjusted based in four layers in the value chain.

According to the Board of Governors Regulation (PDG) on the SPAMK, the cycle of Bank Indonesia’s strategic management begins with the stage of Strategy Formulation and followed with Annual Planning to formulate Bank Indonesia’s strategy in 2019, which process was marked by the signing of performance contract and PS contract of 2019 by the Board of Governors. Starting from 2019, the SPAMK cycle entered the Annual Planning Implementation stage, in parallel with the Monitoring and Evaluation stage routinely held monthly through the Monthly Performance Evaluation to




monitor the achievement of Key Performance Indicator and work programs set in the Performance Contract 2019.

Performance Contract 2019 contains the activity of work units in implementing Bank Indonesia’s Strategic Program, which becomes the responsibility of each Work Unit, with the target of Destination Bank Indonesia in 2024, Bank Indonesia Key Performance Indicators (KPI) 2019, as well as the KPI of Work Unit and details of Work Unit activities which support the achievement of Work Unit’s KPI.

Performance Management Process in 2019

In 2019, the Performance Monitoring and Evaluation process is regularly made monthly. Moreover, the Strategy Formulation process, the stage of activity in creating and formulating Bank Indonesia’s strategy in 2020. The activity is wrapped in a series of activity in form of Mid-Year Evaluation and Annual Work Meeting (ETT-RKT) involving the Board of Governors with all Work Unit Leaders in the Headquarters and Representative Offices.

In the ETT-RKT Forum, Bank Indonesia’s performance evaluation in the first half of 2019 was explained, as well as the strategic environment development which would affect Bank Indonesia’s future strategy. In the forum, some adjustments were made to the 2019 strategy, in line with the latest changes in environment and condition that might be different with the planning process in the previous year, as well as discussions on activities to be done in 2020.

Performance Achievement of Bank Indonesia in 2019.

The achievement of Bank Indonesia’s KPI in 2019 is as follows:

a. Inflation

Consumer Price Index (CPI) inflation in 2019 was recorded at 2.72% (yoy), lower than the figure in 2018 of 3.13% (yoy). With the result, the 2019 CPI inflation was under control and stable in the inflation target range of 3.5±1%. The positive result was due to the consistency and strong policy synergy between Bank Indonesia and the Government, in central or regional levels in maintaining price stability to ensure inflation expectation was anchored in the target, aggregate demand was well-managed, exchange rate moved in line with the fundamentals, and minimized positive impact of global price increase.

b. Exchange Rate Volatility

The rupiah exchange rate strengthened, supported by global risk-on in line with optimism on the US – China trade agreement signing, and FOMC December meeting which leaned to dovish with FFR projection to stay in the Summary of Economic Projection (SEP) until the end of 2020. Further rupiah strengthening was supported with domestic positive sentiment along with stable inflation and communications with market players regarding November trade balance deficit that was beyond market players’ expectations, and inflows mainly to the domestic stock market. Bank Indonesia remained in the market with measured triple intervention by maintaining forex market mechanism.

c. Deviation of O/N PuAB Rate against BI7DRRR

The daily average of O/N interbank (PUAB) rate in 2019 was 4.83% with deviation of O/N PUAB rate against BI7DRR rate in 2019 (ytd) of 14 bps. Bank Indonesia

Picture 8. Value Chain Bank Indonesia

Value Chain of Strategic Programs

Bank Indonesia Key Performance IndicatorM

ain

Activ

ity S

uppo

rtin

g (In

tern

al)

LAYE

R 4

LAYE

R 2

LAYE

R 3

LAYE

R 1

MA 1:Implementation

MA 2:Policy Response

MA 3:Analysis/assessment

Mai

n Ac

tivity

Sup

port

ing

(Ext

erna

l)

MA 4:Data & Information

Value Chain of Work units

Vision of Work units

MF 2

MF 4

MF 1 DA-ER 1

DA-ER 3

DA-ER 2

DA-ER 4

Budget

Budget

Budget

Budget

MF 3

MA: Main Activity MF: Main Function, DA: Details of Activity, ER: End Result




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maintained sufficient liquidity of banking through the implementation of two-sided monetary policy by monitoring market development (Rrh volume of PUAB of Rp17.60 trillion). The 2019 achievement was 14 bps better than in 2018 of 28 bps.

d. Financial System Stability Index

Financial System Stability as reflected by the Finncial System Stability Index was stable in 0.37. The index was far below the threshold of 2.00. The index in 2019 was relatively lower than that of in 2018 which was 1.06.

e. Harmonious Macroprudential and Microprudential Policies

Bank Indonesia with the Financial Services Authority always coordinate to harmonize policy. In 2019, there were at least seven Bank Indonesia’s policies which went through the harmonization process with OJK, related to Overnight Index Swap, Domestic Non-Deliverable Forward transactions, RIM easing, transactions of forex against Rupiah, LTV, Integrated Commercial Banks Report, and draft of Systematic Internalisers regulation.

f. The Availability of FMI and SP Services Operated by BI (RTGS, SSSS, BI-ETP, SKNBI)

Bank Indonesia always maintains the reliability of payment system services, either large value, securities system, retail value or other banking services. In 2019, the services were well-guarded with the service rate reaching 99.99%, with one glitch that was quickly handled.

g. The Standard of Rupiah Fitness Across Republic of Indonesia

Bank Indonesia’s commitment to continue increasing the quality of money circulated in the public, including in 3T areas (Remote, Foremost, and Outermost), is shown through the soil level. In 2019, the soil level of large denominations reached 11, while the soil level of small denominations reached 7.5. Bank Indonesia continues the effort and commitment to maintain the standard of Rupiah fitness across the Republic of Indonesia.

h. Non-Cash Acceptance Ratio

In line with Bank Indonesia’s program to promote the non-cash payment transactions, the non-cash

acceptance ratio in November 2019 reached 38.61x of total adult population (100.55%). The achievement surpassed the December 2019 target which was 38.4x of total adult population.

i. Outstanding Rupiah Market to GDP

The outstanding Rupiah market is one of the indicators to monitor financial market growth especially Rupiah money market. In 2019, the outstanding collateralized instruments (Repo and Swap) reached Rp233 trillion, while the outstanding non-collateralized instruments (PUAB, SBI, NCD, SPN) reached Rp412 trillion; making the total outstanding money market to reach Rp644 trillion. If compared to GDP, the percentage was as follows: (i) collateralized instruments to GDP of 1.44%; (ii) non collateralized instruments to GDP of 2.55%; and (iii) total outstanding money market to GDP of 3.99%.

j. The Composition Ratio of Derivative Transactions against Total Domestic Forex Transactions

In realizing a deep, liquid, and efficient financial market, Bank Indonesia drove the development of derivative market, such as issuing hedging instruments on market rate movement to provide more varied options and increase confidence of market players in making transactions in the domestic market.

In 2019, the success of Bank Indonesia in driving derivative transactions was reflected in the daily average of forex transactions in December 2019 of USD5.44 billion (ytd), while derivative transactions reached USD2.14 billion per day, making the composition ratio of derivative transactions against total domestic forex transactions of 39.13% or above the 2019 target of minimum 35%.

k. Sharia Business Growth

In line with Bank Indonesia’s commitment in promoting the development of sharia economy and finance, Bank Indonesia continuously aims to develop the sharia business sector through many ways, such as developing Islamic boarding school’s economy, developing halal value chain, facilitating halal certification of MSME products to driving the development of halal tourism and business. In 2019, the efforts were successful as reflected in the increase of Indonesia’s ranking in the Global Muslim Travel Index 2019.




l. Sharia Money Market Development

Bank Indonesia also tried developing the sharia money market, through monitoring the growth of sharia money market. In 2019, the growth of sharia money market reached 16.98%. The result was supported with transaction volume from many sharia money market instruments such as PUAS, SPNS and wider use of SukBI and finalization of sharia repo technical aspect in 2019.

m. Fulfillment of HR according to Planning

Fulfillment of HR, in quantity or quality, is a concern of Bank Indonesia to support the effectiveness of task implementation. HR needs are fulfilled through new recruitment (including management trainee and athlete channels), educational activities for quality and skill upgrade (including IHT and educational programs), as well as Leadership Schools (Sesmubi, Sesmabi, Sestabi, dan Sespibi). The fulfillment reached 84.21% of planning in 2019.

n. Compatibility of Position Holders with Job Family

The compatibility of position holders with job family (JF) is also tried to be fulfilled. This is done to achieve ‘person to job fit’ allowing the appropriate HR to fill the appropriate position and job family.

In 2019, total 1,227 employees filled the appropriate position in line with personal branding. Meanwhile, total positions with set JF were 1,713.

o. Digitalization of External Financial Services Business Process

As part of moves toward Bank Indonesia 4.0, digitalization process was performed in several business processes. One of which was in the external

financial services business process. In 2019, 100% digitalization was applied to 38 existing external finance business processes. Several business processes related to external financial services were BI-GEB, BI-RTGS, BI-SSSS, DMFAS, SINAS, BI-ETP, BI-SAK, BI-SKN, SI-DHN, SI-SUN Valas, BI-CAC and BI-SILK.

p. Digitalization of Business Process for HR, Finance and Asset/Logistic Management

One of the efforts toward Bank Indonesia 4.0 is performed through digitalization of several business processes. Among them is the business process for HR, Finance and Asset/Logistic Management. After the FOMOBO implementation on 14 October 2019, the realized digitalization of business process per M.IV October reached 56 out of total 57 Probis (98% out of target of 90%).

q. Good Governance

Good Corporate Governance (GCG) is a requirement in order to build a sturdy and sustainable organization. Every year, Bank Indonesia’s governance is assessed by external expert and is graded based on the maturity level. Since 2016, Bank Indonesia’s governance has been in the enhanced category, with grade of 81.29 out of 100. In 2019, the maturity level of Bank Indonesia’s governance reached 85.39, higher than the grade of previous year at 84.69.

r. Audit Opinion on Bank Indonesia Annual Financial Statement (or LKTBI)

LKTBI 2018 received Unqualified Opinion (or WTP) from the Supreme Audit Agency (BPK-RI) in the Audit Report No. 66a/LHP/XV/04/2019 dated 30 April 2019. The WTP opinion has been successfully obtained for 16 consecutive years.




AboutBank Indonesia


ExecutiveAnalysis

Analysis

Structural Position Hierarchical Flow

Flat FlowFunctional Position

Specialist Position

Work Flow

The charateristics of flat work flow:

Structural Position

Functional Position

Type of Positions

Work process is not tiered.Employees are directly responsible to in-charge Structural Positions (Division Head/Group Head).

Work can be done individually (individual contributor) or collaboratively in projects.

Employees have the autonomy in completing jobs and contribute according to their expertise.

Leaders play role more as facilitator, developing the potential and expertise of subordinates.

SeniorAnalysis

AssistantAnalysis

Head ofDivision

To realize the vision as a central banking institution that have real contribution to the economy and becomes the best in emerging market, while answering global challenges in the 4.0 era, Bank Indonesia initiated three transformation programs: policy transformation, organizational transformation, and HR as well as work culture transformation. The initiative is taken as a strategy to adjust and optimize all elements of the organization in achieving the 2024 vision.

In 2019, Bank Indonesia’s organizational transformation was made via the improvement of organizational function, structure and alignment of authority between work units as well as expansion of flat and group-based work flow. The transformation was made in line with the principle structure follows strategy, in which organizational transformation was made to support Bank Indonesia’s policy in responding to strategic environment dynamics.

The Improvement of Structure, Function and Alignment of Authority of Work units

Various Bank Indonesia’s policies such as the Indonesian Payment System 2025 blueprint, Rupiah Currency Management 2019-2024 Framework, and forex reserves management strengthening strategy became the basis in improving the structure and function of organization. In 2019, at least there were 11 work units at the headquarters that have been revisited. Some of the organizational improvements included:

i. Merging the Electronification and National Payment Gateway Department into the Payment System Operations Department focusing on the implementation of Indonesian Payment System (IPS);

ii. Aligning the rupiah management function with the Rupiah Management 2019-2024 Framework by adjusting the structure of Cash Management Department and the cash operations function in domestic representative offices related to the implementation of command center, (or SPU) and Cash Depot (or DKU) in stages;

iii. Adding the function and work unit of forex reserves management in the Forex Management Department to increase allocation and manage spread product especially Mortgage Backed Security and Corporate Bonds as well as Sukuk;

iv. Integrating four strategic supporting functions (strategic planning, budgeting, risk management and audit). Translating vision, mission, and strategy of an organization into an effective strategic management cycle should be done in integration with other related three strategic processes: budgeting, risk management, dan audit. Therefore, four strategic work units – Strategic Management and Governance Department, Finance Department, Risk Management Department, and Internal Audit Department – as the support of each function had their organizations strengthened.

ORGANIZATIONAL TRANSFORMATION SuPPORTING BANK INDONESIA’S STRATEGY

The Expansion of Flat and Group Work Flows

Facing current dynamics and challenges, Bank Indonesia understands the needs to adjust work flows to be more agile and responsive. The hierarchical/structural work flows are deemed unsuitable in task implementation of some work units. Therefore, in 2019 the flat or flat-group work flows were expanded, in which structural positions and interdivision partitions were removed to make work and HR allocations more effective. Moreover, with the work flows, every employee can increase their expertise and their performance is measured clearly. The organizational improvement strategy also took into account the areas of Bank Indonesia’s policy focus including big data management, digital finance, payment system blueprint, FOMOBO, consumer protection as well as sharia finance and economy development. The adjustment of work unit organizational structure will be implemented in two waves, in which in 2019 the Wave 1 reorganization was implemented in form of 18 work units.

Picture 9. Flat Work Flow

Digital Workplace

The digital era required organizations to be able to utilize digital technology development for their success. This also applies to Bank Indonesia. Therefore, in 2019, Bank Indonesia has completed strategy and implementation stage to realize the Digital Workplace which is expected to boost productivity and efficiency in task implementation without space restrictions. The implementation will be in steps through change management BI-Wide.

The aspects covered in the development of Digital Workplace include information technology (IT) and system infrastructure, non-IT infrastructure (workspace, supporting tools), provisions alignment, and the creation of digital mindset and culture in all ranks.

Some steps have been made to start creating digital culture, such as paperless meeting materials, long distance meeting with the aid of technology, expansion of laptop/ipad/tablet utilization, and connectivity strengthening. Moreover, the implementation of digital workplace will be aligned to the design of BI Digital work culture program to be implemented in 2020.




97

FuTuRE ORGANIZATION: WORK FLOW TRANSFORMATION TOWARD FLAT – GROuP WORK FLOW

An agile organization is required to face the challenges and dynamics of strategic environment. The shift of work flows from hierarchical to flat-group work flows is one of Bank Indonesia’s ways to be able to work in a more effective and efficient manner. Speed, agility and adaptability are the keywords of the work flows.

Previously, Bank Indonesia had two types of work flows: hierarchical work flows and flat work flows in form of divisions and specialist positions. Hierarchical work flow was implemented to jobs which required a detailed check and balance procedure. Meanwhile, flat work flow in divisions was implemented in work units in which the task implementation focused on employees’ expertise with end-to-end type of jobs.

In 2019, organizational transformation was performed by changing the flat work flow in divisions into groups. The transformation removed partitions between divisions, allowing the role of each functional position to be more optimal. Meanwhile, jobs which require stronger risk management will still be done through hierarchical work flow.

Different to previous flat work flow, the flat work flow in groups implemented by Bank Indonesia has some characteristics such as main products no longer attached

to the division level, but to the group level. Furthermore, the role of line manager that previously was executed by Division Head now is fuly executed by Group Head.

It is expected that the flat-group work flow can increase organizational agility because by removing interdivision partitions, work distribution and HR allocation can become more efficient. The development of employees’ expertise can also be more focused. The arrangement of work completion in work units can be more effective with more optimal and efficient work distributions, employees performance can be more accurately assessed with more measured deliverables as well as more optimal functional position.

Currently there are 14 work units in Bank Indonesia which implement the flat-group work flow and will continue to other work units through the wave II reorganization. Going forward, the group-flat work units will be supported by some devices to monitor the progress of project settlement in group level, as well as to support recording of task implementation from each individual in the group.

“A good system shortens the road to the goal” – Ralph Waldo Emerson.


Bank Indonesia Supervision Agency ReferencesSummary of Policy and Flashback

of Bank Indonesia’s Journey 2019


Picture 10. Implementation of Work Flow in Bank Indonesia

CURRENT WORK FLOWHIERARCHICAL WORK FLOW AND FLAT WORK FLOW

FLAT WORK FLOW

Can be assigned as functional

with certain portionAsisten

AnalisExecutive

Analyst

Division Head

Senior Analyst

Assistant Analyst

Senior Expert

Researcher

Expert Researcher

Senior Researcher

Main Expert

Researcher

Analyst

HIERARCHICAL WORK FLOW

Products attached to Work Unit (Division) Products attached to individuals

Department Head

Structural Position Type of Positions : Functional Position Specialist Position

NEW WORK FLOWFLAT - GROUP

FLAT WORK GROUP

FLAT - GROUP WORK FLOW

DIVISION B

A transformation from the flat work flow by removing the partition of divisions to make the role of each functional position more optimal

DIVISION A

Products attached to Work Unit (Division) Products attached to Work Unit (Group)

Group Head

Group Head

Division Head

Executor

Team Leader

Assistant Supervisor

Unit Leader/Supervisor

Group Head

Division Head

Executive Analyst

Senior Analyst

Senior Analyst

AnalisSenior

Division Head

Executive Analyst

Executive Analyst

Group Head

Analyst AnalystAnalyst Assistant Analyst

Assistant Analyst

Assistant Analyst

Assistant Economist

Senior Economist

Expert Economist

Structural Position Type of Positions : Functional Position

Specialist Pool

Economist




AboutBank Indonesia


Amid the complexity of challenges faced, Bank Indonesia issued new policies relevant with the environmental conditions. To achieve that, the support of new capacity and capability both in organization or human resources is required. Hence, the management of organization and human resources is continuously made in dynamic in line with the organizational strategic direction.

In the past five years, the movement of 4.0 industrial revolution is felt by the world communities in almost of all aspects of life. Mass technology utilizations in all sectors also reach the financial services, such as through open API, Advanced Analytics/Machine Learning, Chatbots, Internet of Things (IoT), Blockchain, Quantum and Cloud Computing and so on. In other words, sooner or later the financial industry will turn into digital activities. The circumstance is a challenge that should be answered by well-thought strategy by all parties, including Bank Indonesia as a central bank.

In line with organizational transformation, work culture and HR transformation is made to prepare competent, high performing, and noble Bank Indonesia’s HR, with leadership, maturity, and character based on the strategic values of Bank Indonesia. This is needed as the current composition of Bank Indonesia employees is dominated by X Gen and Y Gen. Latest data shows that until the end of 2019, more than 50% active employees were dominated

by Y Gen, followed by X Gen of 37%. Meanwhile, assigned employees were dominated by X Gen with percentage of nearly 70%. Both generations have different work characteristics from the previous generation, and should be accomodated with the accurate approach.

The transformation program is implemented through four HR management aspects: Planning, Fulfillment, Development, and Maintenance. The planning activity becomes the basis in designing Bank Indonesia’s HR fulfillment strategy, both from internal and external sources. In 2019, Bank Indonesia planned the 2019 HR needs based on the long-term HR planning strategy (2018 to 2022) by factoring i) the direction and strategy of HR and organizational development, ii) HR quantity covering positions and composition, as well as iii) HR quality covering performance, competence, potential, leadership, maturity, and character of employees.

The impact of this is Bank Indonesia is required to fulfill employees with new or special competencies. In that regard, Bank Indonesia Institute has designed an employee development and fulfillment program which factors in job qualifications and future demand of HR quality. Besides a sharper fulfillment planning strategy, in order to obtain employees as needed by the organization, in 2019 Bank Indonesia also set and began to implement improved employee career path, including the adjustment

TOTAL 5,271

ACTIVE WORK

Gen X199137.77%

Baby Boomers

1372.60%

Gen Y3,143

59.63%TOTAL 49

ASSIGNMENT

Gen Y1122.45%

Baby Boomers

48.16%

Gen X3469.39%

BABY BOOMERS(Born in 1946–1964)

GENERATION X(Born in 1965–1979)

GENERATION Y / MILLENIAL (Born in 1980–2000)

This generation was born post the World War II, prioritizing loyalty to institutions and state.

As a witness to the fluctuating world economy and industrial modernization, loyalty is for themselves and family. Relying on themselves and having the tendency to switch jobs often.

Technology-minded, challenge seeker, prioritizing equality, expressive, egalitarian, teamwork and common goals. A witness of the global transformation, “instant gratification”.

Picture 11. HR Composition Based on Generation(Excluding MPP Employees, Sick Leave, unpaid Leave, and Company

Sponsored Graduate Studies)

BANK INDONESIA’S HR TRANSFORMATION, ANSWERING CHALLENGES OF THE 4.0 ERA




of grade structure, job attribute, and job segmentation. Moreover, the arranged improvement steps of career path are expected to become a reference for employees in building their career in Bank Indonesia. Promotional process is also improved, from previously only rank promotions to grade promotions and rank promotions. The grade promotions policy is needed to maintain career expectation and motivation of employees, while supporting the implementation of a more flat and agile organizational structure. The improvement steps are expected to ensure (i) clearer employee development and planning stage, (ii) clarity in career development to employees, and (iii) assistance in succession planning of organizational leadership.

Furthermore, to ensure the implementation of HR management run in discipline and optimal manner, Bank Indonesia also set the HR Management Calendar. This is a proof of Bank Indonesia’s commitment to implement HR management policy in a programmed, scheduled, and transparent manner. Hence, employees can make career planning clearly and HR management is performed accountably. At the moment HR Management Calendar covers all series of employee management, which are related to employee reposition, Potential Employees Group selection, career development and HR fulfillment, internally or externally.

In line with the planned employee needs according to organizational needs, the next step made is designing

strategy to fulfill gap of HR needs amid tighter talent competition in the job market. In 2019 Bank Indonesia also improved recruitment provisions which covered the improvement of candidate seeking method, selection method, and internship program enactment.

The refinement of the strategy is targeted at channel expansion and recruitment methods, so that it can include targeted recruitments such as campus hiring at the best tertiary institutions in Indonesia, referral recruitment through scholarship institutions for candidates with special capacities, and use of technology through digital recruitment in the implementation of regular recruitment for general candidates. To ensure the quality of recruited participants, new selection methods such as the Focus Group Discussion with Work Unit Leaders and the Leadership Forum with the BoG were added. Moreover, recruited candidates via campus hiring followed initial internship program to see their work ability, potential, and excellence and assess the suitability of their competence.

Based on the fulfillment strategy, in 2019 Bank Indonesia managed to recruit 160 best talents included in the management trainee program year XXXIII and 201 best talents included in the Prospective Staff Education (PCS) program. In addition, to fulfill certain function needs and as appreciation to talents in sports, Bank Indonesia recruited 32 athletes through the PCS program and talented employees with specializations in big data through the Multi Level Entry (MLE) program.

Picture 12. Innovation in Employee Recruitment (Management Trainee)

3 5 72 4 6 8

CAMPuS HIRING & WALK-IN

INTERVIEW

1. ACADEMIC POTENTIAL TEST2.ORGANIZATION FIT

1.GENERAL KNOWLEDGE2.CENTRALBANKING

3.ENGLISHinTeRvieW

PSYCHOLOGYTEST

LEADERSHIPFORuM INTERNSHIP

MEDICALCHECK uP &PSIKIATRI

1

ONLINEAPPLICATION

LEADERLESSGROuP

DISCuSSION




AboutBank Indonesia


Bank Indonesia also fulfilled HR needs internally through promotions and repositions. Repositions in 2019 were more systematic with the main objective to place employees in job family fit to their competence, achieving ‘person to job fit’. Repositions were implemented by accounting for the suitability of employee branding with the main Job Family, suitability of cluster and tier, and suitability of tolerable grade and job grade. In 2019 repositions due to mismatch in priority were made to the Deputy Director and Assistant Director positions and in partial were made to the Manager positions.

As part of the steps to prepare well-planned and well-selected successions, Bank Indonesia performed promotional process through selection and management of Potential Employees Group (or KPP). The identification process of KPP candidates was performed through tiered assessments using Qualitative Score and Quantitative Score (Q-Score) approached that covered many updated aspects to maintain the quality of selected KPP. Q-Score renewal covered aspect sharpening, portion percentage adjustment of every assessment aspect, as well as enrichment of many considerations in comparing achievement and competence of KPP candidates from all Work Units. Tight assessment was made in tier through the HR Forum, HR Committee, to decision of the BoG Meeting. With such efforts, in 2019, 485 KPP employees were selected to fill the positions of Deputy Director to Assistant Managers which were the officer position segment in the first half of 2019. After the evaluation process, positional promotions, and new candidate identifications, the number totalled 441 people in the second half of 2019.

To strengthen employees’ mastery of competence, employee competence development program was made through on the job, off the job approaches or combinations. On the job method is the employee competence development method implemented in form of exposure and experience, as well as direct assignment on the job, Assignment to External Institutions. Meanwhile, off the job method is implemented through the Competence Increase Program via In House Training

(IHT) or courses held by third parties, Company Sponsored Graduate Studies, employee internship and self-learning. Combined competence development is implemented through several Development Programs for employees selected as KPP, Onboarding Program for new prospective employees, Career Advancement Education Program, Performance Advancement and Special Empowerment Program, and Career Transition Program.

In 2019, along with the approach, new employee competence development programs began to be implemented such as the Executive Leadership Program via IHT for KPP employees in the Deputy Director and Assistant Director positions. The program covers five scales of competence module: Macroeconomy, Monetary & Market, SSK, SP and PUR as well as the Strategic Leadership & Change Management module.

In 2019 the Career Advancement Education Program was also begun to be implemented as Bank Indonesia’s leadership schools: the Staff Development Program (or PPS) for employees who will be promoted to Assistant Managers, Bank Indonesia Young Leader Level School (SESMUBI) for promotions to Managers; Bank Indonesia Middle Leader Level School (SESMABI) for promotions to Assistant Directors, Bank Indonesia Main Leader Level School (SESTABI) for promotions to Deputy Directors, and BI High Leader Level School (SESPIBI) for promotions to Directors. Employees participating in leadership schools are in certain numbers from KPP pool employees, who upon graduations will get promoted. In 2019, the programs were held in two batches: 57 people in SESMUBI, 42 people in SESMABI, 32 people in SESTABI and 25 people in SESPIBI in Batch I, and 55 people in SESMUBI, 51 people in SESMABI, 30 people in SESTABI and 18 people in SESPIBI in Batch II. Meanwhile, 120 employees participated in PPS.

In addition, in 2019 the implementation strategy of Special Empowerment Program (or PPK) was begun to be drafted to increase the performance of certain employees to give maximum contribution to Bank Indonesia’s task implementation. There are some criteria when selecting




the PPK program participants, which in general cover employees with low motivation, low performance, unsuitable competence and potential with organizational demand, to health problems leading to non-optimal work. In summary, PPK management can be seen in this framework.

To continue sharpening Leadership competence in the digital era, in 2019 Bank Indonesia dispatched 49 Work Unit leaders in the Overseas Competence Increase Program (or PMKLN) in leading training institutions and universities in the world. By enriching the exposure of Work Unit leaders to the 4.0 economic issues, besides leadership topics, PMKLN is also collaborated with the Digital Economy and Financial Technology issues, in Asia, Europe, and the USA. Meanwhile, through formal education, in 2019 Bank Indonesia dispatched 58 employees in the Company Sponsored Graduate Studies Program for Master’s and Doctorate degrees, both domestic and overseas. The dispatch of such employees in 2019 was prioritized in field

of study directly related to Digital Economy or Financial Technology, in line with the effort to prepare competency and knowledge areas required by Bank Indonesia to 2024. All employees in the program were spread in the World’s Top 50 University in various countries with the largest percentage in the US (31%), Australia (28%), UK

(19%), Indonesia (11%) and other Asian and European countries (11%). Moreover, considering the needs for specific topics in Digital Economy, at the end of 2019, Bank Indonesia was exploring the distant learning cooperation with several leading universities in the world, such as the London Business School (LBS) and University of Warwick, UK, and through the Bank of England.

As reference in such program management, Bank Indonesia is improving the planning and mapping of study program needs. Of the mapping, several specific study programs have been proposed to be fulfilled between 2020 and 2024, as per the following data:

Picture 13. Framework of Special Development Program Management

1. DATAPPK TARGET EMPLOYEES

PPK EMPLOYEESYES NO

SPECIAL EMPOWERMENT

RESIGNATION WITH WHOLE COMPENSATION RESIGNATION/DISMISSAL

FOLLOWING EMPOWERMENT PROGRAM WITH EVALuATION

EVERY TERM

SPECIAL EMPOWERMENT

T1 T2 T3

NON-PPK EMPLOYEES

uNFIT

BACK TO WORK uNITS

uNFIT

DEVELOPMENT IN WORK uNITS

2. ASSESSMENTASSESSMENT BY ASSESSORS (EXTERNAL)

3. DETERMINATION/DECISION

4. IMPLEMENTATION

RECOMMENDATION OF PPK EMPLOYEES BY HR COMMITTEE

APPROVAL TO BOG MEETING/MEMBER OF BOG

ON DSDM

FIT




AboutBank Indonesia


As an important part for employee development, development channel has been increased through the assignment of employees to external institutions to further strengthen networking. Until 2019, there were 59 Bank Indonesia employees who were assigned to strategic institutions in Indonesia and International, such as the Coordinating Ministry for Economics, Financial Transactions Analysis and Report Center, Indonesian Money Printing Firm (or Perum PERURI), KSSK, LPS, Presidential Staff Office; international agencies such as the Islamic Financial Services Board (IFSB), Malaysia, IMF, AMRO, BIS (Hong Kong); and subsidiaries Bank Indonesia’s Employees Welfare Foundation and Bank Indonesia Pension Fund (or DAPENBI). In the future, cooperation will be added with other institutions considered highly relevant in supporting the achievement of Bank Indonesia’s mission and vision.

In order to maintain harmony with external dynamics and strategies to motivate, retain and attract the best talent, in 2019 Bank Indonesia has made improvements to aspects of employee maintenance. The basic principles used in improving the maintenance aspect were prioritizing the performance based organization principle, maintaining Bank Indonesia’s competitive position in the market, sharpening governance aspect, fairness aspect, and compliance to existing regulations. Adjustment was made based on the cost of living adjustment (COLA)

and by considering remuneration movement in the job market. Besides regular adjustment, salary structure was improved by simplifying previous salary structure that was based on job grade, individual grade and non grade to salary structure based on level of positions (officer and non-officer).

Incentive for employees. The philosophy of providing incentives is primarily to appreciate the achievement of performance results in the previous period and motivate employees to contribute and perform higher in supporting the achievement of Bank Indonesia’s vision and mission. This is done by redefining the principle of giving incentives, in which they are given not only based on individual employees performance, but also based on the assessment of wider achievements amid more complex organizational challenges. New strategy in making appreciations to employeees is by giving incentives in the implementation of work culture and change management program, as an appreciation to individuals who are considered successful in guarding work culture change and mental change leading to high performance and contribution to the organization.

Employee’s pension benefits. The hybrid pension benefits have been implemented since 1 January 2018 and continuously improved since 2019. The hybrid pension program is aimed at supporting several targets: dynamic and competitive salary system policy in line with market

Bank Indonesia Competency and Knowledge Areas

Core

Economics

Monetary Internal Finance

Payment System and Currency Management

Operation & Settlement

General & Risk Auditor

Strategic Management

Market Legal

HR Specialist

Communication

Financial System Stability IT Specialist Asset

Management Procurement

FIELD AREA

FIELD OF SCIENCE

EXAMPLES OF SuB-FIELD

ManagementAccounting

Information System & Information Technology

Finance OtherLaw

Functional Support Hybrid

Economic Sciences, Islamic Economics, Big Data, Policy, Network Analysis, Sectoral Analysis, Political Economics,Corporate Finance, Financial Economics,Financial Engineering, Financial RiskManagement, Islamic Finance, SystemicRisk, Financial Market Analysis, FinancialTechnology, Derivative in Financial Market, Financial Programming

Computer Sciences, Information System, Business & Technology, Cybersecurity, Law, Advance Accounting

General Management, Operation Management, Human Resource, Corporate Governance, Asset Management, Risk Management, Strategic Sourcing Management, Strategic Management

Picture 14. Planning and Mapping of Study Program Needs




development, maintaining sustainability of DAPENBI and fairness in fund allocation in form of pension benefits between old and new retirees. Despite policy adjustment in providing pension benefits, Bank Indonesia still adheres to ‘no harm principle’ in giving remunerations.

Besides remuneration policy, an objective, transparent, and accountable performance management system in line with the organizational strategy is required to maintain work motivation and increase employee performance. The implementation of performance management in Bank Indonesia consists of the Individual Performance Indicator planning stage, mid-period evaluation, and end-period assessment. Regarding the Individual Performance Indicator creation, performance indicator must be set with the SMART CC (Specific, Measureable, Achievable, Relevant, Time-bound, Consistent, and Continuous Improvement) criteria, in addition to observing perious year’s performance achievement, organizational strategic objective, and employee’s job description. To achieve the determined performance indicator, performance dialogue mechanism between employees and line manager is periodically held for evaluation.

Furthermore, to run change management and work culture, in 2019 Bank Indonesia implemented change strategy through three change programs: BI Innovation, BI Religious, and BI Achievement. The BI Innovation program is a change program aims to create a more creative and innovative employee behavior, while building innovation culture through activities to support a more optimal task implementation. In this regard, change comes in form of innovation of work process, product or service improvement, as well as policy innovation.

Next is the BI Religious program. The program is a change program aimed at instilling religious values in daily work behavior through organizational collective worship and religious activities (all religions) to build noble characters in performing Bank Indonesia’s task implementation. These include congregated prayers with tausiyah reading (Monday and Thursday) for Muslim, Ecumene congregated worship for Christian every Thursday, as well as joint worships for Hindus and Buddhists.

The third change program is BI Achievement. The program is a change program aimed at promoting internalization of strategic values main behavior in achieving

deliverables of Bank Indonesia’s Strategic Programs, and achievements in representation and reputation in the international level. Several activities related to the BI Achievement program are Story of Us (SoU), Trick of Three (ToT), and Gallery of Achievement (GoA). SoU is a creative installation presenting behind the scene story of strategic values main behavior internalization as well as solid cooperation from all work units in every PS. The ToT is a vessel to dig the understanding of participants (millennial generations representing each PS) on tips/strategies in communicating the Bank Indonesia strategic values internalization process in each PS. GoA is a medium for each PS to explain the series of activities and initiatives that show concrete efforts to internalize strategic values in achieving PS and explain the impact after implementing change programs.

In 2019, Bank Indonesia also held internal policy evaluation by measuring employee’s motivation level and engagement through the engagement survey. Out of 4,785 employee respondents who completed the survey, the composite score of Bank Indonesia’s Corporate Engagement Level was 75%, within the Moderately Engaged category which illustrates the employee engagement level working with passion and feeling strong bond with Bank Indonesia.

The Corporate Engagement Level was elaborated in three engagement behavior areas: (i) Say Positively, (ii) Stay in the Company and (iii) Strive for the Best. The Say Positively area has a score of 83%, showing that Bank Indonesia employees always talk positively about the company and will not hesitate in recommending the company to job-seeking friends. The Stay in the Company area has a score of 71%, stating that Bank Indonesia employees do not have the thought to stop working at Bank Indonesia and even refuse to leave BI even when offered the opportunity to work in other organizations. The Strive for the Best Area has a score of 71% that shows Bank Indonesia employees always try to complete existing jobs with the best ability.

The transformation efforts implemented by Bank Indonesia in 2019 are the steps to create the future Bank Indonesia’s HR preparation strategy that is agile to changes. By finalizing the transformation concept, it is expected that in 2020 Bank Indonesia can move toward a more consistent implementation level to answer 4.0 era challenges on the whole.




AboutBank Indonesia


FINANCIAL MANAGEMENT IN MAINTAINING BANK INDONESIA’S FINANCIAL ACCOuNTABILITY AND SuSTAINABILITY

Bank Indonesia successfully maintained the Unqualified Opinion (or WTP) in 2019. The achievement has been acquired for 17 consecutive years. This shows the effort of Bank Indonesia to strengthen its financial management by complying with good governance principles in a continuous manner. The sustainable effort was shown through the integrated application system, renewal of Chart of Accounts (CoA) structure, centralization of financial transaction settlement, formulation of Bank Indonesia’s sharia finance accounting policy, regular implementation of FGD with auditors. Bank Indonesia’s Financial Statements were made and presented in relevant, accountable and transparent manner in line with Bank Indonesia’s Financial Accounting Policy.

Bank Indonesia also maintained status as Compliant Taxpayer since 2015. This can be achieved because Bank Indonesia fulfilled the requirements by the Taxation Director General: WTP opinion on financial statements, timely reporting of Tax Return (or SPT), no tax arrears, and no record of criminal cases in taxation.

Bank Indonesia’s move in implementing an integrated information system is a response in facing global dynamics toward digital economy as well as a commitment

to continue maintaining financial management accountability and sustainability. The integrated information system is realized in the BIMASAKTI project which covers Enterprise Resource Planning (ERP), Human Resource Information System (HRIS), Front Office Middle Office Back Office (FOMOBO), and Core Banking System (CBS) implemented in stages. The ERP, HRIS and FOMOBO system have gone live in 2019 while CBS is planned to go live in 2020.

In line with the utilization of ERP apllication system beginning on 1 Januari 2019, Bank Indonesia also renewed the CoA structure which covered information for management needs to accelerate the decision making process by Bank Indonesia. In the near future, CoA will be improved using the value chain layer approach as part of the strategic budgeting with the objective of Bank Indonesia’s financial accountability and sustainability.

In line with the ERP utilization, Bank Indonesia also implemented the centralization of financial transaction settlements related to payment transactions. The objective was to increase internal control, efficiency of transaction settlements, and efficiency of human resources utilization.

Governor of Bank Indonesia Submits the 2019 Unaudited Bank Indonesia Annual Financial Report to the Supreme Audit Agency




Bank Indonesia’s financial management is also accommodative to organizational development and business process, one of which is sharia economy. As part of sharia financial market development, Bank Indonesia encourages the utilization of sharia financial instruments in monetary operations implementation. In line with this, Bank Indonesia considers the need of sharia financial accounting standard to become reference for recording of financial transactions based on sharia principles in Bank Indonesia. In that regard, Bank Indonesia has strengthened the Drafting Committee for Bank Indonesia’s Financial Accounting Policy (or KAKBI) by adding members of the Steering Board, sources, and technical team with practicions/academicians with sharia financial accounting background. The KAKBI Drafting Committee has agreed the work plan for Bank Indonesia’s sharia financial accounting policy drafting. The sharia financial accounting policy is drafted in stages with applied due process and consideration of the set priority scale in reference to best practices.

From budget planning, Bank Indonesia ensures the set budget aligns with organizational strategy by heeding fairness, compliance, and governance principles. Bank Indonesia’s budget planning is part of the Annual Planning in the Cycle of Planning, Budget, and Performance Evaluation System. Therefore, Bank Indonesia’s investment plan and budget reflect all strategic programs of Bank Indonesia in task implementation and achieving Bank Indonesia’s vision and mission.

Fulfilling the mandate of Law, Bank Indonesia’s Annual Operation Budget for 2020 received approval of the House of Representatives in Bank Indonesia’s Work Meeting with Commission XI of DPR RI on 14 November 2019. Moreover, to fulfill Bank Indonesia’s budget accountability, the 2020 Policy Budget has been reported to the Parliament on 7 November 2019, while the 2020 Annual Investment Budget has been submitted to the Bank Indonesia’s Supervisory Body on 19 December 2019 to be reviewed. Furthermore,

the realized financial impact of Bank Indonesia’s authority and task implementation will be examined by the Supreme Audit Agency of the Republic of Indonesia.

Bank Indonesia continuously increases the quality of data and document provisions to the Supreme Audit Agency. This is done using the main business process approach, including the rupiah monetary operations, forex monetary operations, forex reserves management, Rupiah currency management, Government accounts management, billing to Government management, fixed assets management, intangible assets management, and human resources management before the audit begins.

Coordination between Bank Indonesia and BPK-RI is strengthened further through FGD implementation and timeline agreement for audit implementation. FGD implementation aims to align point of view and understanding on Bank Indonesia’s policy, while strengthening governance, and as the implementation of Bank Indonesia’s transparency and accountability principles.

Besides accountability, Bank Indonesia’s financial sustainability is an important part continuously monitored. Bank Indonesia’s financial sustainability is reflected among others from the percentage of capital components to monetary obligations ratio. Per 31 Desember 2019, the capital components to monetary obligations ratio was 11.08%. This represents Bank Indonesia’s ability to provide funds in meeting monetary obligations. The increase or decrease of capital ratio is highly affected by the current year surplus/deficit. On the other hand, Bank Indonesia does not make the amount of surplus as the main objective, but the stability of Rupiah currency. The assets, liabilities, and surplus/deficit of Bank Indonesia are the financial impact of the policy mix pursued by Bank Indonesia. However, to guard organizational continuity, Bank Indonesia still factors in financial sustainability as a corridor in decision making.




AboutBank Indonesia


In achieving its vision, mission and institutional strategy, Bank Indonesia should be supported with a strong governance system to direct and control authority and task implementation. Governance becomes Bank Indonesia’s main focus in managing organization. This comes from a premise that an institution’s success should be seen not only from the performance, but should be supported with commitment to act in line with the expectation of stakeholders and conformance to existing regulations and standards. Both of these are considered to further protect stakeholders’ interest and provide long-term success.

The implementation of Law No. 23 of 1999 marks the beginning of Bank Indonesia as an independent central bank. Referring to the Law, Bank Indonesia implements governance aspect, such as accountable decision making process, supervision, to transparency to the public. Then in 2015, it was strengthened with the issuance of Bank Indonesia’s Governance in one complete provision. The aim was to give the same view on the governance design

STRENGTHENING GOVERNANCE, RISK MANAGEMENT AND INTERNAL AuDIT

and concept, as well as its consistent and integrated implementation in Bank Indonesia.

Bank Indonesia’s governance is a series of commitment, structure, and process to direct and control Bank Indonesia’s task and authority to realize Bank Indonesia’s credibility through the achievement of Bank Indonesia’s objective and vision in an effective, legally compliant, and accountable manner. Governance management in Bank Indonesia is performed thoroughly that covers five elements summed in The Bank Indonesia’s governance framework, consisting of governance principle, commitment, structure, process, and result.

In line with the complexity of business process and environment as well as higher demand from stakeholders, Bank Indonesia continuously tries to strengthen governance in a comprehensive and through manner. Governance strengthening refers to the governance assessment result performed in the previous period or other things that can increase governance implementation in Bank Indonesia.

Board of Governors and Heads of Work Units at the 2019 Bank Indonesia Annual Work Meeting




Governance principles

Governance principles are a set of values which found good central bank governance: independence, accountability, and transparency. An independent central bank is required to be able to implement its role and function as a monetary authority more effectively and efficiently. To ensure the independency is implemented in full-accountability, Bank Indonesia consistently implements transparency mechanism and public accountability in policy setting and organizational management.

Governance commitment

Governance commitment illustrates the commitment of Board of Governors and employees in the implementation and increase of Bank Indonesia’s governance which is reflected in the vision, mission, strategic value, code of conduct, medium- and long-term strategic plans, as well as realizing Bank Indonesia’s environment that is free from corruption, collusion, and nepotism.

In line with the improvement of vision, mission, and strategy of Bank Indonesia previously, in 2019 Bank Indonesia strengthened its strategic planning management process. The strengthening was done

through value chain approach to make business process more comprehensive. With the approach, the effectiveness and efficiency of work process can be increased. As a form of Bank Indonesia’s commitment to maintain credibility, and uphold integrity and independency, as well as increasing professionalism in task implementation, Bank Indonesia continues to maintain the imlementation of its Code of Ethics and Code of Conduct for Members of the Board of Governors and Employees. To support detection process for breaches of ethics or conduct, Bank Indonesia implements its Whistle Blowing System (WBS), an integrated system, from receiving reports unto follow-up enforcements on suspected violations, while guaranteeing the confidentiality of the reporters. With WBS, the public of Bank Indonesia employees can report potential breaches of ethics, conduct, and work procedures executed by all individuals in Bank Indonesia (employees, outsourced manpower, and the Board of Governors) through website, letter, email, and phone.

Of the reports in WBS, Bank Indonesia analyzed the validity of the information. Disciplinary enforcement process will be taken on information with proven violations in reference to employee disciplinary rules. In 2019, Bank Indonesia WBS received 88 reports; and followed up 22 reports that fulfilled requirements related to indications of violations on Bank Indonesia’s code of ethis and code of conduct. Meanwhile, other reports cannot be followed up because they do not meet the requirements, including reports not related to Bank Indonesia employees or not related to Bank Indonesia’s operational activities.

Governance commitment is also strengthened by reviewing governance-related provisions regularly to be in line with external dynamics and internal needs. In this regard, in 2019 Bank Indonesia improved the regulation on code of ethics and code of conduct in family relationship within an office and conflict of interest. This is aimed at preventing the potential conflict of interest in family relationship within an office, either to employees with family relationship or to Work Unit Leaders who supervise the employees.

Picture 15. Bank Indonesia’s Governance Framework

GOVERNANCE RESULT

CREDIBILITY

GOVERNANCE COMMITMENT

GOVERNANCE PRINCIPLES

INDEPENDENCE, ACCOUNTABILITY, TRANSPARENCY

GOVERNANCE STRUCTURE GOVERNANCE PROCESS

Board of Governors

Medium-Long Term Strategic Plan

Vision, Mission, and Strategic Values, Main Behavior

Code of Ethics and Code of Conduct and Disciplinary Enforcement

Relationship with Stakeholders, Reporting,

and Disclosure

Risk Management and Internal Control

Policy Making and Decision Making

Performance Management

Strategic Planning

Supervision to Bank Indonesia




AboutBank Indonesia


Bank Indonesia’s governance commitment is enforced by implementing the provision on submission requirement of State Administrators Wealth Report (or LHKPN) to the Corruption Eradication Commissions (or the KPK). The LHKPN submission requirement applies to Members of the Board of Governors and employees starting from assistant managers and staffs in certain positions. To guard commitment and ensure implementation of the requirement, LHKPN submission by employees is a requirement in the promotion process. Violations to the requirement are the object of Bank Indonesia’s disciplinary enforcement.

To increase awareness of Bank Indonesia’s HR to strategy direction, strategic plan, and code of ethics and code of conduct empowerment, internalization activities are routinely hold to all employee levels, including through briefing program. Internalization is expected to: (i) increase employee’s understanding on strategic programs which support the achievement of Bank Indonesia’s destination statement, as well as (ii) honing sensitivity on the best fulfillment of ethical standards. In general, governance commitment shows a very best result. This is reflected in the implementation of Bank Indonesia’s strategic plan and the achievement of all targets of Bank Indonesia’s main performance indicators. Meanwhile, the code of ethics management and Bank Indonesia’s code of conduct aspects were maintained as reflected by the increase of compliance affidavit submission level (99.0%), annual affidavit (97.6%), and LHKPN (99.8%).

Governance structure

Governance structure illustrates Bank Indonesia’s organ authorized to implement the mandate of task implementation, and supervision toward Bank Indonesia. The aim is to ensure the control of Board of Governors’ authority as the highest leader of Bank Indonesia remains in line with Bank Indonesia’s objective achievement. Moreover, governance structure also aims to realize checks and balances mechanism in a good implementation of state institutions.

According to Law on Bank Indonesia, the House of Representatives or the DPR-RI holds supervision to

Bank Indonesia. The legislative control is aimed at increasing the quality of decision making, supervising abuse of power, and upholding the performance of state institutions. DPR-RI is assisted by the Bank Indonesia Supervisory Board in the supervision. Moreover, the Supreme Audit Agency also holds supervision to Bank Indonesia, especially in the financial aspect.

As a form of Bank Indonesia’s accountability in task implementation, in line with Article 58 of the Law on Bank Indonesia, Bank Indonesia accounts for the implementation of its task and authority to DPR-RI. In 2019, Bank Indonesia submitted four reports of Bank Indonesia’s authority and task implementation for the period of Quarter IV 2018 and Year 2018, Quarter I 2019, Quarter II 2019, and Quarter III 2019 to DPR-RI and the Government, published them to the public. Complementing the reports submission, Bank Indonesia was present in work meetings held by DPR to provide explanations on the policy taken or to take inputs on things related to Bank Indonesia’s task.

In implementing DPR RI’s supervision function to Bank Indonesia, the Bank Indonesia Supervisory Board submitted review on Bank Indonesia’s budget and operations for four periods: Quarter II 2018, Quarter III 2018, Quarter IV 2018, and Quarter I 2019. In response to the Supervisory Board’s recommendations, Bank Indonesia submitted response on every period which elaborated the conditions and challenges faced as well as follow-up improvements. Bank Indonesia also actively initiated meetings with The Supervisory Board’s members as well as analysts at the technical level. The meetings discussed recommendations of BSBI reviews, Bank Indonesia’s follow-up on the reviews, and coordination mechanism between Bank Indonesia and BSBI.

In finance, BPR-RI holds supervision through audit on Bank Indonesia’s 2019 Annual Financial Statements. In this regard, Bank Indonesia again received Unqualified Opinion. The opinion was achieved 17 times in a row. Besides auditing The Financial Statements, To explore further unto certain issues or activities related to financial management and budget implementation, BPK-RI can conduct a special audit on behalf of the Parliament’s request.




Moreover, in strengthening the supervision function, Bank Indonesia monitors the follow-up on BPK finding recommendations to work process or financial statements, as well as DPR-RI’s supervision recommendations through the Supervisory Board.

In 2019, supervisions to Bank Indonesia were strengthened to increase accountability to supervisory agencies; one of which was the digitalization of data and information provisions to BPK. This was aimed at increasing the effectiveness and accessibility of BPK supervision to Bank Indonesia. To support that, Bank Indonesia issued a guideline on the digital process of BPK audit documents and data submission. The guideline is expected to give clarity on the responsibility of each involved party to ensure smooth data and information provisions to BPK.

Governance process

Governance process regulates a series of governance-supporting standards and procedures implemented in all task implementation aspects as a planned, consequent, and sustainable system. Governance process covers the policy making and decision making area, the strategic planning and performance management area, and the relationship with stakeholders, reporting, and disclosure area.

a. Policy Making and Decision Making

The decisions made by Bank Indonesia’s leaders are strategic decisions which impact the organization’s interest, as well as having strategic impact to the national economy’s interest. Therefore, the decisions made must be accountable. In line with the Law on Bank Indonesia, the BoG Meeting is the highest decision making forum in determining or evaluating principle and strategic Bank Indonesia’s policies and/or receiving reports on must-known policies in line with existing regulations.

Monthly BoG Meeting is held at least once a month to evaluate the economy and Bank Indonesia’s Policy, as well as setting general policy in monetary, macroprudential, payment system, and/or other principle or strategic policies. Monthly BoG Meeting can be attended by one or more ministers

representing the Government with the right to speech without the right to vote. Meanwhile, Weekly BoG Meeting is held at least once a week to evaluate monetary policy implementation, financial system stability development, payment system, and other supporting reports, as well as setting other principle and strategic policies. To increase the effectiveness of policy responses taken, Bank Indonesia continuously strengthens the policy communication process by publishing information on Monthly BoG Meeting schedule for one year. This is supported by the timely delivery of Monthly BoG Meeting results at 14:00 to provide certainty of Bank Indonesia’s policy stance to market players.

Besides the BoG Meeting, Bank Indonesia also communicates its policy through the monthly publication Monetary Policy Review and quarterly publication Monetary Policy Report. The report is meant as a medium for the Board of Governors of Bank Indonesia to give explanation to the wider public on the evaluation of current development on inflation, exchange rate, and monetary condition during the report period, and monetary policy response decisions taken by Bank Indonesia.

In 2019, the BoG Meeting was held 80 times with total discussions of 200 topics, comprising 24 topics of Monthly Meeting and 176 topics of Weekly Meeting. All of the meetings were quorum and as scheduled. The BoG Meeting topics put on agenda were fully discussed. The achievement was a result of effective BoG Meeting management. It was also supported by high attendance level of Members of the BoG in Weekly Meeting and Monthly Meeting as a form of commitment by the BoG in the highest decision making process in Bank Indonesia. Eventually, policy credibility was achieved, and BoG Meeting decision making was accountable.

In 2019, provisions related to the BoG Meeting administration process were strengthened. The planning, administration, to release of meeting’s results were strengthened to increase accountability and effectiveness of the meeting administrations. The provision improvements included: (i) alignment




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of regulations with that of on main policy strategy, (ii) improvement on BoG Meeting administrations in emergency state, and (iii) improvement of writing format and governance of BoG Meeting minutes.

Principle and strategic policy making process in Bank Indonesia is supported by committees which function as supporting organs to give recommendation on principle and strategic decisions that will be decided by the BoG. Currently Bank Indonesia has five committees in line with the need for task implementation: Monetary Policy Committee, Financial System Stability Policy Committee, Payment System and Rupiah Currency Management Policy Committee, Forex Reserves Management Committee, and Human Resources Committee.

In line with the mandate of Law on Bank Indonesia, as a public legal entity, Bank Indonesia is authorized in determining regulations. The implementation is actualized through regulations such as Bank Indonesia Regulation (PBI), Board of Governors Regulation (PDG), Member of Board of Governors Regulation (PADG), and Member of Board of Governors Internal Regulation (PADG Intern). In 2019, Bank Indonesia issued 16 PBIs, 28 PADGs, seven PDGs, and 67 Internal PADGs. As part of legal framework strengthening which supports policy effectiveness, the regulation making process is always supported by opinions and/or legal advice through the harmonization and synchronization process with other regulations. This aims to ensure the issued regulations are in line with Bank Indonesia’s task and authority, meeting the wider public needs, and in line with national regulations. In 2019, no Bank Indonesia regulations received lawsuit from external party.

Furthermore, Bank Indonesia also evaluates regulations regularly by assessing good governance principles. The evaluation aims to align Bank Indonesia regulations with current conditions and with no overlapping between regulations either internal ones or outside Bank Indonesia, which

will increase Bank Indonesia’s credibility. In 2019, evaluations of regulations were made digitally through the Regulation Evaluation and Monitoring System in Bank Indonesia (SIMONEV).

The achievement of Bank Indonesia’s vision should be supported with good national legal system, in line with Bank Indonesia’s task and authority as stated in regulations initiated by the Government or the Parliament. Bank Indonesia is always active as member of Inter-Ministerial Committee or source in the formulation of Academic Text, Bills, and other draft of regulations. Bank Indonesia’s active participation is also meant to create substantial harmony between regulations and to support national legal development. Some discussions of the bill in the year 2019 were on Private Data Protection, on Electronic Transaction and System Administration, a bill on Trading via Electronic System, and on Industry Rescue and Security Action14.

b. Strategic Planning and Performance Management

From the strategic planning and performance management area, Bank Indonesia continuously implements the Budget Planning and Performance Management System (SPAMK) to ensure accountability in authority and task implementation. The system confirms that all stages, from strategy formulation to performance evaluation, are implemented through mature and accountable process. In 2019, the whole process of planning management to evaluation implementation and performance assessment was held in a corridor mandated by regulations which prioritized accountability and transparency. In 2019, Bank Indonesia’s strategy was formulated through performance contract and Strategic Program contract of 2019. Performance Evaluation and Monitoring is regularly held monthly through the Monthly Performance Evaluation to monitor the achievement of Main Performance Indicator and other work programs determined in the 2019 Performance Contract.

14 PP No.71 of 2019 on the Electronic Transaction and System Administration was endorsed on 10 October 2019 and PP No.80 of 2019 on Trading via Electronic System was endorsed on 25 November 2019.




c. Risk Management and Internal Control

From risk management, Bank Indonesia implements risk management improvement to manage and mitigate risks which can weaken organizational capability and capacity in achieving the objective. In 2019, the improvement was made through a top down, forward looking, and integrated risk management transformation. With a top down approach, Bank Indonesia’s risk management is focused on the strategic risks which obstruct Strategic Programs’ achievement. Forward looking approach demands risk management function to focus on historical events and be corrective, as well as predicting future risk implications and potentials and preventive mitigation strategy formulations. Meanwhile, an integrated risk management approach is realized through the integration of risk management and strategic planning in drafting the annual planning, and the integration of risk management and internal audit in the implementation of Risk Based Internal Audit (RBIA).

Moreover, in 2019, risk management also saw improvement in (i) value chain-based risk management framework, and (ii) interlinkage of Bank Indonesia’s Task Sustainability Management Protocol and National Crisis Management Protocol.

The improvement of value chain-based Bank Indonesia’s Risk Management (or MRBI) framework allows identification of strategic risks in every layer of business process which can disrupt the achievement of Bank Indonesia’s Strategic Programs. Moreover, Key Risk Indicator (KRI) is determined for every strategic program’s risk. Strategic risks cover policy risk, financial risk, and operational risk which can obstruct the achievement of Strategic Programs, and impact legal risk and reputation. The MRBI framework is designed as an integrated part of Bank Indonesia’s four governance functions, covering strategic planning, strategic budgeting, strategic risk management, and strategic risk based internal audit, as well as to strengthen the risk management concept of three lines of defense.

The integration is realized through: (i) work units as the first line of defense, implements strategic programs by monitoring strategic planning, strategic budgeting, and strategic risk facilitated by Internal Control Officer (ICO), (ii) Risk Management Department as the second line of defense, plays role in strengthening risk management throughout Bank Indonesia through facilitation, consultation, and risk monitoring as part of the four eyes principles, and strengthening the capability and competence of ICO through regular workshop programs, and (iii) Internal Audit Department as the third line of defense, implements strategic risk based internal audit and independent compliance audit. Therefore, governance monitoring to achieve the strategic program targets and destination statement can be done in holistic from target and planning compatibility, budget effectiveness, as well as its risk level.

Bank Indonesia always tries to achieve best performance by building, maintaining, and increasing excellence such as through benchmarking on other peer central banks which have implemented best practices and credible international organization such as the International Operational Risk Working Group (IORWG). The assessment result of Bank Indonesia’s Operational Risk Maturity by IORWG in 2019 shows risk management maturity in an advance level with maturity value of 92.90. The result becomes a reference to further strengthen the framework of operational risk management in Bank Indonesia.

The interlinkage framework of Bank Indonesia’s Task Sustainability Management Protocol (or PMKTBI) and National Crisis Management Protocol (or PMK) is made to strengthen the operational risk management framework, which is expected to strengthen handling of operational disruptions in the financial market infrastructure which can impact financial system stability. The interlinkage framework of PMKTBI and National PMK was improved in reference to the best practice standard ISO 22301: Business Continuity Management System.




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The interlinkage framework between PMKTBI and National PMK emphasized on coordination strengthening in Bank Indonesia’s internal, as well as between authorities, and industry players especially large and systemic banking group. Hence, Bank Indonesia always tries to strengthen coordination with external parties (including the Meteorological and Geophysical Agency, State Code and Cyber Agency, Financial Services Authority, Deposit Insurance Corporation, and national banks) through activities such as knowledge sharing, Focus Group Discussion, workshop of MKTBI Task Force, and MKTBI Forum.

As part of internal strengthening, Bank Indonesia has operated the Alternate Command Center (ACC) and designed the Disaster Resilience Map of Bank Indonesia’s Domestic Representative Office to support the continuity of Bank Indonesia’s critical task. The representative offices’ Disaster Resilience Map is expected to increase awareness, alertness, and vigilance against potential natural disasters in line with the geographical characteristics of each region, in order to determine mitigation steps in minimizing the impact of disasters.

In supporting Bank Indonesia’s internal control process to meet good governance principles, Bank Indonesia develops and implements the RBIA in reference to The International Professional Practices Framework. The RBIA is an approach of audit on independent and objective control, risk management, and governance process. The RBIA development began in 2016 as the follow-up on maturity assessment result of internal audit function.

The RBIA guarantees that risks can be effectively managed according to risk tolerance/limit on the achievement of Bank Indonesia’s objective, and increasing risk awareness to every risk-owner work unit. The process is held based on diagnostic/assessment on MRBI maturity, Bank Indonesia’s task sustainability management, and internal audit. MRBI assessment is held in various risk management aspects: governance and culture, strategy, manual, infrastructure, and reporting and monitoring. Based on the assessment, Bank Indonesia strengthened

Risk Management and improved Risk Management guideline, MKTBI guideline, and the RBIA guideline. To ensure the effectiveness of improved guidelines, Bank Indonesia held tests to the main business process. As a reference for RBIA implementation, Bank Indonesia has formulated the concept of Integrated Risk Based Internal Audit framework which comprises: (i) objective, (ii) achievement indicators, (iii) framework pillars, and (iv) Integrated RBIA transformation program.

In the development, RBIA is improved in line with the improvement of Bank Indonesia’s strategic direction. The improvement is made through the strategic risk based internal audit integrated with strategic planning, strategic budgeting, and strategic risk management. The framework will be designed by integrating four strategic functions which take into consideration best practices. Moreover, as a prerequisite of RBIA implementation, business process mapping and risk control matrix formulation in domestic representative offices and Overseas Representative Offices.

Picture 16. Integrated Risk Based Internal Audit Framework

Providing assurance on performance achievement through governance evaluation,

risk management, internal control, and compliance of Bank Indonesia

INTEGRATED RISK BASED INTERNAL AuDIT

INDEPENDENCE, OBJECTIVITY, AND ACCOuNTABILITY

POLICY TRANSFORMATION | ORGANIZATIONAL TRANSFORMATION | HR & WORK CuLTuRE TRANSFORMATION

PILLAR 1 PILLAR 2 PILLAR 3

Strategic Audit to provide assurance

on the effectiveness and efficiency

of risk management in achieving

IKu PS

Compliance Audit to provide

assurance on compliance to

regulations

Advisory based on audit result to reduce risks

and increase internal control

awareness

KPI PS ACHIEVEMENT COMPLIANCE INTERNAL CONTROL AWARENESS




Furthermore, to assess the sufficiency and effectiveness of control implementation and design in mitigating PS KPI risks, Bank Indonesia performs audit of strategic programs through test of design (testing control design sufficiency) and test of effectiveness (testing the effectiveness of operational control implementation) with the value chain concept.

In line with the implementation of Enterprise Resource Planning and Human Resources Information System (ERP/HRIS) in which there is a change of transaction recording mechanism, Chart of Accounts, and formulation of Bank Indonesia Financial Statements (or LKTBI). Bank Indonesia performs the Internal Control over Financial Reporting (ICoFR) audit. This aims to confirm the formulation of financial statements post-ERP/HRIS implementation has been supported with adequate control and refers to Bank Indonesia’s Accounting Policy. The implementation of ICoFR audit covers Entity Level Control, Information Technology General Control and Transaction Level Control in formulating the LKTBI.

To complete the audit function implementation, there is a consultancy of internal control system in the improvement of design provision and implementation which covers governance, risk, and control. To guard the quality of internal audit function implementation, Bank Indonesia implements internal audit practice appropriate with international standard of internal audit, the International Professional Practices Framework (IPPF) issued by The Institute of Internal Auditor (IIA). Furthermore, to get confidence on the consistency of IPPF standard implementation, Bank Indonesia performs periodical internal assessment to audit function implementation. Moreover, to increase the capability and quality of audit results, Bank Indonesia always engages auditors in the competence improvement program in audit.

d. Relationship with Stakeholders, Reporting, and Disclosure

As the monetary, macroprudential, and payment system authority, the policies taken by Bank Indonesia intersect with interest of stakeholders.

Therefore, Bank Indonesia is required to continue strengthening synergy with stakeholders. This is pursued by attending work meetings held by DPR to give explanations or inputs on issues related to Bank Indonesia’s task. Moreover, Bank Indonesia also holds dissemination, FGD, socialization, and workshop with the Government, observers, academicians, and the public.

Related to relationship with stakeholders, Bank Indonesia makes some improvements. In communication, Bank Indonesia improves communication guideline especially related to (i) information classification which should be submitted to a specific Member of the BoG and/or to the Board of Governors, and (ii) deadline of main policy publications. This is meant to ensure BoG obtain the accurate and urgent information, while the deadline of main policy publications is expected to increase transparency and certainty to stakeholders.

Bank Indonesia also improved the provisions regarding the implementation of its Social Program. Improvements were made to harmonization and legal arrangements and adjustments to authority in the implementation process.

Bank Indonesia also continues to increase the quality of information dissemination to stakeholders. This is reflected in the international award given to Bank Indonesia’s Annual Report 2018 by the League of American Communications Professionals with rank 8 in the category of Top 100 worldwide, platinum award in the category of finance with valuation >US$10 billion, and most improved for the category of introduction and special achievement winners.

Governance Result

Governance Result is a manifest of Bank Indonesia’s governance enforcement and implementation which have positive impact to value creation and sustainability of Bank Indonesia’s mandate. Good governance enforcement and implementation in Bank Indonesia are reflected through good task implementation based on governance principles, as well as the fulfillment of standard and compliance to existing regulations.




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Governance strengthening and management implemented in all Bank Indonesia’s process lines are regularly evaluated to receive a comprehensive feedback in increasing the effectiveness of Bank Indonesia’s governance enforcement. The evaluation is done through three measurement methods: (i) governance assessment, (ii) FGD on policy credibility, and (iii) communication evaluation survey. In 2019, Bank Indonesia’s governance index reached 85.39 which showed governance maturity within the enhanced level. Meanwhile, the Credibility Index for monetary as well for macroprudential policies reached 5 (scale 1-6). It was the evaluation of economic observers and media in monetary and macroprudential policies. Bank Indonesia’s communication index reached 5.1 which showed Bank Indonesia’s policy communication to stakeholders was effective and transparent.

The achievement reflects that Bank Indonesia has good commitment, structure, and process in governance enforcement and implementation. Moreover, the achievement also shows Bank Indonesia’s strong commitment in building Bank Indonesia’s credibility as the leading public institution in governance enforcement and implementation.

Bank Indonesia will continue strengthening governance implementation consistently according to the governance roadmap. To ensure the governance strengthening steps are implemented by all parties in Bank Indonesia, monitoring and control are held regularly. The strengthening will support Bank Indonesia’s reputation as a credible central bank.




Information system support in Bank Indonesia’s task implementation is a critical aspect aimed to increase the efficiency and effectiveness of task implementation and welcoming the 4.0 industrial era. This is reflected in one of the Destination Statement, “Digitalization of Business Process”, and Strategic Program “Building Information System in the Digital Era”. Through the increase of people, process, and technology factors, Bank Indonesia has made several achievements, namely improving governance and IT services according to best practice, and completing several projects for the development and implementation of strategic information systems to improve the digitalization of business processes.

In the industrial era 4.0 where technological developments are occurring very quickly, it presents a major challenge for Bank Indonesia’s information systems to provide reliable and safe services to support the decision-making process and task implementation. Hence, alignment between business needs and IS development plan is very important to realize quality IS services.

In that regard, Bank Indonesia is drafting Bank Indonesia’s Information System Masterplan (or RISIBI) in supporting the achievement of 12 Bank Indonesia’s strategic programs. Moreover, in supporting the achievement of 2024 Destination Statement, Bank Indonesia develops business process digitalization.

The business process in Bank Indonesia is categorized into seven business process categories which cover external financial services; asset/logistic, finance, and

HR management; information processing and collection; collaboration and decision making; analytical; information distribution and management; and internal and external correspondence. The digitalization process in 2019 has reached its target of 27%, focusing on business process related to external financial services and asset/logistic, finance, and HR management.

To increase the efficiency and effectiveness of Bank Indonesia’s task implementation, support from information system is needed. In 2019, the completion of IS development project reached 99% totaling of 94 projects. In the monetary sector, we have seen the implementation of forex information and/or data monitoring and utilization system related to export and import activities integrated in real time (or SIMDIS), integrated bank reporting system with OJK and LPS, adjustment of minimum reserve requirements calculation application, and other reporting systems supported with updated warehouse data system for data processing. Meanwhile, in market sector, we have implemented a system to support DNDF auction process to deepen financial market.

IS support in the financial system stability and macroprudential sectors is through the development of various systems, such as RIM, PLM, and LTV particularly on Macroprudential application and Probability of Default – Loan to Value. Meanwhile, in the payment system and Rupiah circulation sector is supported by developing alternative systems for the securities trading system managed by Bank Indonesia and counterfeit money management system used in conjunction with the Indonesian National Police.

INFORMATION SYSTEM TOWARD DIGITAL ERA

Submission of ISO 27001 Certificate by an External Auditor to Bank Indonesia




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Since 2014, Bank Indonesia has issued the Bank Indonesia information system transformation initiative through the formulation of Information System Enterprise Architecture (IS-EA) and Development Roadmap 2014 – 2019. One of the biggest IS transformation is an integrated system implementation related to the resources management and planning function, the front office middle office back office (FOMOBO) function, the banking services function, and the HR management function through the BIMASAKTI project. The BIMASAKTI project consists of three system developments: Enterprise Resource Plan and Human Resource Information System (ERP-HRIS), Front Office Midle Office and Back Office (FOMOBO), and Core Banking System (CBS). In 2019, ERP-HRIS application and one stage of FOMOBO application were implemented. Meanwhile, another stage of FOMOBO application and CBS application will be implemented in 2020.

As mentioned previously, the target of business process digitalization in Bank Indonesia in 2019 was 27%. It was translated into the digitalization of external financial services business function entirely and 90% of asset/logistic, finance, and HR management business process. The digitalization target can be achieved through the development of applications in the Payment System sector that support external services and ERP-HRIS application implemented in four stages to support task implementation in asset/logistic, finance, and HR management.

With technology development and growing millennial employees, Bank Indonesia launched the Digital Workplace (DWP) development initiative. The DWP is a concept of digital work supported by digital technology utilization in all business processes which allow employees to be connected with required resources and can coordinate, communicate, and collaborate virtually for decision making anytime and anywhere, including in communicating and providing services to stakeholders.

DWP implementation aims to increase work process effectiveness, resources utilization efficiency, productivity and innovation, and HR engagement. The DWP components that will be developed include messaging, collaboration, communication, productivity, crowd sourcing, connectivity, and mobility. In 2019, several tools that supported DWP components such as smart printer, messaging tools, Human Resource Information System (HRIS), and digital collaboration tool have been implemented.

Besides providing support for task implementation, Bank Indonesia also strengthens capacity and capability in Information System, covering technology, process, and human aspects. in technology aspect, IS continues updating system by using newest technology to gain benefits which

can increase efficiency and effectiveness. Meanwhile, the process is strengthened by adopting IS management best practice which covers IS service management (ISO 20000 - Information Technology Service Management), IS security management (ISO 27001 – Information Security Management System), and Data Center management (TIA 942 – Conformance Constructed Facilities).

Increasing risk on IS security has become a concern for many parties. Therefore, it is important for Bank Indonesia to have a strong and reliable cyber security. One of Bank Indonesia’s efforts to increase cyber security is by forming the Information Security Incident Response Team (ISIRT) on 15 May 2018. ISIRT is a special team tasked to investigate and solve IS security incidents to support Bank Indonesia’s task sustainability and implementation.

Cyber security is also improved by running internal program, the information security awareness program. The program aims to increase employees’ awareness on the importance of information security while practicing habit which can increase information security level, such as the use of quality password and remaining vigilant against cyber attack.

Besides internal strengthening, cyber security is also built by involving the payment system industry. This is because every member is interconnected that susceptibility in a member will impact other members. Therefore, in 2019 the Cyber Security Sharing Platform of Payment System (or CSSP SP) was founded, with 60 members from the payment system industry especially banking. CSSP SP aims to do information sharing on recent cyber risk issues to increase cyber security in the payment system industry.

In 2019, Bank Indonesia cooperated with OJK in the development of reporting application which can be beneficial and used by both authorities. The cooperation has resulted in the APOLO and BI-ANTASENA systems to get integrated one-door reports from banking. This is also a follow-up to the mandate of Law No 21 of 2011 which demands Bank Indonesia, OJK and LPS to build and maintain information exchange means in integrated manner. With the report integration, it is expected that in the future banking reports will be more efficient, quality, and developed based on needs, which eventually can provide more accurate information for policy making in each authority and more positive contribution for the national economy.

To strengthen support on task implementation in each authority, Bank Indonesia and OJK establish the Information Exchange and Reporting System Coordination Forum (or FKPISP) as a coordinating forum related to Information System. In 2019, the Board of Governors of Bank Indonesia and the Board of Commissioners of OJK held three high level meetings to discuss latest issues on information exchange and asset usage.




117

BANK REPORTING INTEGRATION (ANTASENA)

Reporting Integration is a joint effort of Bank Indonesia, OJK, and LPS to build a more efficient reporting mechanism by integrating reporting of the banking sector through one joint portal mechanism. Reporting Integration is built in reference to one metadata which minimizes redundant and inconsistent information. This can also increase efficiency of report submission from banking, considering banks submit reporting to Bank Indonesia, OJK, and LPS via separated applications. In addition, Reporting Integration is also aimed at creating “one data” of banking to realize banking data access and exchange required anytime by each authority, as well as increasing the quality of bank reporting data.

The development of Reporting Integration refers to four basic principles:

1. Efficiency: ensuring the requested information is clearly used by authorities, with no redundancy, and is submitted in one application platform.

2. Flexibility: ensuring the dynamic authority’s business process can be fulfilled in easy and fast manner.

3. Consistency & Clarity: ensuring the reported data and information can be formulated clearly in reference to standardized metadata, in order to obtain quality banking data.

4. Collaboration: collaboration between authorities is built in creating an integrated reporting in reference to the jointly agreed metadata.

The development of Reporting Integration15 in Bank Indonesia merges information sourced from seven existing reports (LBU, LSMK, LBBU, LBBUS, LHBU, LKPBU, and LKBBU) and is submitted through the National Metadata-Based Integrated Reporting Application (BI-ANTASENA). BI-ANTASENA significantly changes the bank reporting architecture to Bank Indonesia and gives breakthrough in technical solutions:

• Informationbasedreportingformat,nolongerformbased,and the information is arranged based on the metadata agreed by Bank Indonesia, OJK, and LPS.

• Providing the option of reporting submission linesaccording to the technology level owned by banks: upload system, Managed File Transfer (MFT), and Application Programming Interface (API).

• Data Quality Management (DQM) integrated in BI-ANTASENA that data quality monitoring, consistency checking, and data fairness are done automatically, no longer manually or using application outside the reporting system.

The benefits obtained from BI-ANTASENA implementation are: (i) efficiency increase from application maintenance and development; (ii) the flexibility and simplicity in the adjustment and addition of data needs; (iii) the guarantee of consistency, clarity, and quality of data and information obtained; and (iv) the use of latest technology, and the provision of reporting submission options in other formats in line with the technology level owned by banks.

15 Reporting Integration of BI-OJK-LPS covers nine existing reporting: Commercial Banks Daily Report, Commercial Banks Regular Report, Sharia Commercial Banks Regular Report, Commercial Banks Monthly Report, Monthly Financial System and Monetary Stability Report of Sharia Banks and Sharia Units, Commercial Banks Monthly Financial Statement, Commercial Banks Headquarters Report, Rural Banks Monthly Report, and Sharia Rural Banks Monthly Report.

As a legal basis for banks to submit reports through BI-ANTASENA beginning on 31 December 2019 in parallel with existing reporting until August 2020, Bank Indonesia has issued Bank Indonesia Regulation No 21/9/PBI/2019 on Integrated Commercial Banks Report on 30 August 2019 and Members of the Board of Governors Regulation No 21/23/PADG/2019 on Integrated Commercial Banks Report on 6 December 2019.

The implementation of Reporting Integration through joint portal of BI-OJK-LPS beginning on 31 December 2019 as marked by the launching of Reporting Integration by Bank Indonesia Governor, Chairman of the Board of Commissioners of Financial Services Authority, Chairman of the Board of Commissioners of Deposit Insurance Corporation, and attended by chiefs of all Indonesian banks on 19 December 2019.





Picture 17. Mechanism of Reporting Integration through Joint Portal

JOINT PORTAL

Processed

www.pelaporan.idREPORTER

Integrated Data

Utilization by BI, OJK,

and LPSProcessed

Processed




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PROCuREMENT FuNCTION EFFECTIVENESS AND OPTIMAL LOGISTICS MANAGEMENT

In 2019, Bank Indonesia strengthened the governance of procurement function by making some transformations on procurement to support Bank Indonesia’s task implementation. Bank Indonesia also strengthened the governance of logistics and assets management by setting the framework for reference in fulfilling quality and best standard supporting facilities for Bank Indonesia’s task implementation.

External and internal developments demanded Bank Indonesia to respond to existing challenges by making transformation in many sectors including procurement and logistics management. Technology development, international standard, best practice, and government policy changes also affected the process of goods/services procurement in Bank Indonesia. Furthermore, the development of work facilities provision such as ISO certificates, green and smart building, work process digitalization and creative digital workplace also required Bank Indonesia to strengthen logistics management and work facilities. Internally, Bank Indonesia also faced challenges such as organizational transformation and human resources, as well as the implementation of integrated information technology in form of Enterprise Resource Planning (ERP) as one of the tools in the implementation of business process on goods/services procurement, work facilities provision and Bank Indonesia’s task implementation support.

Effective Goods/Services Procurement Bank Indonesia which Prioritizes Governance Aspect

The transformation of goods/services procurement in Bank Indonesia in 2019 was performed by strengthening procurement policy, strengthening procurement process in form of integrated planning, strengthening procurement strategy through standardization of procurement aspects, strengthening supporting infrastructure in the procurement process, strengthening HR competence, strengthening advisory role, and strengthening networking and strategic partnership with other institutions.

In this regard, transformation was made to strengthen governance and effectiveness of goods/services procurement process covering the policy, process, people, and technology aspects. The four aspects in 2019 were focused on activities with high magnitude to

the improvement of pace on procurement quality and completion with very high urgency level, among others:

a. strengthening procurement organization and policy such as the improvement of Standard Operating Procedure (SOP) for goods/services procurement in Bank Indonesia and review to existing provisions and organization;

b. strengthening procurement process through the implementation of integrated planning – the integration between procurement plan and finance function (work plan, budget, and payment program), optimization of contract management, and formulation of vendor management framework;

c. strengthening procurement strategy through the standardization of procurement aspects: arrangement of 208 standards of goods/services per commodity types (critical item, strategic item, leverage item, and pure commodity), 67 standards of procurement documents, implementation of procurement strategy (bundling, unit price contract, and long-term contract), standardization of 14 master contracts, 46 standards of cost structure, and implementation of 99 unit price contracts;

d. strengthening supporting infrastructure in the procurement process through the implementation of ERP e-Procurement application, development of price database and procurement dashboard;

e. strengthening procurement-executing HR competence in Bank Indonesia, both in Headquarters or Bank Indonesia’s Representative Offices through the certifications of goods/services procurement in the internal Bank Indonesia, national, or international levels;

f. strengthening advisory role through the implementation of procurement business process internalization and provision of technical assistance to procurement executors in Headquarters and Bank Indonesia’s Representative Offices; dan

g. strengthening networking and building strategic partnerships with other institutions in policy development and cooperation increase in goods/services procurement.




With the efforts to strengthen goods/services procurement process, in 2019 Bank Indonesia managed to do cost efficiency of Rp640.3 billion or 8.1% on goods/services procurement with total value of Rp7,226.9 billion.

Moreover, in 2019 Bank Indonesia also became a benchmark for other institutions related to the goods/services procurement regulation and policy such as the LPS, the OJK, Social Security Agency (BPJS) on Health, Taxation Directorate General (DJP), and the Perum PERURI. This shows that Bank Indonesia is an advanced organization in implementing best practice in procurement, with the implementation of commodity-based procurement strategy. The model used in this procurement is supply positioning model developed by Peter Kraljic. The model categorizes goods and services based on value of purchase and level of risk aimed at determining purchase/procurement strategy from certain goods and services.

The procurement centralization in Bank Indonesia has been implemented from mid-2016. Up to 2019, procurement centralization managed to increase procurement effectiveness and efficiency by prioritizing good governance. The achievements came from governance improvement through check and balance implementation in goods/services procurement; a standardized procurement implementation from policy, strategy, and implementation of provisions on procurement; and unification of goods/services procurement in one provision. Nevertheless, the centralization of goods/services procurement in the future will face challenges, such as growing procurement value; long procurement processing time; and external aspects such as market conditions (supply and demand), policy and regulation, economic condition, and other factors in the procurement ecosystem which builds the cycle of goods/services procurement with binding chain of goods/services flow, cash flow, and information flow.

Therefore, Bank Indonesia in the future will continue strengthening procurement governance by holding on three guiding principles (governance, efficiency, and

sustainable procurement), that in 2024 Bank Indonesia can become the benchmark of procurement for other institutions; have procurement process which can support the achievement of strategic programs and task implementation of Bank Indonesia; have the best and current digital procurement; and implement comprehensive Governance, Risk, and Compliance (GRC) in procurement.

Services Management in Logistics, Archiving, and Security according to Good Governance to Support Bank Indonesia’s Task

Services management in logistics, archiving, and security is realized through three aspects as the main pillars: Policy and Development, Planning and Management, and Services and Facilities.

To ensure the standard and quality of logistics and assets management, in 2019 Bank Indonesia strengthened the planning by designing the Logistics and Assets Management Policy Framework which covers Bank Indonesia’s Office Complex Masterplan (RIKOPERBI), Bank Indonesia’s Housing Masterplan (RIRBI), and Bank Indonesia’s Asset Utilization Masterplan (RIPABI). The masterplans are guidelines for procurement of logistics main infrastructure by self-developing office buildings, Bank Indonesia’s Housing and other facilities, or by optimizing assets with other parties.

The logistics and assets management framework contains the principle, standard, and design of guideline as reference of fulfillment of quality and world-class supporting facilities for Bank Indonesia’s task implementation, created based on the mapping result, drafting and updating of guideline design/standardization, as well as RIKOPERBI, RIRBI and RIPABI projects realization target until 2025. The planning concept strengthening has significant impact to the achievement of logistics and assets management quality, as well as to the pace in anticipating the planned relocation of State Capital to Penajam, East Kalimantan, beginning in 2020.




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In 2019, several Bank Indonesia’s logistics strategic projects were completed that provided positive contribution in supporting Bank Indonesia’s major task implementation, such as land provision for the development of Cash Management Center, Data Center 2, and Business Resumption Site, fitting out project of Overseas representative office Beijing, laying the first stone of building of Domestic Representative Office Province South Sulawesi, and construction of official residence in Domestic Representative Office Balikpapan.

Besides managing the construction of office buildings, official residence, or other facilities, logistics management in Bank Indonesia also renovated buildings and facilities, by prioritizing efficiency aspect and green building, such as the use of energy-saving lamp, solar cell, and product selections for air conditioning equipment (genset, chiller). Renovation of office buildings, official residence, and other facilities was implemented in the Headquarters and Representative Offices, such as:

a. Renovation of office for work unit operations including the Tourism Joint Secretariat Room;

b. Renovation of office buildings: Domestic representative office in South Sulawesi Province, Papua, and in West Java, renovation of official residence of the Board of Governors, official residence of domestic representative office Riau and guest house;

c. Fullfilment and improvement of other task implementation supporting tools, such as mechanical electrical, lift replacement, electronic security system improvement for domestic representative office; and

d. Providing international standard sports facilities in Bank Indonesia office complex (or KOPERBI).

In increasing the quality of asset maintenance, Bank Indonesia has increased the premium subscription status with electricity firm Perusahaan Listrik Negara (PLN) in the KOPERBI to safeguard Bank Indonesia’s operations and critical tasks. Bank Indonesia also tried to increase

awareness for the implementation of ISO 41001:2018 Facilities Management System in 2021 by considering the existence of new ISO auditor and preparation of Bank Indonesia’s assets infrastructure.

Bank Indonesia also managed to build an international-standard archiving system. This is seen from the addition of work units receiving the Statement of Compliance ISO 15489 – Record Management from previously 29 work units in 2018, to 40 work units in 2019. Bank Indonesia also received ISO 30301:2001 Management System for Records and ISO 9001:Quality Manajemen System for the formulation of document management policy and archiving services.

In the organization of official events, in 2019, all official events were well organized, including some national-scale events such as Coordination Meeting of Central and Regional Government, Regional Economic and Financial Evaluation Meeting, Fesyar in Java, Sumatra and the Indonesian Eastern Area, Regional Inflation Control Team (TPID), Indonesian Creative Works (KKI), Indonesia Sharia Economic Festival (ISEF) and Bank Indonesia’s Annual Meeting. The successes were due to the standardized and measured planning and implementation.

In the strengthening of security and safety aspects, Bank Indonesia has performed moves and efforts to anticipate demonstrations and riots in the 2019 presidential election, Java-Bali blackout and incident in West Papua in August 2019, while monitoring safety and security activities BI-wide through the Security Command Center.

Bank Indonesia’s success in the implementation of logistics, archiving, and security functions will be increased in line with technology development and digital economy era, logistics management trend according to the green and smart building concept, work process digitalization and creative digital workplace, while factoring the requirement to support task implementation of Work Units more optimally.




In 2019, the success of communications in supporting Bank Indonesia’s policy achievement was reflected at least from two main indicators: the quality of stakeholders engagement (Engagement Quality Index) at 84.69% (out of 100%) and the 2019 public institution’s information disclosure award with informative predicate for the category of State Public Institutions and Non-Ministry Government Institutions from the Central Information Commission (KIP) of the Republic of Indonesia. The quality of good stakeholders engagement shows generally stakeholders receive, believe, use Bank Indonesia’s policy as judgement in decision making, even suggest other parties to refer to the policy. The predicate of informative public institution from KIP is a real form of Bank Indonesia’s commitment which always makes innovation in developing quality information services to the public. The award is a move to boost an increase of information disclosure by public institutions and a means to optimize public supervision on state administrators and other public institutions.

Moreover, as a form of social responsibility, Bank Indonesia through the Dedication to the Country Program initiated 1,000 BI Corner units or Reading and Fairytale Corner in all educational levels and strategic public facilties across Indonesia. The success is acknowledged through an award to Bank Indonesia as Caring Partner for National Early Childhood Education (PAUD) from the Education and Culture Minister.

Communications to Support the Effectiveness of Bank Indonesia’s Policy Mix

In Bank Indonesia, communications are an instrument to build and direct stakeholder’s expectations on the policy taken and targets to be achieved. In 2019, Bank Indonesia’s communications were pushed to support the achievement of vision and mission 2018-2024 translated into 12 Strategic Programs (PS).

Bank Indonesia’s communication role is implemented through the establishment of continuous communication process, consisting of planning, execution, and evaluation. Good planning process supported by tactical implementation can direct communication implementation according to the determined objective and targets. To ensure communication implementation has gone as targeted, Bank Indonesia performs regular evaluation. The evaluation process aims to gain feedback, both in communication process or policy

EFFECTIVE COMMuNICATIONS AND SOCIAL RESPONSIBILITY OF BANK INDONESIA

review. In increasing the achievement of stakeholders engagement quality to Bank Indonesia’s policy, in 2019 communication direction, strategy, and tactics were strengthened. Two of them were by determining communication themes regularly in the planning process and sharpening stakeholders’ linkage to the effectiveness of Bank Indonesia’s policy.

In 2019, Bank Indonesia’s policy communication was directed to support Bank Indonesia’s policy mix in strengthening economic stability and maintaining economic growth momentum. Bank Indonesia’s accommodative policy mix covered monetary policy, macroprudential policy, payment system and Rupiah management policy, financial market deepening supported by international policy, MSME policy and sharia finance and economy policy.

Besides policy communication, Bank Indonesia also performed educational communication to increase stakeholder’s understanding in supporting Bank Indonesia’s task implementation. Educational communication includes the role and task of a central bank, characteristics of Rupiah authenticity, supporting digital payment implementation through QRIS (QR Code Indonesian Standard), and utilizing Non-Bank Money Changer Business Activity (KUPVA BB) and Licensed Fund Transfer Operator (PTD) as part of the campaign of Anti-Money Laundering and Terrorism Funding Prevention (APU PPT).

The effectiveness of Bank Indonesia’s communication implementation is shown by the indicator of stakeholder’s engagement quality, as well as statements from influencer in line with the main message of Bank Indonesia’s policy which reached 92% (out of 100%) and Net Favorable Ratio (NFR) of positive news in mass media in 2019 which reached 38% (with target of 12%).

BI’s communication success was also shown by continuous news exposure. In 2019, there were 22,787 news articles from 182 mass media related to Bank Indonesia, with positive-neutral news tone reaching 72%. In addition, there were 98,784 news articles from 1,823 online mass media, with majority positive-neutral news tone reaching 78%. Moreover, Bank Indonesia becamse the first Central Bank with the highest number of followers (accumulation of all social media) compared to other peer central banks. (Source: OMFIF, December 2019).




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Strengthening Public Information and Public Literacy Services

In providing public information services, Bank Indonesia’s contact center (BICARA 131) always presents to give prime service to the public. In reflection of prime service, the Stakeholders Satisfaction Index (SSI) in 2019 showed 87.32% information requesters stated satisfaction of BICARA 131 service. BICARA also managed to keep ISO 9001:2015 Quality Management System. BICARA 131 continues innovating to increase internal capacity and set strategy, while making improvement in people, process, or technology, and showing high performance to give service excellence to the public.

Consistency in providing prime information service to the public managed to send Bank Indonesia to brilliant achievements. Bank Indonesia contact center (BICARA 131) managed to obtain awards in The Best Contact Center Indonesia 2019 event with 14 medals and was awarded as the best contact center in the State Institutions category for small contact center. Worldwide, Bank Indonesia received awards in the Asia-Pacific Contact Center World (CCW APAC) and Contact Center World 2019.

Moreover, as part of transparency and disclosure and in line with the Law on Public Information Disclosure (KIP), Bank Indonesia also continues optimizing education and information services to the public through www.

bi.go.id website. The website presents complete and comprehensive information on policy and data released.

Bank Indonesia’s effort to increase public literacy is reflected from the Museum BI which always presents to give information service to the public. In 2019, Museum BI continued increasing service to the people, one of which was through strengthening omnichannel communication means through optimization of all media owned, such as museum roaming, event organizing, and exhbitions and digital media through Museum BI’s social media to attract the interest of millennials who are the largest visitor segment.

The management of Museum BI is also strengthened by committing to fulfill compliance to domestic and international regulations. In line with this, in 2019 Museum BI received Type A museum standard from the Education and Culture Ministry of the Republic of Indonesia and managed to maintain the ISO 9001:2015 Quality Standard accredited by the United Kingdom Accreditation Service (UKAS). The effort to strengthen Museum BI management is also supported with the improvement of Museum BI operator resources capability certified by the Professional Certification National Agency. Moreover, Bank Indonesia also continued strengthening networking with the museum community and relevant institutions bot domestically or internationally to attract people to visit and know

01000

January

Num

ber o

f New

s

February March April May June

Online Print

July August September October November December

2000300040005000600070008000

7282

17111147 1265 1274

1817

10781688 1642 1553 1702 1597 1583

5285 5731 5697

8789

4675

9006 8744

7974 7967

7215

5703

900010000

98,784News from 1,823 Online Media News from 182 Print Media

22,787

Picture 18. News Development in Print and Online Media related to Bank Indonesia in 2019




Museum BI closer. The effort is manifested in the increasing visitor numbers in Museum BI of 45.70%, from 231,366 visitors in 2018 to 337,110 visitors in 2019. The number is the largest in Museum BI’s history.

Other public literacy improvement activities were implemented through the outreach program to reach and educate the people in introducing Bank Indonesia’s important function as the guardian of national economic stability. The outreach program was implemented vua sharing method as well as discussion with state institutions, law enforcers, or state auditors. Other programs implemented were Bank Indonesia Teaches, seminar with academicians, and Education Festival with the theme Digital Payment ala Millenial in Lampung, Manado, and Solo with the peak event of Bank Indonesia Netifest in Jakarta.

Ahead of the Idul Fitri Holiday in June 2019, BI also held the Homecoming Service Post with the theme “Fitra with Rupiah” in kilometer 57 Cikampek. Museum BI was also active in doing the outreach program by holding the initiative exhibition “Museum Goes to School” in several schools and Islamic boarding schools. Bank Indonesia also consistently received visits from educational institutions (School/University/Institution). In 2019, there were 70 public education visits attended by 5,478 participants.

Moreover, Bank Indonesia also transformed the external magazine publication in branding and contents to better attract stakeholder’s interest. The transformation resulted in the achievement of two awards in 2019: 2nd Winner of The Best E-Magazine Government InMA and 3rd Winner in the category of The Best Government InMA for Gerai Info/BICARA magazine. Furthermore, Fokus magazine also received Gold Winner in the category of The Best Government InMA.

Bank Indonesia’s Social Responsibility: Dedication to the Nation Program

As a form of social responsibility, Bank Indonesia implements the people caring and empowerment activity called the “Dedication to the Nation Program”. The Dedication to the Nation Program in 2019 carried the theme “Strengthening the role of Dedication to the Nation through program that has real contribution to the national economy”. The program was aimed at 1) supporting inflation control and reducing Current Account Deficit, through strategic food resilience program, export-oriented leading commodities program, and art and culture development program as well as tourism supporting tools/infrastructure, 2) supporting the development of sharia economy and digital economy, especially through synergy of economic independence of Islamic boarding schools and other sharia businesses as well as encouraging MSME to utilize e-commerce, 3) expanding scholarship channeling to TS and vocational educations across Indonesia.

The Dedication to the Nation Program in 2019 was implemented through three programs: first was the Economic Capacity Increase Program done among others through strategic food resilience program, export-oriented leading commodities program, and culture development program which boosts tourism. The Economic Capacity Increase Program also touched on women empowerment, creative economy, and sharia economy. Second was the HR Capacity Increase Program aimed at education to increase understanding on Bank Indonesia’s task, especially on inflation, which is expected to form public opinion accurately and proportionately on inflation expectations. This is important because inflation expectation is a fundamental factor which affects inflation movement. The third program was the Social Care Program in education, religion, health, environment, culture and disaster management.




AboutBank Indonesia


Bank Indonesia through Bank Indonesia’s Reading Corner (BI Corner) encourages active role of the people to increase public literacy toward developed Indonesia. BI Corner is established as a vessel to build proximity between the people and Bank Indonesia, as well as a means for delivery of Bank Indonesia’s policy. Public literacy and education activities have important meaning for real contributions by Bank Indonesia. The increase of public literacy, including financial literacy, is expected to drive a real and quality economic growth. Communications between Bank Indonesia and the public are expected to build an ecosystem that is able to create support from all stakeholders, including the general public, to policies taken by Bank Indonesia.

BI Corner is implemented through the establishment of mini library designed by thinking of comfort and giving attraction to visitors, as well as providing access to quality information and literatures in printed form or e-book, local and foreign. BI Corner has been initiated by Bank Indonesia since 2015 as part of the leading theme “Dedication to the Nation” Program: Smart Indonesia. BI Corner is implemented in the university level, educational institutions, regional libraries, and other institutions. Until 2019 972 units BI Corner have been built in Strategic Public Infrastructure/Regional Libraries, Universities and High Schools/Equals as well as 301 units of Reading and Fairytale Corner (PBD) for early childhood education (PAUD) across Indonesia.

As an appreciation and to give motivation to all BI Corners in Indonesia, Bank Indonesia holds the BI Corner Award. In 2019, BI Corner Award was held in November 2019. With the BI Corner Award program, engagement between Bank Indonesia and aid recipient institutions is expected to become stronger. The award considered some aspects such as organization management, policy commitment of program recipient institutions, activation and networking or cooperation activities done by program recipient institutions, impact of BI Corner to institutions and users, as well as commitment of institutions to help Bank Indonesia’s role and task.

Going forward, Bank Indonesia is targeting 1,000 BI Corners in all educational levels and strategic public facilities. BI Corner is expected to become educational means and research center for students and general public. This is in line with Bank Indonesia’s move to give a real support in increasing the quality of educations in the public.

BANK INDONESIA PROMOTES PuBLIC LITERACY THROuGH BI CORNER

Bank Indonesia 2019 Annual Report124

Public Literacy Through BI Corner



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As a form of Bank Indonesia’s real contribution in creating Indonesian HR with quality and integrity, and as its role as a leading institution in the education and research sector, Bank Indonesia in 2019 collected two international accreditations from two renowned institutions. First, the Corporate Learning Improvement Process (CLIP) accreditation from European Foundation for Management Development (EFMD) as a world-class corporate university. Second, SCOPUS accreditation for Bulletin of Monetary Economics and Banking (BMEB) as a research journal with international quality owned by Bank Indonesia.

In response to more dynamic global challenges which require accurate and credible policies, and in realizing the vision to become a central bank that has real contribution and is the best in emerging market, Bank Indonesia continues strengthening HR capability through education and research activities held by the BI Institute. The programs are designed with integration of four aspects as the main pillars in strengthening Bank Indonesia’s HR capability: Education, Research, Partnership, and Exposure. In 2019, from its establishment in 2015, BI Institute has entered the advancing phase as marked by the strengthening of strategy and quality of education and research programs to answer organizational needs, supported with advanced tools and prominent schools and scholars.

STRENGTHENING EDuCATION AND RESEARCH ECOSYSTEM WHICH SuPPORTS ECONOMIC LEADERSHIP

In ensuring the standard and quality of education and research program, Bank Indonesia always refers to national and international best practices. Therefore, in 2019 BI Institute received two international recognitions from prominent institutions. First is the acknowledgment of BI Institute as an international-standard corporate university with the Corporate Learning Improvement Process (CLIP) accreditation from European Foundation for Management Development (EFMD), receiving very good status and five-year accreditation period. Second, the acknowledgement of Bank Indonesia’s research journal, Bulletin of Monetary Economics and Banking (BMEB), as a research journal with international quality through the SCOPUS accreditation for three-year period. Besides BMEB, the Journal of Islamic Monetary and Finance (JIMF) obtained the SINTA 2 (Science and Technology Index) accreditation from the Higher Education (DIKTI) Ministry. All of these are the realization of Bank Indonesia’s commitment in strengthening institutional quality by continue making improvements in line with international best practice.

In regard to HR development through learning activities, in 2019, Bank Indonesia held 194 classes with total 6,121 participants, both internal and external. The program was implemented in form of onboarding education, competence development, career advancement, and

Leadership Forum




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career transition. Program inclusivity was reflected in the balanced involvement of internal faculties (monetary, market, Payment System and Rupiah Currency Management, Financial System Stability, and Corporate Enabler) and external faculties (academician, practicioner, expert, regulator), with total faculties of 1,053.

Learning quality was also strengthened by developing advanced learning tools, in line with the development of digital era. The learning program is currently completed with innovations such as case study, boardgame, and e-learning. This also aims to support the development of high order thinking skill, which becomes the main requirement amid digitalization in many aspects. Various modules on digital economy are also developed to answer the development of science and digital era challenges at the moment.

The leadership development program is also sharpened through the improvement of Leadership School (SESPI) design in Bank Indonesia. Education materials cover the conception, framework, and current strategic issues in macroeconomy and central banking which are arranged in gradation and with alignment between levels of SESPI (SESMUBI, SESMABI, SESTABI and SEPIBI). Leadership is also strengthened with the focus to build higher order thinking skill, especially in the capability aspects of analyzing, evaluating and creating which enrich the learning method with case studies and simulations. To gain practical insight, strategis study is performed in four sectors - Manufacturing, Maritime, Tourism and Infrastructure – related to digitalization aspect. Sectoral substance is deepened through Focus Group Discussion (FGD) between education participants and related ministries/institutions, regional governments, associations and academicians.

HR development related to research in Bank Indonesia is reflected with the implementation of 13 strategic frontier researches related with macroeconomy, international economy, development economy, and the financial system. Moreover, as a strategic contribution in increasing centralbanking literacy, Bank Indonesia

released two books on sharia economy. Bank Indonesia researchers are encouraged to produce quality and world-class researches. This is signified with the acceptance of Bank Indonesia’s research publications in international journals: six researches are accepted in SCOPUS-index international journals, six others are published in international journal BMEB, and two other journals are published in non-SCOPUS international journals. The acceptance of research outcomes in international journals is proof that the quality of Bank Indonesia researchers’ results are acknowledged and meet international standards.

Bank Indonesia’s contribution in strengthening the national research and learning ecosystem which also become a form of Bank Indonesia’s exposure in the national and international levels, is shown in the implementation of partnerships. In the learning program, partnership is implemented in the flagship program (in 2019 there were 16 national and international flagship programs with partners such as IMF, SEACEN, other central banks), educational visits by other national institutions and central banks to Bank Indonesia in learning certain topics, as well as cooperation with Universities in the development of centralbanking subject (including training of trainer and public lecture). Research on the domestic economy is also strengthened with the implementation of joint research, both with collaborating institutions or research scholars with local researchers, and the implementation of research grant as well as research aids.

In science and knowledge literacy, Bank Indonesia makes contribution through the writing of 8 books with topics on centralbanking, leadership, or institusional memory. To extend the reach of dissemination and literacy, and expanding Bank Indonesia’s exposure in the field of science reference, the book is then published in hardcopy as part of the collection in Bank Indonesia’s Library and stakeholders (Universities and related institutions). Moreover, in digital form, the book is also uploaded into Bank Indonesia’s website and Bank Indonesia’s Digital Library.




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BANKINDONESIA’S ANNuAL FINANCIAL STATEMENT

Rosmaya Hadi Deputy Governor

“Bank Indonesia ensures financial sustainability and accountability are well-guarded to maintain the credibility of Bank Indonesia”




Gedung Bank Indonesia - Sumatera BaratBank Indonesia Representative Office Province West Sumatera




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s an independent state institution, Bank Indonesia is always committed

to manage finances by complying with good governance principles and

present relevant, accountable, and transparent financial statements.

Based on the audit result of LKTBI 2018 by the Supreme Audit Agency, Bank

Indonesia again received the Unqualified Opinion (WTP). The WTP opinion

complemented the WTP opinions received for 16 consecutive years. The

achievement affirms the confidence of external auditors that LKTBI has presented

in fairness, in all material issues, according to Bank Indonesia’s Financial

Accounting Policy.

BANK INDONESIA’S ANNuAL FINANCIAL STATEMENT




The objective of Bank Indonesia’s financial statements is to demonstrate the management’s achievement or accountability on the use of its financial resources in the context of achieving and maintaining the stability of Rupiah value, including the information of financial effects of Bank Indonesia policies on its financial position and surplus/deficit.

Bank Indonesia surplus/deficit is a financial effects arising, during certain accounting period, particularly from the asset management in the context of achieving Bank Indonesia’s objective. Unlike commercial entities in particular, income generation is not Bank Indonesia’s ultimate objective. Similarly on the expenses, which mainly arises from policy

implementation during certain accounting period in the context of achieving its ultimate objective, and generally unrelated to income generation. Therefore, as precribed by the Act, Bank Indonesia performance cannot be assessed by its financial statements, but rather by its achievement in maintaining the stability of Rupiah value and controlling the inflation as well as by other macro indicators.

Nevertheless, the financial effects of the majorities of endeavors and activities undertaken by Bank Indonesia so as to achieve its objective may be measured in monetary terms, therefore Bank Indonesia’s financial statements can be used to assess the financial effects of Bank Indonesia’s efforts to achieve its objective.

EXTERNAL AuDITOR OPINION (The Audit Board of The Republic of Indonesia)

17 LKTBI received “Unqualified Opinion”consecutively

Years

*) Capital as stipulated within the laws and regulations

Table 7. Financial Highlights (In IDR Million)

FINANCIAL HIGHLIGHTS

uraian 2019 2018 2017 2016 2015

Total Assets/Liabilities 2,351,331,998 2,285,655,456 2,196,278,482 1,955,850,192 1,906,193,817

Capital*) 3,726,349 3,726,349 3,726,349 3,726,349 3,726,349

Total Revenues 91,803,593 105,869,251 52,452,723 60,509,678 121,181,386

Total Expenses 46,579,853 41,047,268 44,734.407 37,098.325 38,827,508

Current Year Surplus (Deficit) 33,350,475 48,015,971 5,276,899 17,076,885 61,325,477




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STATEMENT OF RESPONSIBILITIES OF THE BOARD OF GOVERNORSIN RELATION TO THE FINANCIAL STATEMENT OF BANK INDONESIA

AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019

Pursuant to the article 61 of Act Number 23 of 1999 on Bank Indonesia, with several amandments prior to the latest adjustment of Act Number 6 of 2009, we hereby declare that:1. We are responsible for the preparation and presentation of financial statements of Bank Indonesia;2. The financial statements of Bank Indonesia have been prepared and presented fairly in accordance with Bank Indonesia

Financial Accounting Policy;3. We are responsible for Bank Indonesia’s internal control system designed to provide reasonable assurance as to the

integrity and reliability of Bank Indonesia’s financial statements.

Thus this statement is made truthfully.

Jakarta, April 22, 2020

Dody Budi WaluyoDeputy Governor

Perry WarjiyoGovernor




Report on the financial statementsPursuant to Act Number 15/2004 concerning the State Financial Management and Accountability Audit, Act Number 15 of 2006 concerning the Audit Board, and Act Number 23 of 1999 concerning Bank Indonesia as lastly amended by the Act Number 6 of 2009, the Audit Board of the Republic of Indonesia (BPK) has performed an audit of Bank Indonesia’s Annual Financial Statements consisting of Bank Indonesia Statement of Financial Position as per December 31, 2019, Statement of Surplus Deficit for the year ended on that date, and Notes to the Financial Statements.

Bank indonesia’s Responsibility for the financial statements Bank Indonesia is responsible for the preparation and the presentation of financial statements in conformity with Bank Indonesia Financial Accounting Policies, with reasonable internal control to prepare financial statements that are free of material misstatements, whether arising from fraud or errors.

The Audit Board’s ResponsibilityBPK is responsible for stating the opinion on financial statements based on BPK Audit. BPK performs an audit based on the State Financial Audit Standards. The standard requires BPK to comply with its code of ethics, as well as to plan and perform an audit in order to gain reasonable assurances that the financial statements are free of material misstatements.

An audit includes evidence examination that supports the figures as well as their disclosures in the financial statements. The exercised procedures represent professional judgements of the auditor, including assessment on the risks of material misstatement in the financial statements, whether arising from fraud or errors. In assessing risks, the Auditor considers internal control which is relevant to the fair preparation and presentation of Bank Indonesia’s financial statements to design accurate audit procedures that are consistent with the existing conditions, but not for the purpose of stating an opinion on the effectiveness of Bank Indonesia’s internal control. BPK audit also includes an evaluation on the accurate practice of accounting principles and the fairness of accounting estimates made by Bank Indonesia, as well as the evaluation on the overall presentation of financial statements.

BPK views that the audit evidence which has been obtained is a sufficient and appropriate basis to state the opinion.

Opinion In our opinion, the financial statements as mentioned above presents fairly, in all material respects, financial position of Bank Indonesia as per December 31, 2019, and surplus deficit for the year ended on that date, in conformity with Bank Indonesia Financial Accounting Policies.

THE AUDIT BOARD OF THE REPUBLIC OF INDONESIA

AUDiTOR RePORT On THe finAnciAL sTATemenTs




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Reports on internal control system and complianceTo obtain reasonable assurances on the fairness of the financial statements, BPK performed an audit of internal control system and compliance with the provisions of laws

and regulations. The Audit Findings on Internal Control System and Compliance with the Provisions of Laws and Regulations are presented in Reports Number 2b/LHP/XV/04/2020 and Number 2c/LHP/XV/04/2020 dated April 28, 2020, both are inseparable parts of this report.

Jakarta, April 28, 2020THE AUDIT BOARD OF THE REPUBLIC OF INDONESIA

Auditor in Charge

ttd

Laode Nusriadi, Ak., CA., CPA., CSFA.Accountant State Register Number RNA-8888

Remark of The Governor AboutBank Indonesia



InstitutionalManagement


See accompanying Notes to Financial Statements which are an integral part of the Financial Statements.

STATEMENT OF FINANCIAL POSITION

ASSETS1. Gold2. Financial Assets Related to Monetary Policy Implementation

2.1. Securities Held and Claims Denominated in Rupiah2.2. Sharia-based Securities Held and Claims Denominated in Rupiah2.3. Securities Held and Claims Denominated in Foreign Currencies

3. Receivables from the IMF4. Claims

4.1. Claims on the Government4.2. Claims on Banks

5. Other Assets5.1. Participating Interest in Domestic and International Institutions5.2. Other Financial Assets5.3. Fixed Assets and Other Assets

TOTAL ASSETS

LIABILITIES1. Currencies in Circulation2. Financial Liabilities Related to Monetary Policy Implementation

2.1. Bank Demand Deposits2.2. Securities Issued and Liabilities Denominated in Rupiah2.3. Sharia-based Securities Issued and Liabilities Denominated in

Rupiah2.4. Securities Issued and Liabilities Denominated in Foreign Currency2.5. Sharia-based Securities Issued and Liabilities Denominated in

Foreign Currency3. Counterpart of Special Drawing Rights Allocated by the IMF4. Liabilities to the Government

4.1. Demand Deposits4.2. Loans

5. Other Liabilities

6. Revaluation Reserves7. Capital8. Accumulated Surplus (Deficit)

8.1. General Reserves8.2. Statutory Reserves8.3. Current Year Surplus (Deficit)

TOTAL LIABILITIES

53,478,173 2,086,099,162

354,936,043 24,020,567

1,707,142,552 36,583,396

140,756,764 140,756,347

417 34,414,503

877,898 4,290,591

29,246,014

2,351,331,998

793,742,924 996,137,979 406,335,957 327,657,637

58,503,751

199,176,207 4,464,427

38,069,419 162,911,500

162,911,500 -

19,636,715

106,983,656 3,726,349

230,123,456 169,008,705

27,764,276 33,350,475

2,351,331,998

46,865,268 1,981,813,594

292,739,327 14,634,289

1,674,439,978 38,350,644

179,953,811 179,851,439

102,372 38,672,139

919,374 4,614,101

33,138,664

2,285,655,456

749,183,201 937,013,537 417,622,296 331,324,018

46,846,246

139,004,133 2,216,844

39,886,095 175,998,830 175,991,854

6,976 23,751,596

129,230,959 3,726,349

226,864,889 154,601,659

24,247,259 48,015,971

2,285,655,456

B.8, D.1 B.10, B.11, B.31, D.2

B.10.2, D.2.1 B.11.1, D.2.2 B.10.3, D.2.3

B.12, D.3 B.13, B.14, D.4 B.13.1, D.4.1 B.14, D.4.2

D.5 B.15, D.5.1 B.16, D.5.2 B.17, D.5.3

B.9, D.6 B.10, B.11, B.31, B.32, D.7

B.10.2, D.7.1 B.10.2, D.7.2 B.11.2, D.7.3

B.10.3, B.32.1, D.7.4 B.11.2, D.7.5

B.12, D.8 B.13, D.9

B.13.2, D.9.1 B.13.2, D.9.2

B.18, B.29, B.30, B.32.1, D.10 B.19, D.11 B.20, D.12 B.20, D.13

B.20.2, D.13 B.20.2, D.13 B.20.2, D.13

NotesDecember 31,

2019December 31,

2018(Restated)

BANK INDONESIASTATEMENT OF FINANCIAL POSITION

As at December 31, 2019 and Desember 31, 2018(In IDR Million)

Bank Indonesia’s AnnualFinancial Statement

Summary of Policy and Flashbackof Bank Indonesia’s Journey

Bank IndonesiaSupervisory Board References

Bank Indonesia 2019 Annual Report 137

See accompanying Notes to Financial Statements which are an integral part of the Financial Statements.

STATEMENT OF SURPLUS DEFICIT

BANK INDONESIASTATEMENT OF SURPLUS DEFICIT

For the Period of January 1 to December 31, 2019 and the Period of January 1 to December 31, 2018

(In IDR Million)

NotesJanuary 1 to

December 31, 2019January 1 to

December 31, 2018(Restated)

REVENUES1. Monetary Policy Implementation

1.1. Interest Income 1.2. Income from Sharia-based Transactions1.3. Net Result of Financial Transactions1.4. Net Result of Foreign Currency Transactions1.5. Others

2. Payment System Services3. Macroprudential Supervision4. Income from Loans and Financing5. Other Income

TOTAL REVENUES

EXPENSES1. Monetary Policy Implementation

1.1. Interest Expenses1.2. Expenses from Sharia-based Transactions1.3. Other Expenses

2. Payment System Services3. Macroprudential Supervision4. Remuneration on the Government Demand Deposits5. General and Administrative Expenses

TOTAL EXPENSES

SURPLUS (DEFICIT) BEFORE TAXES

TAXES

SURPLUS (DEFICIT) AFTER TAXES

90,156,500 48,753,935

1,188,060 18,700,451 21,409,718

104,336 373,570

7,162 147,861

1,118,500

91,803,593

23,780,113 20,275,321

2,425,953 1,078,839

4,652,440 257,010

7,060,217 10,830,073

46,579,853

45,223,740

11,873,265

33,350,475

104,645,786 43,625,026

619,422 10,434,010 49,813,107

154,221 388,538

6,434 189,955 638,538

105,869,251

23,004,902 20,044,525

1,680,273 1,280,104

3,474,070 165,297

5,464,668 8,938,331

41,047,268

64,821,983

16,806,012

48,015,971

B.32, D.15 B.21, B.32.2, D.15 B.22, B.32.2, D.15

B.23, D.15 B.24, D.15

B.32.2, D.15 B.25, D.16

B.26, B.32.2, D.17 B.27, B.32.2, D.18

D.19

B.32, D.20 B.21, D.20 B.22, D.20

B.32.2, D.20 B.25, B.32.2, D.21 B.26, B.32.2, D.22

B.28, D.23 D.24

B.30, D.14.1






NOTES TO FINANCIAL STATEMENTS

A. GENERAL INFORMATION

A.1. Establishment, Status, and Domicile of Bank Indonesia

De Javasche Bank NV was nationalized in December 1951 by virtue of Act Number 24 of 1951 dated on December 6, 1951 concerning the Nationalization of De Javasche Bank. Following this nationalization, the Government and the Parliament agreed to establish Bank Indonesia based on Act Number 11 of 1953 concerning the Principal Act of Bank Indonesia which was ratified on May 19, 1953; announced on June 2, 1953; and came into effect on July 1, 1953. This Act conferred Bank Indonesia a special role as the central bank of the Republic of Indonesia

The role of Bank Indonesia as the central bank had developed due to economic, social, and particularly political dynamics, marked by several substitutes and amendments to the Bank Indonesia Act, as lastly amended by Act Number 6 of 2009 concerning Government Regulation in Lieu of Act Number 2 of 2008 concerning the Second Amendment to Act Number 23 of 1999 on Bank Indonesia, hereinafter referred to as Bank Indonesia Act. In addition to the Act, the central bank's substance were also included in the substance of the Fourth Amendment of the 1945 Constitution of the Republic of Indonesia (UUD 1945) as stipulated in Article 23D that the State has a Central Bank whose structure, status, power, responsibility, and independence are regulated by the Act.

With a clear-cut constitutional basis, the implementation of Article 23D of the 1945 Constitution of the Republic of Indonesia (UUD 1945), in addition to its status as the Central Bank of the Republic of Indonesia, the Act conferred Bank Indonesia as an independent public entity in the discharge of its duties and exercise of its power, free of interference from the Government and/or any other party, as well as being a legal entity with an authority to manage its own assets excluded from the State Budget. To carry out its tasks independently with utmost responsibility, Bank Indonesia is required to be transparent and in compliance with the principles of public accountability and open for public control, including the obligation to preparing financial statements for an audit by the Audit Board of the Republic of Indonesia (BPK-RI). Subsequently, the audit results must be publicly announced through the mass media.

As stipulated in the Bank Indonesia Act, the domicile of Bank Indonesia is in the capital city of the Republic of Indonesia.

A.2. Objective and Duties of Bank Indonesia

Pursuant to the Bank Indonesia Act, the objective of Bank Indonesia is to achieve and maintain the stable value of Rupiah. To achieve this objective, Bank Indonesia has the following duties: 1. Formulating and implementing monetary policy;2. Regulating and ensuring smooth payment system;3. Regulating and monitoring financial system stability.

Following the promulgation of the Financial Services Authority Act through Act Number 21 of 2011 which regulates the transfer of functions, duties, and authorities of regulating and supervising financial services in the banking sector from Bank Indonesia to the Financial Services Authority (OJK), the regulatory and supervisory duties over the financial service activities in the banking sector, as stipulated in number 3, were handed over from Bank Indonesia to OJK as of 31 December 2013.





In addition to regulating the transfer of functions, duties, and authorities for micro-prudential regulation and supervision from Bank Indonesia to OJK, the OJK Act also affirms that the macro-prudential regulation and supervision shall remain as the duty and authority of Bank Indonesia.

In regards to the separation between duties and authorities concerning macro-prudential and micro-prudential regulation and supervision, the Act Number 21 of 2011 concerning Financial Services Authority (OJK) states that the coordination and cooperation between macro-prudential and micro-prudential authorities cover these following areas: (i) coordination and cooperation on formulating banking supervisory regulations on minimum capital requirements for banks, banking products, derivative transactions and other banking activities, as well as determining banking institutions that fit into the category of a systemically important bank; (ii) coordination and cooperation on the implementation of bank supervision by Bank Indonesia related to its functions, duties, and authorities, and (iii) coordination and cooperation on information exchange.

Bank Indonesia has the urgency of retaining the regulatory duties and authority in the banking sector, in view of banking sector's strategic roles as a means for transmitting monetary policy, operator of payment system services, and their influences on financial system stability. Moreover, Bank Indonesia's regulatory and supervisory authority in the banking sector affirms its duties in monetary, payment system and macro-prudential areas, in pursuant to the Acts, including Foreign Exchange Activities and Exchange Rate System Act; Funds Transfer Act; Prevention and Eradication of Money Laundering Act; the Currency Act; and Prevention and Resolution of Financial System Crisis Act.

A.3. Board of Governors of Bank Indonesia

Pursuant to the Bank Indonesia Act, Bank Indonesia is led by a Board of Governors which comprises a Governor, a Senior Deputy Governor, and 4 (four) to 7 (seven) Deputy Governors. As of December 31, 2019, the Board of Governors consisted of:

Governor : Perry WarjiyoSenior Deputy Governor : Destry Damayanti Deputy Governors : 1. Erwin Rijanto

2. Sugeng3. Rosmaya Hadi4. Dody Budi Waluyo

Under Article 41 of the Bank Indonesia Act, the Governor, Senior Deputy Governor, and Deputy Governors shall be proposed and appointed by the President with the approval of the House of Representatives of the Republic of Indonesia (DPR-RI), while candidates for Deputy Governor shall be proposed by the President pursuant to the recommendation of the Governor.

A.4. Offices and Employees of Bank Indonesia

Bank Indonesia's head office is located on Jalan M.H. Thamrin Number 2, Jakarta. As of December 31, 2019, Bank Indonesia has 30 (thirty) departments at the Head Office, 46 (forty six) Domestic Representative Offices, and 5 (five) Overseas Representative Offices. Bank Indonesia Domestic Representative Offices comprise 5 (five) Coordinator Representative Offices at Provincial Level, 29 (twenty nine) Representative Offices at Provincial Level and 12 (twelve) Representative Offices at City/Regency Level.






As at December 31, 2019, Bank Indonesia has 5,460 employees, including 45 employees who are seconded to various agencies, including The Indonesian Financial Transaction Reports and Analysis Centre, ASEAN+3 Macroeconomic Research Office, International Monetary Fund, Supervisory Board of Bank Indonesia, Bank Indonesia Employee Welfare Foundation, Deposit Insurance Agency, Monetary System Stability Committee, and Coordinating Ministry for the Economy.

The Organizational Structure of Bank Indonesia is presented in Appendix 1.

A.5. The Capital of Bank Indonesia

Pursuant to the Bank Indonesia Act, the capital of Bank Indonesia is stipulated to be no less than IDR2,000,000,000,000.00 (two trillion Rupiah). This capital must be increased so it is no more than 10% (ten percent) of total monetary liabilities, using fund from General Reserve or proceeds from Asset Revaluation.

Subsequently, it is stipulated that the surplus resulting from Bank Indonesia's operation shall be allocated as follows:1. 30% (thirty percent) for Statutory Reserves; and2. the remainder to be accumulated as General Reserves so that the sum of capital and General Reserves is 10%

(ten percent) of total monetary liabilities.3. Any remaining surplus after the allocation as referred to point (1) and (2) shall be transferred to the Government.

During the settlement of the Bank Indonesia Liquidity Assistance (BLBI), the Allocation for Statutory Reserves is set at 10%.

The General Reserves is used to increase capital or to absorb Bank Indonesia's deficit, while the Statutory Reserves is used for replacing and/or revitalizing fixed assets, equipment procurement, organization and human resources development to support Bank Indonesia's duties and authorities as well as the participating interest related to Bank Indonesia's duties.

A.6. The Legal Basis and Purpose of Bank Indonesia's Financial Statements

Pursuant to the Bank Indonesia Act, Bank Indonesia must complete Bank Indonesia's annual financial statements within 30 (thirty) days after the end of the fiscal year.

Bank Indonesia is obliged to submitting Bank Indonesia's annual financial statements to The Audit Board of The Republic of Indonesia (BPK-RI) within 7 (seven) days after the statements are completed. The audit results will subsequently be presented to the House of Representatives of Republic of Indonesia (DPR-RI).

The objective of Bank Indonesia's financial statements is to demonstrate management's achievements and fulfillment of responsibilities for the financial resources used to achieve and maintain Rupiah stability, which includes information on the impact of Bank Indonesia's policies on financial position and surplus/deficit of Bank Indonesia.

Presentation of Bank Indonesia's financial statements:1. Is not intended to assess the level of achievement of Bank Indonesia's objective, namely Rupiah stability, since

it is incapable of being assessed solely in monetary terms.





2. Is not intended to provide information about efficiency in the use of resources in achieving Bank Indonesia's objectives. Although the use of resources by Bank Indonesia may be measured in monetary terms, the achievement of Bank Indonesia's objective is incapable of being assessed in solely monetary terms. Consequently, the efficiency in the use of financial resources in achieving the objective of Bank Indonesia cannot be measured.

Nevertheless, the financial impacts from Bank Indonesia's efforts to achieve its objectives may be measured in monetary terms, therefore Bank Indonesia's financial statements can be used to assess the financial impact of efforts to achieve its objectives.

A.7. Bank Indonesia's Policies that Significantly Affect the Financial Positions

A.7.1. Review on domestic and global economic condition 2019

1. Slowdown in global economic growth, decreasing uncertainty in global financial market. The global economy was projected to grow at 3% in 2019, down from 3.6% in 2018. The trade wars have brought in unfavorable impacts not only to the countries involved, but also to others globally. However, the global economy has seen some positive progress following the U.S.- China trade deals and the withdrawal of the United Kingdom from the European Union (Brexit), amidst the ongoing geopolitical risks. The progress resulted from trade deals between the U.S. and China has reduced the risks within global financial market and driven the influx of foreign capital inflows into developing countries.

2. Domestic economy is expected to maintain its momentum supported by strong domestic demand, despite declining exports prompted by the slowing global economy. Economic growth was projected at 5.10% in 2019, slightly lower compared to 5.17% in 2018. During three quarters of 2019, economic growth were at 5.07% (yoy), 5.05% (yoy), dan 5.02% (yoy) respectively. Indonesian economy saw a stable growth supported by household consumptions, fiscal expansion and exports which started to see improvement in Q-III 2019. The most recent development showed that consumer confidence grew riding on the seasonal patterns into year-end, lending a support to maintain household consumption at a sound level. Moreover, this positive development was strengthened by fiscal expansion riding on the seasonal patterns into year-end, prompting more economic growth in Q-IV 2019.

3. Indonesia Balance of Payments (BOP) has bolstered Indonesia's external resilience supported by current account deficit which was estimated at 2.70% of GDP in 2019, lower than 2.98% of GDP in 2018. Meanwhile, financial and capital accounts were expected to maintain a large surplus, riding on strong investor confidence in the domestic economic outlook coupled with attractive domestic financial assets for investment. In the meantime, the position of foreign exchange reserve was recorded at USD 129.2 billion as at end of December 2019, an increase compared to USD 120.7 billion at the end of December 2018. The position of reserve assets at the end of December 2019 is equivalent to 7.6 months of imports or 7.3 months of imports and government foreign-debt, which is well above the international adequacy standard of 3 months. Bank Indonesia regards that the current foreign exchange reserves is capable to support Indonesia's external resilience and maintain macroeconomic and financial system stability.

4. Rupiah exchange rate generally continued gaining strength. In 2019, Rupiah exchange rate on a point-to-point basis strengthened by 3.58% or 0.76% on average compared to position at end of 2018 to IDR13,901/USD from IDR14,481/USD. In 2018, Rupiah exchange rate on a point-to-point basis weakened






by 5.65%. This strengthening was supported by solid BOP, foreign exchange inflows from exports, and continuous foreign capital inflows driven by stable Indonesian economic prospects, robust domestic financial market, as well as decreasing uncertainty in the global financial market. Bank Indonesia will continue to accelerate the financial market deepening, targeting money and foreign exchange markets in particular, to support exchange rate policy effectiveness and strengthen domestic financing.

5. Consumers Price Index inflation in 2019 was recorded at 2.72% (yoy) or within the target range of 3,5%±1%. This figure shows that Consumers Price Index inflation in 2019 was lower compared to 3.13% (yoy) recorded in 2018. This positive result is attributed to Bank Indonesia's continuous efforts in maintaining price stability and strengthening policy coordination with both central and local governments.

A.7.2. Bank Indonesia's Policy Implementations that Significantly Affect Its Financial Positions

1. Monetary policy easing by reducing policy rates and conducting liquidity injections to the banks to ensure adequate liquidity and strengthen the transmission of Bank Indonesia's accommodative policy mix. In 2019, Bank Indonesia has cut its benchmark interest rate (BI 7-day Reverse Repo Rate /BI7DRR) 4 (four) times by 100 bps to 5%, Deposit Facility rate by 100 bps to 4.25% and Lending Facility rate by 100 bps to 5.75%. Earlier in 2018, Bank Indonesia had increased policy rate by 175 bps to 6.00. In its implementation, Bank Indonesia has: (i) conducted two-sided Open Market Operation (OMO), namely regular injection through repurchase agreement (repo) auction complementing FX swap, (ii) oriented OMO contraction towards collateral-based instruments, specifically Government Bonds (SBN), (iii) purchased SBN in secondary market to support monetary operation implementation. Bank Indonesia's utilization of policy rates and monetary operations strategy to ensure sufficient liquidity in the money market were supported by exchange rate stabilization policy in line with the fundamental and moving market mechanism, through triple intervention strategy, whether in the spot market, Domestic Non-Deliverable Forward (DNDF) market, and SBN purchase from the secondary market.

To ease bank liquidity for loan disbursements, Bank Indonesia cut the Minimum Reserve Requirements for Rupiah by 100 bps in June and November 2019 to 5.5%, which shall come into effect on January 2, 2020.

2. Utilization of accommodative monetary policy to increase banking intermediation capacity for economic financing. In 2019, Bank Indonesia eased the requirement for Loan to Value /Finance to Value (LTV/FTV) ratio at 5%-10% on average for property and automotive loans, including green financing. Bank Indonesia has also improved Macroprudential Intermediation Ratio (RIM) by broadening its range to 84-94% and expanding bank lending capacity, including prudent foreign loans.

3. Acceleration of money market deepening. Bank Indonesia continued the effort to increase transaction volume and the use of various instruments in the money market and foreign exchange markets, including DNDF, Interest Rate Swap (IRS) and Overnight Index Swap (OIS), as well as Commercial Papers. Bank Indonesia continued strengthening money market infrastructure, including Electronic Trading Platform (ETP) and Central CounterParty (CCP) for derivative transaction, as well as other financial market infrastructure. The financial market deepening policy conducted by Bank Indonesia aims to provide hedging alternatives and also to support the expansion of long-term investment in the capital market. Bank Indonesia, with the Government and OJK, continued efforts to drive financial





instruments development for innovative infrastructure financing, such as Infrastructure Fund (DINFRA), Earning Based Assets (EBA), project bonds, and green bonds.

4. Non-cash payment system policy to support electronification and payment efficiency. Bank Indonesia continued to expand the electronification program for non-cash payment to other areas, such as distribution of government social aid program, transportation mode payment, and promoting electronic financial transactions in Regional Governments in order to increase people's purchasing power and consumptions. Bank Indonesia National Clearing System (SKNBI) was improved to be larger, faster, and more economical in order to create efficient retail transaction settlements. Enhancement was also made to the National Payment Gateway interconnection and interoperability. Innovation for payment system was developed to support digital economy and finance. Bank Indonesia believes that digital innovation can strengthen the interconnection among economic agents, from the smallest to the largest, from individual consumer, Small and Medium Enterprises (SME) to larger corporations. For this reason, Bank Indonesia has introduced Indonesia Payment Systems Blueprint 2025.

5. Cash Payment System Policy to support smooth economic activities. Bank Indonesia ensured Rupiah currency printing plan for both notes and coins is in line with the policy direction to maintain the availability of Rupiah currency in sufficient amount, appropriate denominations, timely manner and fit quality throughout Indonesia. The Rupiah currency printing plan takes into consideration domestic economic growth, withdrawal and revoking unfit money (UTLE), Rupiah currency in Bank Indonesia's custody, and should be in line with the policy direction of Non-Cash Payment System. To maintain the availability of quality Rupiah currency, Bank Indonesia implements clean money policy, in which Bank Indonesia destroys unfit money and replaces them with the fit quality Rupiah currency. Additionally, the efficiency and area coverage for Rupiah distribution has been expanded throughout Indonesia, including the foremost, outermost, and remote (3T) areas.

The financial effects resulting from Bank Indonesia's policies as discussed above are reflected within the main line items of Bank Indonesia's Financial Statements. In the Statement of Financial Position, the line items of Financial Assets and Liabilities Related to Monetary Policy Implementation indicate the implementation of monetary policy, while the line item of Currency in Circulation indicates the cash payment system policy. Meanwhile, in the Statement of Surplus Deficit, the financial effects of such policy are reflected in the line items of income and expenses from Monetary Policy Implementation, income and expenses from Payment System Services, and income and expenses from Macroprudential Supervision.

B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Bank Indonesia's financial statements are prepared in compliance with the accounting standards applied to Bank Indonesia, referred to as Bank Indonesia Financial Accounting Policies (KAKBI).

KAKBI is prepared by an independent KAKBI Committee, based on generally accepted Financial Accounting Standards and adjusted to accommodate the unique characteristics of Bank Indonesia as a not-for-profit entity, and also in compliance with the generally accepted accounting conventions and best practices for central banks.

B.1. KAKBI Compliance Statement

Bank Indonesia prepared its Financial Statements as at December 31, 2019 based on KAKBI.






B.2. Entity Theory Concept

Bank Indonesia applies the concept of entity theory. Based on this theory, the financial statements do not definitively separate the elements of liabilities and equities. Bank Indonesia places all of its stakeholders on an equal priority. Moreover, as a not-for-profit entity, Bank Indonesia's financial statements are not aimed at determining the net worth of Bank Indonesia.

Therefore, Bank Indonesia does not present neither the equity sub-classification in the Statement of Financial Position or the statement of changes in equity in the financial statements.

B.3. Concept of Income and Expense Recognition

The measurement and recognition of income and expenses take into account the concept of conformity in regards to the objective of Bank Indonesia.

Bank Indonesia recognizes income and expenses resulted from transactions that have been realized and its unique transactions that have achieved their ultimate objectives.

B.4. Principles of Financial Statements Preparation

The financial statements are presented in Rupiah. Unless otherwise stated, the financial information presented is rounded off to the nearest million Rupiah.

The financial statements are prepared based on historical cost concept, except:1. Gold are measured at fair value through revaluation reserves;2. Financial Instruments for Policy Implementation are measured at fair value through revaluation reserves;3. Derivative Instruments are measured at fair value through revaluation reserves;4. Employee benefits liability are measured at current value of remuneration minus net value of plan assets.

The financial statements are prepared based on an accrual basis.

B.5. Use of Judgment, Estimates, and Assumptions

Preparation of the financial statements in accordance with KAKBI requires the management to establish judgment, estimates, and assumption which may impact the reported assets, liabilities, revenues, and expenses.

B.6. Translating Foreign Currency Position and Transactions, and Translating Gold Position and Transaction

On the reporting date, the foreign currency-denominated monetary item balances are translated to Rupiah using the prevailing Bank Indonesia mid exchange rate on the reporting date. The differences arising from previous carrying amount and results of translation of foreign currency-denominated monetary items balances resulted from Bank Indonesia unique transactions are presented as revaluation reserves on liability side in the Statement of Financial Position. Differences from translating foreign currency-denominated monetary items balances resulted from Bank Indonesia non-unique transactions are presented as foreign exchange gains or losses in the Statement of Surplus Deficit. In addition, gains and losses arising from foreign exchange transactions, which have achieved their ultimate objective, are recognized as current year surplus/deficit. Foreign currency transactions are translated to Rupiah at





December 31, 2018(IDR in full amount)Currency

December 31, 2019(IDR in full amount)

1 EUR1 GBP1 AUD1 SDR1 NZD1 USD1 CAD100 JPY

16,559.75 18,372.77 10,211.28 20,140.03

9,718.21 14,481.00 10,624.37 13,111.51

15,588.58 18,249.93

9,739.04 19,222.72

9,359.54 13,901.00 10,654.15 12,796.65

the prevailing exchange rate on the date of the transaction. Bank Indonesia mid exchange rates for currencies against the Rupiah as at December 31, 2019 and December 31, 2018 were:

Bank Indonesia adopts Net Currency Position (NCP) method to calculate the result of exchange rate translation of foreign currency position and transactions. NCP is the net position of foreign currencies which is calculated from the difference between the total foreign currency-denominated assets of NCP components and the total foreign currency-denominated liabilities of NCP components. This method allows Bank Indonesia to measure the Rupiah cost of the NCP balances, the rupiah value of the NCP balances as well as the average cost in Rupiah for each foreign currency's nominal unit.

The exchange difference between the Rupiah fair value and the Rupiah cost of NCP balances is recognized as a Foreign Currency Revaluation Reserves - Translation (FCRR-Translation). When the foreign curency is sold against another foreign currency and considered have yet to meet its ultimate objective, the exchange difference of foreign currency units sold is not recognized as an exchange rate gains/losses, but recognized as Foreign Currency Revaluation Reserves - Transaction (FCRR-Transaction). The balance of FCRR -Translation is tracked based on the movements of foreign currecy balances and the change of daily mid exchange rate. Furthermore, the balance of FCRR -Transaction is tracked based on inter-foreign exchange transaction movements; so that when a foreign exchange transaction has achieved its ultimate objective, the foreign currency revaluation reserves balance that must be transferred to the Statement of Surplus Deficit can be identified.

The ultimate objective of the foreign exchange transaction is achieved at the time the foreign currency is translated into Rupiah or gold, or foreign currency-denominated liabilities are derecognized. When such transactions occur, the proportioned balance of both FCRR -Translation and FCRR -Transaction are recognized as a foreign exchange gains/losses in the Statement of Surplus Deficit.

B.7. Related Party Transactions

Related party transactions, whether conducted with or without the same level of prices, terms, and conditions of other parties, are disclosed in the Notes to Financial Statements.

B.8. Gold

Gold is a part of foreign reserves and is intended to serve as, among others, liquidity buffer in supporting monetary policy implementation and or fulfilling obligations denominated in foreign currency.






Bank Indonesia's gold reserves consists of gold bar and contractual rights to gold bar.

Upon acquisition, gold is recognized at acquisition cost. On the reporting date, the gold reserves balance is measured based on fair value, specifically the gold price at the London market, and subsequently calculated into Rupiah using Bank Indonesia mid exchange rate at the end of the reporting period. The difference arising between the previous carrying amount and the amount that results from the translation of the balance is recognized as the gold revaluation reserves and presented in the liability side of the Statement of Financial Position.

Gains and losses due to derecognition of gold reserves are recognized at the current year's Statement of Surplus Deficit.

In the Statement of Financial Position, gold is presented net of allowance for impairment.

Gold transactions are translated to Rupiah using the exchange rate on the transaction date.

B.9. Currency in Circulation

Currency in circulation is the Rupiah currency that is not under control of Bank Indonesia.

Currency in circulation is one of Bank Indonesia's unique transactions that can not be found in other entities. In accordance with the mandate stipulated within Bank Indonesia Act and Law Number 7 of 2011 on Currency, Bank Indonesia is the sole institution in Indonesia that is authorized to print and circulate the Rupiah currency. Bank Indonesia coordinates with the Government in regards to planning, printing, and destructing of Rupiah Notes and Coins. The coordination is based on the Memorandum of Understanding between Bank Indonesia and the Government of the Republic of Indonesia Number 14/1/GBI/DPU/NK/MOU-5/MK.05/2012 dated June 27, 2012 on the Coordination of Planning, Printing, and Destructing of the Rupiah Notes and Coins.

Bank Indonesia's authority to issue and circulate the Rupiah currency has put the control of the Rupiah currency under Bank Indonesia as a function that set Bank Indonesia distinct from other entities. For Bank Indonesia, the Rupiah currency is one of the tools used to maintain the smooth operation of national payment system.

When the Rupiah is not under the control of Bank Indonesia, Bank Indonesia recognizes liability to the holders of Rupiah currency. However, this liability neither represent claim to a specific asset in Bank Indonesia nor have a maturity period. Currency in circulation is recognized as a liability in the amount of its nominal value as stated in denomination of the Rupiah currency.

Currency in circulation is derecognized if, and only if, the Rupiah currency: (a) comes under the control of Bank Indonesia again; or (b) has been declared invalid as legal tender due to its revocation and withdrawal from circulation and is no longer controlled by Bank Indonesia after a certain period of time has elapsed, in accordance with the provisions of the laws and regulations in effect.

B.10. Financial Assets and Liabilities Related to Monetary Policy Implementation

Bank Indonesia owns financial assets and liabilities to be utilized for its policies implementation.





B.10.1. Classification

At the time of initial recognition, Bank Indonesia classifies its policy-related financial assets into these categories:1. Measured at amortized cost; or2. Measured at fair value through revaluation reserves.

Financial assets are measured at amortized cost only if both of the following conditions are met:1. The asset is held within a business model whose objective is to hold assets in order to collect contractual

cash flows; and 2. The contractual terms of the financial asset give rise on specified dates to cash flows that are solely

payments of principal and interest on the principal amount outstanding.

Financial assets that do not meet the above conditions are calculated at its fair value through revaluation reserves.

Bank Indonesia classifies policy-related liabilities at amortized cost using effective interest rate method, except for financial liabilities measured at fair value through revaluation reserves, derivative for instance.

B.10.2. Financial Assets and Liabilities Related to Policy Implementation Denominated in Rupiah

Financial assets and liabilities related to policy implementation denominated in Rupiah seek to serve as monetary instruments within the context of implementing monetary policies to achieve and maintain the stability of the Rupiah's value in accordance with the mandated rules and regulations.

Assets and liabilities denominated in Rupiah used to implement Bank Indonesia's monetary policies consist of:1. Government Bonds (SUN) are marketable securities denominated in Rupiah which are guaranteed

by the Government of the Republic of Indonesia, subject to their tenors.2. Claims on banks arising from securities (SSB) purchased from banks under repurchase agreements

(reverse repo), subject to the agreed price and tenor.3. Minimum Reserve Requirements which banks are required to fulfill in accordance with Bank Indonesia

Regulation Number 20/3/PBI/2018 dated April 3, 2018 on Minimum Reserve Requirements in Rupiah and Foreign Currency for Conventional Banks, Sharia Banks, and Sharia Business Units.

4. Bank Indonesia Certificates (SBI) are Rupiah-denominated marketable securities issued by Bank Indonesia as recognition of short-term debt.

5. Bank Indonesia Certificates of Deposit (SDBI) are Rupiah-denominated marketable securities issued by Bank Indonesia as recognition of short-term debt which can only be traded between banks.

6. Term Deposits denominated in Rupiah are placements denominated in Rupiah made by Open Market Operations participants in Bank Indonesia within specified tenor.

7. Deposit Facilities are facilities provided by Bank Indonesia for Monetary Operations participants who intend to place their funds in Bank Indonesia. Deposit Facility has a tenor of one working day.

8. Liabilities arising from securities sold under repurchase agreement (repo) at price and tenor as in the agreement.

9. Foreign currency derivative instruments against the Rupiah includes foreign currency swap and DNDF:






a. Foreign currency swap are transaction involving the actual exchange of two currencies at a rate agreed at the time of the conclusion of the contract (spot), and a reverse exchange of the same two currencies at a future date at a rate agreed at the time of the contract (forward).

b. Domestic Non Deliverable Forward (DNDF) against Rupiah Transactions are transactions of exchange of foreign currency against Rupiah at a future date, usually takes place more than 2 working days), at a rate agreed at the time of contract. On the second leg of the DNDF transaction, the exchange involves only the net value arising from the difference between the JISDOR rate and the NDF rate.

Assets and liabilities related to monetary policy denominated in Rupiah are classified as instruments measured at amortized cost, except for Government Bonds and derivative instruments which are measured at fair value through revaluation reserves.

B.10.3. Financial Assets and Liabilities Related to Policy Implementation - Denominated in Foreign Currency

Assets and liabilities denominated in foreign currency which are used by Bank Indonesia to implement policy are as follows:1. Minimum Reserve Requirements denominated in foreign currency that must be met by banks in

accordance with PBI Number 20/3/PBI/2018 dated April 3, 2018 on Minimum Reserve Requirement in Rupiah and Foreign Currency for Conventional Commercial Banks, Sharia Commercial Bank, and Sharia Business Unit.

2. Term Deposits denominated in Foreign Currency are placement of funds denominated in foreign currency for a spesified participants of Open Market Operations in Bank Indonesia.

3. Placement of funds in current accounts and deposits in overseas banks which serve as foreign exchange reserves management.

4. Marketable securities denominated in foreign currency which serves as foreign exchange reserves.5. Bank Indonesia Foreign Exchange Notes are securities denominated in foreign currency issued by Bank

Indonesia as recognition for short-term debt.6. Liabilities from repurchase agreement (repo) of marketable securities.

Assets and liabilities denominated in foreign currency related to monetary policy are classified as instruments to be measured at amortized cost, except for foreign currency-denominated Marketable Securities (SSB) assets which are measured at fair value through revaluation reserves.

B.10.4. Initial Recognition

Bank Indonesia measures its financial asset and financial liability at fair value at the time of initial recognition. In the case of a financial asset or financial liability is not classified for measurement at fair value through revaluation reserves, fair value shall include transaction costs that directly attributable to the acquisition or issuance of the financial asset or financial liability.

B.10.5. Derecognition

Bank Indonesia derecognizes financial assets when, and only when:1. Contractual rights to the cash flow from the financial asset expires; or





2. Bank Indonesia transfers the contractual rights to receive cash flow of the financial assets or retains the contractual rights to receive cash flow from the financial assets, but assumes a contractual obligation to pay the cash flow to one or more recipients in the agreement.

Asset derecognition includes write-offs.

Bank Indonesia removes a financial liability from the statement of financial position if, and only if, it extinguished, i.e, when the obligation specified in the contract is discharged, cancelled or expired.

B.10.6. Measurement at Amortized Cost

The amortized cost of a financial asset or financial liability is the amount of financial assets or financial liabilities which is measured at initial recognition minus principal repayments, plus or minus the cumulative amortization using the effective interest rate calculated based on any difference between the initial value and the maturity amount, minus any reduction for impairments.

Amortized cost measurement takes into account the impairments based on objective evidence.

B.10.7. Fair Value Measurement Through Revaluation Reserves

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market-participants at the measurement date.

Bank Indonesia uses the quoted prices in active market as the benchmark for financial asset fair value. For inactive market, Bank Indonesia uses a valuation technique that takes into account the situation and the availability of appropriate data. This valuation technique employs the latest market price reference for similar transaction or instrument and the assumptions and estimates that maximizes the use of relevant observable inputs while, at the same time, minimizing the use of unobservables inputs.

Fair value measurement through revaluation reserves takes into account the impairments based on the objective evidence.

B.10.8. Presentation

Financial instruments is presented on a net basis in the Statement of Financial Position, taking into account both accrued and deferred interests.

B.11. Sharia-based Financial Assets and Liabilities

Bank Indonesia is in possession of sharia-based financial assets and financial liabilities which are used for monetary policy implementations.

B.11.1. Sharia-based Financial Assets

Bank Indonesia's sharia-based financial assets consists of:






1. Government Sharia Securities (SBSN)SBSN or commonly referred to as Sukuk Negara represents Government marketable securities which are issued in compliance with sharia principles, constituting an ownership in SBSN assets, denominated in Rupiah or foreign currency.Bank Indonesia accumulates SBSN for building stock, to be used as a monetary instrument that will replace Bank Indonesia Sharia Certificates (SBIS) in accordance with Act Number 1 of 2004 on State Treasury. Short-term SBSN or Islamic Treasury Bills (SPNS) is purchased from the primary market.

2. Claims from sharia repo transactionsClaims from sharia repo transactions are Bank Indonesia's claims arising from the purchase of sharia marketable securities with repurchase obligations (reverse repo) at a price and tenor as in agreement.

B.11.2. Bank Indonesia's Sharia-based Financial Liabilities

Bank Indonesia's sharia-based financial liabilities consist of:1. Placement of bank's funds in Rupiah and foreign currency within the context of Minimum Reserve

Requirements deposits as prescribed in PBI Number 20/3/PBI/2018 dated April 3, 2018 concerning Minimum Reserve Requirement in Rupiah and Foreign Currency for Conventional Commercial Banks, Sharia Banks, and Sharia Business Units.

2. Bank Indonesia Sharia Certificates (SBIS) is a short-term Rupiah-denominated marketable security that is in compliance with sharia principles and issued by Bank Indonesia.

3. Bank Indonesia Sharia Deposit Facilities (FASBIS) is a deposit facility provided by Bank Indonesia for bank's placements in Bank Indonesia in the context of sharia-compliant standing facilities. FASBIS has a tenor of one working day.

4. Liability arising from the sale of marketable securities with repurchase agreement under sharia compliance.5. Liability arising from sharia-compliant term deposits denominated in foreign currency.6. Sukuk Bank Indonesia (SukBI) is a short-term (maximum of 1 year) sharia-based marketable security

denominated in Rupiah that is issued by Bank Indonesia. SukBI is categorized as financial liability instrument that is measured at its amortized cost.

Sharia-based financial liability is classified as an instrument measured at acquisition price under sharia-compliant agreement.

In accordance with PKAK 01 on Accounting Policies, for transactions that are sharia-compliant and unique, Bank Indonesia shall comprehensively consider: (i) Bank Indonesia's objective; (ii) the economic and legal substance of the transactions; (iii) the accounting treatment, based on accounting standards, that is applied to similar transactions by other entities; (iv) business model of the sharia-compliant transaction; (v) generally-accepted sharia accounting principles; and (vi) the opinion of the authority for assessing sharia-compliant transactions.

In view of the business model of sharia-compliant transaction and ownership of sharia-compliant financial instruments, thus Bank Indonesia's sharia-compliant transactions are considered unique and in compliance with the Fundamental Principles for the Preparation and Presentation of Bank Indonesia Financial Statements (PDP2LK). Therefore, its accounting treatment refers to PKAK 06 on Policy-Related Financial Instruments.

Sharia-based asset and liabilities related to monetary policy implementation are measured at amortized cost, except for SBSN which is measured at fair value through revaluation reserves.





B.12. Transaction with the International Monetary Fund (IMF)

In accordance with the provisions of the laws and regulations, Bank Indonesia represents the Republic of Indonesia as a member at the International Monetary Fund (IMF), whereby Bank Indonesia has a number of transactions with IMF, including:

B.12.1. Membership Participation Claim (Quota)

Membership Participation Claim (Quota) is Bank Indonesia's claims to the IMF that consists of deposits denominated in foreign currency (Reserve Tranche Position) and participation in Rupiah (Quota Subscription). Participation in Rupiah is exercised through:1. the issuance of debt securities (Promissory Notes) denominated in Rupiah; and 2. the deposit in IMF Account Number 1 in Bank Indonesia.

Moreover, Bank Indonesia also manages IMF Account Number 2 that is used by the IMF to pay its operational expenses denominated in Rupiah.

Membership participation claim and IMF's account are denominated in Special Drawing Rights (SDR), thereby Bank Indonesia applies a currency revaluation adjustment on membership participation claims denominated in Rupiah, Promissory Notes and IMF Number 1 and 2 accounts based on exchange rate determined by the IMF every April 30.

B.12.2. Special Drawing Rights

Bank Indonesia has Special Drawing Rights (SDR Holdings) at the IMF which represents Indonesia's potential claim on freely usable currencies (SDR basket) owned by other IMF members and other SDR holders. These SDR Holdings are due to Special Drawing Rights Allocations (SDR Allocations) or SDR purchases.

Asset and liabilities associated with Special Drawing Rights Allocations receives/bears interest at the same rate. The IMF charges an administration fee for managing Special Drawing Rights.

Upon acquisition, asset and liability related to membership participation and SDR Allocations is recognized at its fair value. Subsequent to initial recognition, these assets and liabilities are measured at amortized cost.

On the reporting date:1. Balance of assets and liabilities denominated in foreign currency related to the IMF is translated to

Rupiah by using Bank Indonesia mid exchange rate. The difference between previous carrying amount and results of translation is recognized as revaluation reserves in the liability side of the Statement of Financial Position.

2. Balance of membership participation in Rupiah, Promissory Notes, and IMF Number 1 and 2 account are revalued by using the relative change of exchange rate of Rupiah against SDR at the reporting date. The difference between the previous carrying amount and the result of revaluation adjustments is recognized as currency valuation adjustment.






Assets related to the IMF are derecognized when Bank Indonesia withdraws the funds or pays off its liabilities, the IMF terminates the entire or part of SDR allocations, or when Indonesia withdraws its membership in the IMF.

Liabilities related with the IMF are derecognized when the IMF withdraws the funds or cancels the entire or part of Indonesia's SDR allocations, or when Indonesia withdraws its membership in the IMF.

Membership participation claim, which is the net amount of Quota less Promissory Notes and IMF Account Number 1, is presented in the asset side as part of “Receivables from the IMF”. The IMF Account Number 1 should have taken into account currency revaluation adjustment.

Special Drawing Rights at the IMF is presented in the asset side as part of “Receivables from the IMF” amounting to the carrying value that has taken into account both accrued interest income and interest expense in SDR.

The allocation of Special Drawing Rights to Indonesia is presented in the liability side as “Special Drawing Rights Allocated by the IMF” at its carrying value.

IMF Number 2 Account is presented in the liability side as part of “Other Liabilities” at its carrying value that has taken into account currency valuation adjustment.

B.12.3. Special Demand Deposit with the IMF

Bank Indonesia has a placement of funds in special demand deposit with the IMF. This placement is presented in “Financial Asset Related to Monetary Policy Implementation” at book value.

B.13. Claims on and Liabilities to the Government

B.13.1. Claims on the Government

Claims on the Government are claims that occurred in regards to the implementation of Bank Indonesia's duties prior to the enactment of Bank Indonesia Act.

The claims are mainly Government Bonds (SUP) which represent the Government's long-term obligation to Bank Indonesia that cannot be transferred and/or sold to other parties. The principal and interest payments are made in agreement with the tenor.

At the time of initial recognition, Bank Indonesia's claims to the Government are recognized at the nominal value. Subsequent to initial recognition, the claims are measured at carrying value. Bank Indonesia derecognizes claims on the Government when they are partially or fully settled.

B.13.2. Liabilities to the Government

Bank Indonesia has liabilities to the Government in the forms of :





1. Government's demand deposits denominated in Rupiah and foreign currency, due to Bank Indonesia's function by the law as the treasurer of the Government. On behalf of the Government, Bank Indonesia may receive and transfer Rupiah and foreign currency.

Bank Indonesia pays a remuneration on the Government's demand deposits. The Government' demand deposits which are categorized as Rupiah-denominated State General Cash Account (RKUN), USD-denominated RKUN, and non USD-denominated RKUN earn interest of 0.1% per year. On the other hand, the Goverment's demand deposit which is categorized as treasury accounts denominated in Rupiah earns interest of 80.476% of the reference rate, while USD accounts and non-USD accounts earn 65% of the reference rate. As of March 2016, negative remuneration has been applied on JPY-denominated Government's demand deposits.

The interest rate on Government's demand deposits is determined based on the Minister of Finance and the Governor of Bank Indonesia's Joint Decree that regulates the coordination of State Funds, initially made in 2009 and lastly stipulated in the Minister of Finance and the Governor of Bank Indonesia's Joint Decree Number 956/KMK.05/2016 and Number 18/18/NK/GBI/2016 dated December 30, 2016 concerning Coordination of Government Cash Management.

Bank Indonesia recognizes the Government's demand deposits as liability at nominal value.

Bank Indonesia derecognizes the Government's demand deposits when they are partially or fully withdrawn.

2. Bank Indonesia's borrowings from the Government c.q. Ministry of Finance are based on Act Number 13 of 1968 concerning the Central Bank.

Bank Indonesia recognizes borrowings from the Government as liabilities at nominal value. After initial recognition, borrowings from the Government is measured at nominal value minus installment payments. Bank Indonesia derecognizes the borrowings from the Government when they are partially or fully settled.

B.14. Claims on Banks

Claims on banks represent claims that occured in regards to the implementation of Bank Indonesia's tasks prior to the enactment of the Bank Indonesia Act. The types of loans disbursed by Bank Indonesia are:1. Bank Indonesia Liquidity Credit (KLBI) is a loan or financing for banks from Bank Indonesia to support the

implementation of the Government's program. 2. Subordinated Loan or referred to as SOL is a loan extended to banks for financial restructuring programs.

By virtue of Bank Indonesia Act, Bank Indonesia can no longer provide SOL and KLBI loans.

However, in carrying out its function as the lender of the last resort, Bank Indonesia may still provide loans, as follows:1. Intraday Liquidity Facility (FLI) from Bank Indonesia to banks that are members of Bank Indonesia Real Time

Gross Settlement System (BI-RTGS) and members of the Bank Indonesia National Clearing System (SKNBI). The loan is provided by purchasing marketable securities from the bank under Repurchase Agreement (Repo) that must be settled within the same day.






2. Short-Term Liquidity Credit Facility (PLJP) is a loan facility from Bank Indonesia for conventional commercial banks to cover their short-term liquidity mismatch.

3. Short-Term Sharia Liquidity Financing Facility (PLJPS) is a sharia-based funding facility from Bank Indonesia for sharia banks to cover their short-term liquidity mismatch.

Claims on banks related to monetary policy, such as claims from securities purchased from banks under repurchase agreement (reverse repo) are excluded from this item. Accounting treatment for claims on banks related to monetary policy is prescribed in number B.10 and B.11.

At the time of initial recognition, Bank Indonesia recognizes claims on banks at nominal value. Subsequent to initial recognition, the claims are measured at amortized cost. Bank Indonesia derecognizes claims on banks when they are fully settled.

B.15. Participating Interest in Domestic and International Institutions

Bank Indonesia carries out participating interest in domestic and international institutions. Bank Indonesia can have participating interest in legal entities or other entities, only if those entities supports its duties and subject to the approval of the House of Representatives (DPR-RI).

Upon initial recognition, Bank Indonesia recognizes its equity participation at acquisition cost. Subsequent to initial recognition, the equity participation is measured at acquisition cost. Bank Indonesia derecognizes the equity participation once Bank Indonesia ceased its participation in the interest.

B.16. Other Financial Assets

Bank Indonesia owns financial assets that are unrelated to policy or due to transactions conducted in accordance with Act Number 13 of 1968 concerning the Central Bank, i.e. foreign currency banknotes and various claims to parties other than banks and the Government.

Upon initial recognition, Bank Indonesia records other financial assets at acquisition cost. Subsequent to initial recognition, Bank Indonesia measures other financial assets at acquisition cost.

Bank Indonesia deregonizes other financial assets when it transfers the ownership of the assets or when the claims are fully settled.

B.17. Fixed Assets and Other Assets

B.17.1. Fixed Assets And Intangible Assets

Bank Indonesia owns lands, buidlings, vehicles, and a number of information technology hardware and software that are categorized as fixed assets and intangible assets.

Upon initial recognition, Bank Indonesia records fixed assets and intangible assets at acquisition cost. Subsequent to initial recognition, Bank Indonesia adopts cost models for the valuation of both tangible and intangible assets.





Depreciation and amortization are applied to fixed assets and intangible assets by using a straight-line method throughout their useful life. Expenditures that extend the useful life of the assets are recognized as an additional to the asset's carrying value.

Bank Indonesia derecognizes fixed assets and intangible assets when they are at the end of their useful life, sold, donated, replaced, withdrawn from use or lost.

B.17.2. Currency Material Inventory

Currency material inventory is measured at its acquisition cost. Bank Indonesia applies weighted average method to determine the cost per unit of currency material inventory. Currency material inventory is recognized as Bank Indonesia's asset and shall be recognized as an expense at the amount used for currencies printing in the period the currencies are acquired by Bank Indonesia.

B.18. Other Liabilities

Bank Indonesia has a number of liabilities that are not related to policy implementation, such as demand deposit of international financial institutions, tax payables, and employee benefit liabilities.

B.19. Revaluation Reserves

Revaluation reserves reflect the cumulative change in the fair value of Bank Indonesia's assets and liabilities and cumulative impact of exchange rate changes.

Revaluation reserves are recognized when changes occur in the fair value of Bank Indonesia's assets and liabilities and/or changes in the Rupiah value of Bank Indonesia's assets and liabilities denominated in foreign currency, and/or gain or loss on Bank Indonesia's unique transaction that have yet to achieve their ultimate objectives at the time when the transaction is executed, such as the impact of currency translation differences due the shifting in foreign currency composition.

Revaluation reserves are recognized as an income or expense when the ultimate objective or substantive economic objective has been achieved.

B.20. Capital and Reserves

B.20.1. Capital

Bank Indonesia's capital is recognized and presented in the amount as stipulated in accordance with the provisions of the laws and regulations.

B.20.2. Reserves

The increase and decrease of the General Reserves, Statutory Reserves, as well as Allocation of current year's Surplus/Deficit are determined in accordance with the provisions of the laws and regulations.






B.21. Interest Income and Expenses

The items are intended to accommodate both interest income and expenses denominated in Rupiah and foreign currency due to monetary policies implementation conducted in a conventional manner. Included in the items are interest expense arising from policy-related debt instrument, remuneration expenses arising from the banks' Minimum Reserve Requirement, and interest income from marketable securities.

Interest income and expenses are recognized on an accrual basis in the Statement of Surplus Deficit.

B.22. Income and Expenses from Sharia-based Transactions

The items are intended to accommodate Rupiah and foreign currency-denominated income and expenses arising from the implementation of sharia-compliant monetary policy. Included in the items are profit sharing from sharia-based financial instruments and fees from sharia-based securities.

Income and expenses from sharia-based transactions are recognized on an accrual basis in the Statement of Surplus Deficit, except for profit sharing income derived from SBIS and FASBIS which are recognized on a cash basis.

B.23. Gains/Losses on Financial Transactions

The item is intended to accommodate capital gain (net after losses) from the sales of gold, marketable securities, and derivative transactions.

B.24. Foreign Exchange Gains/Losses

The item is intended to accommodate net gains/losses arising from foreign currency transactions that have achieved the ultimate objective.

B.25. Income and Expenses from Payment System Services

The items are intended to accommodate income and expenses from both cash and non-cash payment system services.

Income from payment system services comprises cash and non-cash transfer fees, including administrative penalty.

Expenses from payment system services comprise currency materials, currency printing and circulation, as well as non-cash payment services system expenses.

B.26. Income and Expenses from Macroprudential Supervision

The items are intended to accommodate income and expenses from macroprudential supervision, expanding access on Micro, Small, and Medium Enterprises (MSME), as well as for financial system surveillance.

Income from macroprudential supervision comes from the penalties which are charged to banks that violate macroprudential regulations.





Meanwhile, expenses from macroprudential supervision arises from the supervision on macroprudential policy and financial system stability.

B.27. Income from Loans and Financing

The item are intended to accommodate interest income received due to Bank Indonesia's function as the lender of the last resort and from the loan disbursements to banks and the Government in accordance with Act Number 13 of 1968 concerning the Central Bank.

B.28. Remuneration on Government Demand Deposits

The item is intended to accommodate interest expense on Government demand deposits denominated in both Rupiah and foreign currency.

B.29. Employee Benefits

Bank Indonesia provides benefit program for its employees, comprising employment benefits and post-employment benefits. Employment benefits consist of short-term and long-term benefits. Post-employment benefits consist of pension program and other program. As of January 1, 2015, Bank Indonesia has two pension program schemes, i.e. fixed employment program for all employees who have been registered as participants of the fixed pension benefit program, and contribution pension program for all new employees whose induction began on January 1, 2015 and beyond.

Periodically, employee benefit expenses and liabilities are calculated by an independent actuary. The expenses and liability of employee benefits are separately set for each plan, using projected unit credit method. The estimated liability of employee benefits is presented as Other Liabilities in the Statement of Financial Position. Actuarial gains/losses are presented as Revaluation Reserves in the Statement of Financial Position. Bank Indonesia applies PSAK (2013 Revision) on Employee Benefits.

B.30. Income Tax

Based on Article 4 section (1) letter s of Act Number 36 of 2008 concerning the Fourth Amendment to Act Number 7 of 1983 concerning Income Tax, Bank Indonesia's surplus is subjected to Income Tax (PPh). Accordingly, Bank Indonesia has been registered as taxpayer since January 1, 2009.

The stipulation of Income Tax imposition on Bank Indonesia's surplus is prescribed further in Article 7 of Government Regulation Number 94 of 2010 dated December 30, 2010 concerning Calculation of Taxable Income and Settlement of Income Tax Payable in Current Year, as follows:1. Bank Indonesia's surplus which constitutes income tax object are Bank Indonesia's surplus as presented in the

(Audited) Annual Financial Statement after fiscal adjustments or corrections in accordance with the Income Tax Laws by taking Bank Indonesia's characteristic into account.

2. Stipulations on income tax payment and calculation procedures on Bank Indonesia surplus as mentioned in Article 7 (1) are regulated in the Minister of Finance's Regulation (PMK) Number 100/PMK.03/2011 dated July 11, 2011 as revised through PMK Number 86/PMK.010/2015 dated April 27, 2015 concerning Changes to the Minister of Finance's Regulation Number 100/PMK.03/2011 concerning Income Tax Payment and Calculation Procedures On Bank Indonesia Surplus.






Subsequently, within the notes for Article 7 of Government Regulation Number 94 of 2010 dated December 30, 2010 concerning Calculation of Taxable Income and Settlement of Income Tax Payable in Current Year, it is stipulated that Bank Indonesia's characteristics related to Bank Indonesia's surplus include the foreign exchange gains/losses, allowance for impairment of financial assets, and depreciation of fixed assets.

Current tax for both current and previous periods is recognized in the amount of tax payable calculated based on the prevailing tax rate (tax regulation) or the substantively effective rate on the date of the Statement of Financial Position.

Tax return is recognized once the tax assessments are received or a decision over the objection or appeal has been received.

Bank Indonesia adopts PSAK 46 on Income Taxes Accounting. In accordance with PSAK 46, an entity presents the impact of both current and deferred income taxes on the current year's surplus (deficit).

Deferred tax should be measured at the tax rates that are expected to apply to the period when the asset is recovered or the liability is settled, based on tax rates/laws that have been enacted or substantively enacted by the end of the reporting period. All temporary differences between the carrying amount of assets and liabilities and its respective tax treatments are recognized as deferred taxes using the Asset and Liability Method. This method also recognizes deferred tax benefits on tax loss compensation.

B.31. Changes in Accounting Method Due To Changes in Treasury Application

In a bid to enhance treasury operation, Bank Indonesia implemented a new application system on October 14, 2019. The implementation of the systems has caused a number of accounting methods change including the formula and mechanism of marking to market, amortization, and accrual of income or expenses. The effects resulted from the accounting methods change on assets, liabilities, revenues, and expenses related to monetary policy have been presented in the Annual Financial Statements Bank Indonesia 2019.

B.32. Restatements of the Statement of Financial Position and the Statement of Surplus Deficit

Bank Indonesia presented the restatements of items and sub-items in its Statement of Financial Position and Statement of Surplus Deficit for the year ended December 31, 2018 as the comparative information in conformity with paragraph 29 Statement of Financial Accounting Policy (PKAK) 02 concerning the Presentation of Financial Statements. The restatements of items and sub-items in the audited Statement of Financial Position and Statement of Surplus and Deficit as at December 2018 are as follows:

B.32.1. Restatement of the Statement of Financial Position

The restatement of items in the Statement of Financial Position as at December 31, 2018 audited are as follows:

Restatements are due to reclassification of the item and sub-item in the liabilities, as shown in the table above. Securities Issued and Liabilities Denominated in Foreign Currency, previously reported at IDR139,049,933 million, was restated to IDR139,004,133 million. An amount of IDR45,800 million was reclassified to Other Liabilities, due to debt owed to the suppliers for money materials.

B.32.2. Restatement of the Statement of Surplus Deficit

In 2019, there has been an implementation of a new set of Chart of Accounts (CoA) and reorganization within a number of business units in Bank Indonesia, which in effect, attributing some adjustments to the balance of items and sub-items in the Statement of Surplus Deficit as of December 31, 2018 audited, as follows:





AdjustmentLKTBI 2018 (*)(As Previously

Reported)

LKTBI 2018 (*) (Restated)

IDR Million IDR Million IDR Million

LIABILITIES2. Financial Liabilities Related to Monetary

Policy Implementation 2.4. Securities Issued and Liabilities

Denominated in Foreign Currency 5. Other LiabilitiesTOTAL LIABILITIES

(45,800)

(45,800)

45,800 -

937,059,337

139,049,933

23,705,796 2,285,655,456

937,013,537

139,004,133

23,751,596 2,285,655,456

(*) LKTBI 2018 = Bank Indonesia Annual Financial Statements 2018

AdjustmentLKTBI 2018 (*)(As Previously

Reported)

LKTBI 2018 (*) (Restated)

IDR Million IDR Million IDR Million

REVENUES1. Monetary Policy Implementation

1.1. Interest Income 1.2. Income from Sharia-based Transactions1.3. Net Result of Financial Transactions1.4. Net Result of Foreign Currency Transactions1.5. Others

3. Macroprudential Supervision5. Other IncomeTOTAL REVENUESEXPENSES1. Monetary Policy Implementation

1.3. Other Expenses2. Payment System Services3. Macroprudential SupervisionTOTAL EXPENSESSURPLUS (DEFICIT) AFTER TAXES

(357,169)(560,487)

560,487 0 0

(357,169)5,729

351,439 0

25,427 25,427 (1,162)

(24,265)00

105,002,955 44,185,513

58,935 10,434,010 49,813,107

511,390 705

287,099 105,869,251

22,979,475 1,254,677 3,475,232

189,562 41,047,268 48,015,971

104,645,786 43,625,026

619,422 10,434,010 49,813,107

154,221 6,434

638,538 105,869,251

23,004,902 1,280,104 3,474,070

165,297 41,047,268 48,015,971

(*) LKTBI 2018 = Bank Indonesia Annual Financial Statements 2018






Descriptions of the restatement of Statement of Surplus Deficit are as follows:

1. Restatement of Revenue from Monetary Policy Implementation:- Interest Income, previously reported at IDR44,185,513 million, was restated at IDR43,625,026

million. An amount of IDR560,487 million was reclassified to Income from Sharia-based Transactions. This is due to the rearrangement of CoA, associated with Income from Sharia-based Transactions, attributed to amortization of Sharia-based Marketable Securities denominated in Rupiah.

- Others, previously reported at IDR511,390 million, was restated at IDR154,221 million. An amount of IDR357,169 million was reclassified to Other Income at IDR351,087 million and to Income from Microprudential Supervision at IDR6,082 million. The reclassification was made to match with the nature of transaction.

2. Income from Macroprudential Supervision, previously reported at IDR705 million, was restated at IDR6,434 million. An amount of IDR5,729 million was the result of attribution from Income from Monetary Policy Implementation - Others amounting to IDR6,802 million due to related with macroprudential supervision. Oppositely, an amount of IDR353 million from Income from Macroprudential Supervision was reclassified to Other Income, attributed to policy-supporting-activities.

3. Other Income, previously reported at IDR287,099 million, was restated at IDR638,528 million. The amount of IDR351,439 million was attributed to the following reclassification: - IDR351,807 million from Income From Monetary Policy Implementation - Others, attributed to

income denominated in Rupiah and foreign currency generated from policy-supporting-activities. - IDR353 million from Income from Monetary Policy Implementation, attributed to income denominated

in Rupiah as a result from macroprudential supervision.

4. Expenses from Monetary Policy Implementation - Other Expenses, previously reported at IDR1,254,677 million, was restated at IDR1,280,104 million. The amount of IDR25,427 million was attributed to the following reclassification:- IDR24,265 million from Expenses from Macroprudential Supervision, associated with the

reorganization of Sharia Finance and Economy Department (DEKS). The reorganization resulted DEKS activities considered to be related with monetary policy as opposed to macroprudential policy.

- IDR1,162 million from Expenses from Payment System Services, due to the transaction fee denominated in foreign currency for activities related to monetary policy.

5. Expenses from Payment System Services, previously reported at IDR3,475,232 million, was restated at IDR3,474,070 million. An amount of IDR1,162 million was reclassified to Expenses from Monetary Policy Implementation - Other Expenses, due to the transaction fee denominated in foreign currency for activities related to monetary policy.

6. Expenses from Macroprudential Supervision, previously reported at IDR189,562 million, was restated at IDR165,297 million. An amount of IDR24,265 million was reclassified to Expenses from Monetary Policy Implementation - Other Expenses, attributed to the reorganization of DEKS so that its activities considered to be related with monetary policy as opposed to macroprudential policy.





B.33. Chart of Accounts

Bank Indonesia's Financial Statements are prepared based on Board of Governors Regulation (PADG) Intern No. 19/59/PADG INTERN 2017 dated on December 28, 2017 concerning Bank Indonesia Financial Accounting System, lastly amended by PADG Intern No. 22/22/PADG INTERN/2020 dated on April 24, 2020 concerning the Third Change on PADG Intern No. 19/59/PADG INTERN 2017 dated on December 28, 2017 concerning Bank Indonesia Financial Accounting System. Based on this regulation, the CoA used in the preparation of Bank Indonesia Annual Financial Statements 2019 is made in conformity with the guidelines set by the department that manages the finance of Bank Indonesia, effective January 1, 2019.

B.34. Impacts of Covid-19 Pandemic on Bank Indonesia's Financial Instruments

Bank Indonesia applies PKAK 06 (2018): Policy-related Financial Instruments, effective January 1, 2020, which is an adoption from PSAK 71: Financial Instruments, while maintaining its uniqueness of being a central bank. This PSAK amends the method of calculation for allowance for impairment losses on financial assets, from objective evidence to expected credit loss. In essence, expected credit loss method measures the potential loss on financial assets resulted from the deteriorating factors of credit risk while taking into account available relevant information, including forward looking information.

The implementation of expected credit loss method is predicted to have a slight impact on the allowance for impairment losses on financial assets. The prediction is supported by the fact that financial assets owned by Bank Indonesia are of good quality, mostly in the form of sovereign bonds or sovereign related bond, both are investment grade.

In view of the development on Covid-19 pandemic and looming uncertainty within global economy, Bank Indonesia has been consistently monitoring and factoring in its impacts into Bank Indonesia's forward looking estimates in the method of calculation for expected credit loss.

Meanwhile, in the application of PSAK 68: Fair Value Measurement, Bank Indonesia's financial assets are measured at fair value through revaluation reserves while maintaining the use of quoted price (without adjustment) within active market for identical assets that can be accessed on measurement day (level 1). This is attributed to the good quality of Bank Indonesia's financial assets and the availability of fair market price.

The Covid-19 pandemic has triggered high uncertainty in the global economy and significantly affected financial market activities, indicated by the liquidity drying up in the financial instruments. However, this condition has seen an improvement following the well-coordinated actions from the government and central banks globally, resulting in the introduction of expansionary fiscal and monetary policies in a bid to curb a deeper economic recession while, at the same time, boosting liquidity within the financial market. The expansionary policies are indicated by the trend on policy taken by global central banks to cut interest rates, followed by many countries to reduce the yields on their government bonds. The US 10-Year Bond saw its yield dipping to 0.63% on April 15, 2020 or lower compared to 1.92% on December 31, 2019. The reduced interest rate has positively affected the fair value of Bank Indonesia's financial assets, particularly on securities held denominated in foreign currencies.

Bank Indonesia consistently monitored the development of Covid-19 pandemic and its impacts on Bank Indonesia's financial assets and has accordingly conducted a prudent and comprehensive financial risk management.






C. RISK MANAGEMENT

The implementation of Bank Indonesia Risk Management (MRBI) is geared toward supporting the achievement of Bank Indonesia's vision, mission, and strategic programs through a comprehensive risk management. The implementation of MRBI is carried out with a top-down, forward-looking, and integrated method using value chain concept through strategic risk management approach. An integrated implementation of strategic risk management with strategic planning, strategic budgeting, and strategic Risk Based Internal Audit (RBIA) shall add value to the achievement of destination statement, protecting Bank Indonesia's assets as well as increasing its credibility.

In line with the strategic function integration, risk management becomes a cohesive element in the design and implementation of Bank Indonesia's policies along with operational activities. This is to ensure that each and every Bank Indonesia's decision and activity has taken into account all risk factors and their mitigation, particularly that of strategic risk that can obstruct Bank Indonesia's mandate. Hence, for strategic program, a top-down approach is exercised during the identification of strategic risks, comprising policy risk, financial risk, and operational risk. Subsequently, strategic risk control requires the involvement from various working units within the value chain framework using Risk Control Matrix (RCM).

In compliance with the international standards on the practice of risk management, Bank Indonesia applies the three lines of defense concept. This concept is to ensure a multi-tiered control in risk management by the working unit implementing business process (first line of defense), by risk management working unit (second line of defense), and by internal audit working unit (third line of defense). Meanwhile, risk management practice is strengthened through some improvements, including the integration of Bank Indonesia's Business Continuity Management with the Crisis Management Protocol, empowered roles of Internal Control Officer (ICO) and the alignment of RCM with the value chain to support RBIA.

In 2019, ICO was focused on the internal control monitoring within the BIMASAKTI application system, particularly on supporting the accuracy of financial statements. Additionally, ICO's roles also include self assessment to ensure fairness and reliability of the budget used by each working unit This role is associated with the monitoring and facilitation function which is part of ICO's responsibility. To support this role, various capability and competency development programs are provided to ICO, including workshop, training, mentoring, and MRBI Forum participation.

In general, the risk management for maintaining the quality of Bank Indonesia's financial statements is conducted throughout the year through the application of appropriate accounting policies and guidelines, competent human resources, clear segregation of duties, a tiered approval process, as well as reliable application system. In 2019, risk mitigation function was strengthened by the implementation of Internal Control Over Financial Reporting (ICOFR) Audit. ICOFR Audit aims to ensure that the accounting records of assets, liabilities, and expenses are in compliance with the prevailing regulations, as well as to ensure the effectivity and efficiency of internal control design, particularly that of within the BIMASAKTI application system.

By referring to the international best practices and Bank Indonesia Financial Accounting Policy (KAKBI), Bank Indonesia's financial risk is reflected in Bank Indonesia's financial statements. Both fair market value (marking to market) and credit loss (based on objective evidence) of Bank Indonesia's financial assets are presented in the financial statements. Moreover, Bank Indonesia has completed an assessment on credit risk calculation based on expected credit loss, later included in a stipulation which shall come into effect in 2020.





December 31, 2019 IDR Million


GoldContractual Rights to Gold Bar:

Gold DepositsLess: Allowance for Impairment of Financial AssetsTotal Gold

49,711,0913,767,082

0

53,478,173

43,562,8883,302,380

0

46,865,268



354,936,04324,020,567

1,707,142,5522,086,099,162

292,739,32714,634,289

1,674,439,9781,981,813,594

Securities Held and Claims Denominated in RupiahSharia-based Securities Held and Claims Denominated in RupiahSecurities Held and Claims Denominated in Foreign CurrencyTotal Financial Assets Related to Monetary Policy Implementation

Financial risk mitigation is carried out in order to maintain financial risk within the established limit and threshold, hence avoiding obstruction to Bank Indonesia's financial performance. Credit risk management is carried out by assessing the creditworthiness of the third parties (marketable securities issuers, counterparties, correspondent banks, custodians, and third party securities lending agents), and by monitoring their compliance with the risk limits. Market risk management is conducted through portfolio valuation (marking to market) and portfolio volatility monitoring (value at risk) as well as the sensitivity of Bank Indonesia portfolio This financial risk monitoring includes liquidity risk which is carried out by establishing the risk limits in compliance with the investment guidelines.

D. DETAILS OF FINANCIAL STATEMENTS

D.1. Gold

Gold reserves as at December 31, 2019 and December 31, 2018 were TOz 2,525,984.11 or equivalent to IDR53,478,173 million and TOz2,525,126.32 or equivalent to IDR46,865,268 million respectively, with details as follows:

Gold bar price in London gold market as at December 31, 2019 and December 31, 2018 were USD1,523.00 per troy ounce (TOz) and USD1,281.65 per TOz respectively. In 2019, Bank Indonesia exercised a swap allocation for 857.76 TOz of gold coins or equivalent to IDR18,160 million, previously presented in Other Assets, to gold bar.

D.2. Financial Assets Related to Monetary Policy Implementation

Securities held by Bank Indonesia are measured at fair value through revaluation reserves, while claims arising from repo transaction and other claims are measured at amortized cost.

Financial Assets Related to Monetary Policy Implementation as at December 31, 2019 and December 31, 2018 were IDR2,086,099,162 million and IDR1,981,813,594 million respectively, with details as follows:








Government SecuritiesClaims on Banks Arising from Securities Repurchase AgreementOther Claims Less:Allowance for Impairment of Financial AssetsTotal Securities Held and Claims Denominated in Rupiah

265,568,45587,860,339

1,507,2490

354,936,043

205,575,71283,900,275

3,263,3400

292,739,327



Balances with Banks and Portfolio Managers Outside IndonesiaSecuritiesClaimsLess:Allowance for Impairment of Financial AssetsTotal Securities Held and Claims Denominated in Foreign

Currency

369,040,0691,338,098,636

3,8470

1,707,142,552

370,358,4271,304,071,220

10,3310

1,674,439,978

D.2.1. Securities Held and Claims Denominated in Rupiah

Other Claims amounted to IDR1,507,249 million are claims on derivative transactions.

D.2.2. Sharia-based Securities Held and Claims Denominated in Rupiah

Sharia-based Securities Held and Claims Denominated in Rupiah as at December 31, 2019 and December 31, 2018 were IDR24,020,567 million and IDR14,634,289 million respectively, comprising Government Sharia Securities (SBSN) and claims on banks arising from Sharia-based securities repurchase agreement.

D.2.3. Securities Held and Claims Denominated in Foreign Currency

1. Balances with Overseas Institutions consist of Demand Deposits, Term Deposits, Investments with External Portfolio Managers, and Cash Collateral Reinvestments.

In 2019, term deposit balance at the IMF was increased following the shift in Indonesia's commitment on Windfall Gold Sales Profit (WGSP) at the IMF which amounted to SDR21,785,148.00. The placements were allocated into 3 (three) demand deposit accounts, comprising Poverty Reduction and Growth Facility (PRGF), Trust for Special PRGF Operations for the Heavily Indebted Poor Countries (HIPC) and PRGF Subsidy Operations (The Trust), and Catastrophe Containment and Relief Trust (CCRT). The allocation of additional deposits was 50% for PRGF term deposit, 25% for HIPC term deposit, and the remaining 25% for CCRT term deposit. Accordingly, the term deposits at the IMF now consist of: a) PRGF Term Deposit of SDR25,000,000.00 or equivalent to IDR503,501 million as at December 31,

2018 was increased by SDR10,892,574.00 to SDR35,892,574.00 or equivalent to IDR689,953 million as at December 31, 2019.





b) PHIPC Term Deposit of SDR4,850,030.00 or equivalent to IDR97,680 million as at December 31, 2018 was increased by SDR5,446,287.00 to SDR10,296,317.00 or equivalent to IDR197,923 million as at December 31, 2019.

c) CCRT Term Deposit of SDR5,446,287.00 or equivalent to IDR104,692 million as at December 31, 2019.

2. Included in the Securities Held Denominated in Foreign Currency were those allocated for Securities Lending Program amounting to IDR66,440,198 million. However, the position of collateral as at December 31, 2019 was nil due to no loan securities in Securities Lending Program.

Meanwhile, as at December 31, 2019 there were securities amounting to IDR28,635,840 million were on loan by custodians which were secured by sufficient and good quality collaterals.

D.3. Receivables from the International Monetary Fund

Receivables from the International Monetary Fund as at December 31, 2019 and December 31, 2018 were IDR36,583,396 million and IDR38,550,644 million respectively, with details as follows:

The quota balance held by Indonesia at the IMF as at December 31, 2019 was SDR4,648,400,000.00 or equivalent to IDR89,354,892 million and equivalent to IDR93,618,915 million as at December 31, 2018. Meanwhile, Reserve Tranche Position (RTP) as at December 31, 2019 was SDR788,272,993.00 or equivalent to IDR15,152,751 million and as at December 31, 2018 was SDR787,922,221.00 or equivalent to IDR15,868,777 million.

Valuation of IMF accounts denominated in Rupiah is adjusted based on IMF's exchange rate on April 30. Bank Indonesia made an estimated adjustment in its IMF membership participation in Rupiah as at December 31, 2019 for Quota subscription amounted to IDR1,836,851 million and for IMF Account No.1 amounted to IDR995,266 million.

Receivables from the IMF as at December 31, 2019 were SDR1,115,069,159.00 or equivalent to IDR21,434,662 million and December 31, 2018 were SDR1,116,558,653.00 or equivalent to IDR22,487,525 million.



Quota Less:Promissory NotesIMF Account No. 1Estimated quota value adjustment in RupiahRTPSDR Holdings:Special Drawing RightsAccrued RevenueAccrued ExpensesLess:Allowance for Impairment of Financial AssetsTotal Receivables from the International Monetary Fund

89,354,89275,043,726

995,266(1,836,851)

15,152,751

21,434,66245,871

(49,888)0

36,583,396

93,618,91576,037,340

1,002,266710,532

15,868,777

22,487,52566,355

(72,013)0

38,350,644






D.4. Claims

Claims as at December 31, 2019 and December 31, 2018 were IDR140,756,764 million and IDR179,953,811 million respectively, with details as follows:

D.4.1. Claims on the Government

D.4.1.1. SUP Number SU-002/MK/1998 (SU-002)

SU-002 was non-tradeable and non-transferable government bonds issued on October 23, 1998 based on Presidential Decree Number 55 of 1998 concerning Domestic Loans in Debt Securities in conjunction with Government Regulation Number 60 of 1998 concerning Additional Equity Participation of the Republic of Indonesia in PT Bank Ekspor Impor Indonesia. The nominal value of SU-002 at issuance on October 23, 1998 was IDR20,000,000 million.

Pursuant to Act Number 41 of 2008 dated November 10, 2008 concerning the State Budget for the Fiscal Year 2009, the Minister of Finance has issued an addendum to SU-002 amending the interest rate from 1.0% to 0.1% per year, effective on January 1, 2009. The outstanding balance of SU-002 as at December 31, 2019 was IDR10,654,159 million.


SU-004 was non-tradeable and non-transferable government bonds issued on May 28, 1999 based on Presidential Decree Number 55 of 1998 concerning Domestic Loans in Debt Securities in conjunction with the Joint Approval between the Government and Bank Indonesia dated February 6, 1999. The nominal value of SU-004 at issuance on May 28, 1999 was IDR53,779,500 million.



Claims on the GovernmentNon-Tradeable Government Bonds:

SUP Number SU-002/MK/1998SUP Number SU-004/MK/1999SUP Number SU-007/MK/2006Government Bonds SRBI-01/MK/2003

Claims:Claims due to Loan InterestOther Claims

Claims on BanksClaims Arising from Loans to Banks Prior to 1999

Less:Allowance for Impairment of Financial Assets

Total Claims

10,654,15930,163,32328,827,37471,064,446

47,0423

55,65355,236

140,756,764

12,048,59533,686,94932,194,936

101,859,121

61,8353

157,60855,236

179,953,811





Pursuant to Act Number 41 of 2008 dated November 10, 2008 concerning the State Budget for the Fiscal Year 2009, the Minister of Finance has issued the fifth addendum of SU-004 amending the annual interest rate from 3.0% to 0.1% per year effective on January 1, 2009. The outstanding balance of SU-004 as at December 31, 2019 was IDR30,163,323 million.


SU-007 was non-tradeable and non-transferable government bonds issued on November 24, 2006 based on Act Number 24 of 2002 concerning Government Bonds and the Joint Agreement between the Minister of Finance and Bank Indonesia Governor concerning Restructuring of Government Bonds Number SU-002/MK/1998 and SU-004/MK/1999 dated April 18, 2006. The nominal value of SU-007 at issuance on November 24, 2006 was IDR54,862,150 million.

SU-007 was issued to reiterate interest arrears and indexation arrears arising from SU-002 and SU-004 as at December 31, 2005, with details as follows:1. SU-002 interest arrears amounting to IDR4,637,583 million.2. SU-004 interest arrears amounting to IDR12,291,887 million.3. SU-002 indexation arrears amounting to IDR11,231,072 million.4. SU-004 indexation arrears amounting to IDR26,701,608 million.

The terms and conditions for these bonds are as follows:1. SU-007 took effect on January 1, 2006 and will mature on August 1, 2025.2. SU-007 bears an interest of 0.1% per year which is calculated on the outstanding principal and paid

in cash by the Government of Indonesia to Bank Indonesia bi-annually on February 1 and August 1. The first interest payment was made on December 1, 2006 for the interests due on February 1, 2006 and on August 1, 2006.

3. Principal repayment for SU-007 was split into 38 installments. The first installment was due and paid on February 1, 2007 while the remainder are due and to be settled on August 1 and February 1 of each year, with the final installment to be due on August 1, 2025. Principal repayments are settled either in cash or with Government Bonds (SUN).

The outstanding balance of SU-007 as at December 31, 2019 was IDR28,827,374 million.

D.4.1.4. Government Bonds Series SRBI-01/MK/2003 (SRBI-01)

SRBI-01 was non-tradeable and non-transferable government bonds issued to substitute SUP Number SU-001/MK/1998 and Number SU-003/MK/1999 in the context of exercising the Joint Agreement between the Government and Bank Indonesia concerning the Settlement of the Bank Indonesia Liquidity Assistance (BLBI) as well as the Financial Coordination between the Government and Bank Indonesia dated August 1, 2003 (Joint Decree of 2003), with nominal value of SRBI-01 amounted to IDR144,536,094 million.

On July 31, 2012, a revision to the Joint Decree of 2003 was signed by the Governor of Bank Indonesia, the Minister of Finance, and the Coordinating Minister of the Economy, stipulating the restructuring of SRBI-01/MK/2003 from the initial bullet payment which matures in 2033 with a self-liquidating system, to installment payment (amortized) which matures in 2043, as such amending the terms and conditions of SRBI-01 into as follows:






1. SRBI-01 came into effect on August 1, 2003, and matures on August 1, 2043.2. SRBI-01 bears an annual interest at 0.1% of the outstanding principal, to be paid by the Government

bi-annually, every February and August.3. SRBI-01 principal is paid on February 1 and August 1 of each year with the last installment to be due

on August 1, 2043. Principal installments are paid in cash or from Bank Indonesia's surplus which have been allocated for the Government.

In 2019, the Government has paid the principal installments of SRBI-01 out of the Government's part of Bank Indonesia's surplus. The outstanding balance of SRBI-01 as at December 31, 2019 was IDR71,064,446 million.

D.4.2. Claims On Banks

Claims on Banks are claims from loans to banks prior to 1999, comprising Subordinated Loans (SOL) and KLBI which were disbursed in accordance with Act Number 13 of 1968 concerning the Central Bank. The balances of SOL and KLBI as at December 31, 2019 and December 31, 2018 were IDR55,653 million and IDR157,608 million respectively.

D.5. Other Assets

Other Assets as at December 31, 2019 and December 31, 2018 were IDR34,414,503 million and IDR38,672,139 million respectively, with details as follows:



Participating Interest in Domestic and International InstitutionsBank for International SettlementsInternational Islamic Liquidity ManagementLess:Allowance for Impairment of Financial Assets

Other Financial AssetsBanknotes and Demand Deposit Denominated in Foreign CurrencyClaims on Domestic Non-BankClaims on Overseas Non-BankLess:Allowance for Impairment of Financial Assets

Fixed Assets and Other AssetsFixed Assets and Intangible AssetsOthers

Total Other Assets

877,898808,393

69,5050

4,290,591127

10,130,215774,198

6,613,949

29,246,01417,081,05012,164,964

34,414,503

919,374846,969

72,4050

4,614,10125,878

10,419,788808,978

6,640,543

33,138,66417,031,20716,107,457

38,672,139





D.5.1. Participating Interest in Domestic and International Institutions

D.5.1.1. Participation in Bank for International Settlements (BIS)

The purpose of the equity participation is to gain more access in BIS decision-making activities, to take benefits from the provided facilities, to increase investor confidence on Indonesia, and to improve cooperation in central banking pertaining to monetary policy, financial system stability and payment systems. Bank Indonesia purchased 3,000 shares (0.55% of total issued shares) on September 29, 2003 at a nominal value of SDR5,000.00/share and a total acquisition cost of SDR42,054,000.00 or equivalent to IDR808,392 million and IDR846,969 million as at December 31, 2019 and December 31, 2018 respectively.

D.5.1.2. International Islamic Liquidity Management (IILM)

IILM's objective is to provide high quality, liquid and high rating internationally tradeable short-term Sharia-based financial instruments, used mainly to support liquidity management by Islamic financial institutions. Bank Indonesia's membership is represented by shares in IILM which as at December 31, 2019 accounted to 6.67% or valued at USD5,000,000.00 or equivalent to IDR69,505 million and equivalent to IDR72,405 million as at December 31, 2018.

D.5.2. Other Financial Assets

D.5.2.1. Banknotes and Demand Deposit Denominated in Foreign Currency

Banknotes and Demand Deposit Denominated in Foreign Currency was IDR127 million in the form of Banknotes and Demand Deposit denominated in Foreign Currency under the management of Bank Indonesia Overseas Representative Offices used for operational activities.

D.5.2.2. Claims on Domestic Non-Banks

Claims on Domestic Non-Banks consisted of: 1. Claims on disbursed loans of IDR5,789,426 milllion which represented claims on KLBI through banks

as channeling agents that have not been settled as per due date. Included in those claims were arrears derived from the Agricultural Enterprise Loan (KUT) amounting to IDR5,669,741 million.In its endeavour to resolve KUT risk sharing, Bank Indonesia has held a number of discussions with the related ministries (Coordinating Ministry for the Economy, Ministry of Finance, State Ministry of Cooperatives and Small and Medium Enterprises, as well as with Jamkrindo. The last discussion held was a High Level Meeting on February 8, 2018.

2. Claims on loans and multipurpose financing to employees and the Board of Governors Members as at December 31, 2019 was IDR4,251,834 million.

D.5.2.3. Claims on Overseas Non-Banks

Claims on Overseas Non-Banks included Bank Indonesia's claims to the third parties which comprised USD48,797,259.98 or equivalent to IDR678,331 million and EUR4,987,667.93 or equivalent to IDR77,751 million. Meanwhile, a claim to Indo Plus B.V (IPBV) was also registered at USD288,415.53 or equivalent to IDR3,857 million and EUR310,159.01 or equivalent to IDR4,839 million.






D.5.3. Fixed Assets and Other Assets

D.5.3.1. Fixed Assets and Intangible Assets

Fixed Assets and Intangible Assets as at December 31, 2019 and December 31, 2018 were IDR17,081,050 million and IDR17,031,207 million respectively, with details as follows:

D.5.3.2. Other Assets

Other Assets amounted to IDR12,164,964 million, comprising currency material inventory of IDR631,315 million, assets under construction of IDR1,113,627 million, prepaid taxes of IDR10,055,390 million, and deferred tax of IDR208,073 million.

D.6. Currency in Circulation

Currency in Circulation is Rupiah currency legal tender that is not under the control of Bank Indonesia. Its position as at December 31, 2019 and December 31, 2018 was IDR793,742,924 million and IDR749,183,201 million respectively, with details as follows:

In its endeavour to safeguard the availability of fit currency throughout Indonesia, Bank Indonesia constantly provides quality Rupiah in sufficient amount and withdraws the unfit ones from circulation (clean money policy).



17,935,7024,566,8591,013,411

23,515,972

(2,559,153) (3,178,104)

(697,665) (6,434,922)17,081,050

17,662,6964,191,729

843,31722,697,742

(2,286,661) (2,804,607)

(575,267) (5,666,535)17,031,207

Acquisition CostFixed Assets: - Lands and Buildings - Non-Lands and Buildings Intangible Assets

Accumulated Depreciation/AmortizationFixed Assets: - Buildings - Non-Buildings Intangible Assets

Book Value



Printed MoneyLess:Currency in VaultTotal Currency in Circulation

1,129,488,111335,745,187

793,742,924

971,953,121222,769,920

749,183,201





In accordance with Act Number 7 of 2011 dated June 27, 2011 concerning the Currencies (the Currency Act), Bank Indonesia coordinates with the Government in the destruction activities of Rupiah currency. The coordination is based on a memorandum of understanding between both parties which governs the procedures for currency destruction, which include producing official reports on currency destruction, and quarterly information. Moreover, it also stipulates that the amount and the nominal value of the destroyed currency shall be announced in the Official Gazette of the Republic of Indonesia.

During the period of January 1 to December 31, 2019, Bank Indonesia has received Perfectly Printed Currencies (Hasil Cetak Sempurna or HCS) from Perum Peruri, comprising 11,558 million pieces of Rupiah banknotes with a nominal value of IDR362,363,920 million and 999 million pieces of coins with a nominal value of IDR292,971 million.

During the same period, Bank Indonesia has destroyed 6,818.7 million pieces of banknotes and 56,5 million pieces of coins with a total nominal value of IDR205,129,831 million.

The destroyed banknotes and coins above consisted of the unfit Rupiah currency held by Bank Indonesia and the banknotes that had been withdrawn from circulation or declared invalid as legal tender and exchanged by the public to Bank Indonesia.

D.7. Financial Liabilities Related to Monetary Policy Implementation

Financial Liabilities Related to Monetary Policy Implementation as at December 31, 2019 and December 31, 2018 were IDR996,137,979 million and IDR937,013,537 million respectively, with details as follows:

D.7.1. Bank Demand Deposits



Bank Demand DepositsSecurities Issued and Liabilities Denominated in RupiahSharia-based Securities Issued and Liabilities Denominated in RupiahSecurities Issued and Liabilities Denominated in Foreign CurrencySharia-based Securities Issued and Liabilities Denominated in Foreign

CurrencyTotal Financial Liabilities Related to Monetary Policy Implementation

406,335,957327,657,637

58,503,751199,176,207

4,464,427

996,137,979

417,622,296331,324,018

46,846,246139,004,133

2,216,844

937,013,537



Conventional Bank Demand DepositsIn RupiahIn Foreign Currency

Sharia Bank Demand DepositsIn RupiahIn Foreign Currency

Total Bank Demand Deposits

385,847,652296,330,908

89,516,74420,488,30520,267,082

221,223406,335,957

397,939,950300,506,926

97,433,02419,682,34619,146,047

536,299417,622,296






D.7.2. Securities Issued and Liabilities Denominated in Rupiah

D.7.3. Sharia-based Securities Issued and Liabilities Denominated in Rupiah

D.7.4. Securities Issued and Liabilities Denominated in Foreign Currency

D.7.5. Sharia-based Securities Issued and Liabilities Denominated in Foreign Currency

Sharia-based Securities Issued and Liabilities Denominated in Foreign Currency as at December 31, 2019 and December 31, 2018 were IDR4,464,427 million and IDR2,216,844 million respectively. This constituted banks' placement with Bank Indonesia on Sharia-based Term Deposit denominated in foreign currency.



Bank Indonesia Sharia CertificatesBank Indonesia Sharia Deposit FacilityLiabilities to Banks arising from the Sale of Marketable Securities

with Repurchase Agreement under Sharia ComplianceBank Indonesia SukukTotal Sharia-based Securities Issued and Liabilities

Denominated in Rupiah

10,436,00027,282,400

0

20,785,35158,503,751

8,215,00032,590,500

4,212,746

1,828,00046,846,246



Term Deposits Denominated in Foreign CurrencyBank Indonesia Foreign Exchange NotesOthersTotal Securities Issued and Liabilities Denominated in

Foreign Currency

156,745,96242,363,584

66,661199,176,207

89,515,726 42,282,141

7,206,266139,004,133



Bank Indonesia CertificatesBank Indonesia Certificates of DepositDeposit FacilitiesTerm DepositsLiabilities to Bank arising from Securities Sold under

Repurchase Agreement OthersTotal Securities Issued and Liabilities Denominated

in Rupiah

70,331,3590

124,221,83636,539,55896,564,884

0327,657,637

45,674,46925,824,12090,198,092

127,781,45241,519,751

326,134331,324,018







Government Demand Deposits:in Rupiahin Foreign Currency

Loans from GovernmentTotal Liabilities to the Government

162,911,500142,358,251

20,553,2490

162,911,500

175,991,854118,287,792

57,704,0626,976

175,998,830

D.8. Counterpart of Special Drawing Rights Allocated by the IMF

Counterpart of Special Drawing Rights Allocated by the IMF as at December 31, 2019 and December 31, 2018 was SDR1,980,438,720.00 or equivalent to IDR38,069,419 million and IDR39,886,095 million respectively.

D.9. Financial Liabilities to Government

Financial liabilities to Government as at December 31, 2019 and December 31, 2018 was IDR162,911,500 million and IDR175,998,830 million respectively, with details as follows:

D.9.1. Government Demand Deposits

As the treasurer the Government, Bank Indonesia administers Government Demand Deposits. Government Demand Deposits as at December 31, 2019 was IDR162,911,500 million, including Government Demand Deposits Earning Remuneration of IDR160,772,598 million, with details as follows:



Government Demand Deposits in RupiahGovernment Demand Deposits in Foreign CurrencyTotal Government Demand Deposits Earning Remuneration

142,343,11718,379,481

160,722,598

118,272,96056,452,140

174,725,100



Sharia-compliant Term Deposits Denominated in Foreign Currency

Accrued Shares on Return for Sharia-based MonetaryOperation Instruments Denominated in Foreign Currency

Total Sharia-based Securities Issued and LiabilitiesDenominated in Foreign Currency

4,462,221

2,206

4,464,427

2,215,593

1,251

2,216,844






Government Demand Deposits denominated in foreign currency included a guarantee to issue the Government's Letter of Credit of IDR1,837,550 million.

D.9.2. Loans

Loans from the Government denominated in Rupiah are the government loans received from the Two Step Loan (TSL) program granted by the ASEAN Japan Development Fund for Indonesia which matures on April 20, 2019. These loans are subsequently loaned by Bank Indonesia to the executing banks for the Large Privately-Owned National Plantations.

Bank Indonesia has paid off the principal and the interest of the loans as well as the Consulting Service to the Ministry of Finance on April 18, 2019 which was iterated in the Letter of Banking Services, Licensing and Treasury Operation Department No.21/2/DPPT-GOTr-PTBI/Srt/B dated April 29, 2019, hence the balance as at December 31, 2019 was nil.

D.10. Other Liabilities

Other Liabilities as at December 31, 2019 and December 31, 2018 were IDR19,636,715 million and IDR23,751,596 million respectively, with details as follows:

D.10.1. Employee Benefits Liabilities

Employee benefits liabilities amounted to IDR6,007,231 million comprised long-term and post-employment benefits. Employee benefits liabilities are recorded based on independent actuary's calculations as at December 31, 2019 in accordance with PSAK 24 (2013 Revision). The assumptions used in the actuary's calculations included mortality rate using the 1983 Group Annual Mortality (GAM), employee benefit tax loading of 15% to 30%, and discount rate of 5.50% to 8.20%, as well as the limit of Retirement Basic Income increment of 5% maximum.

The followings are plan assets, liabilities, and expenses movements for the period of January 1 to December 31, 2019:



Demand Deposits of Domestic and International InstitutionsEmployee BenefitsOthersTotal Other Liabilities

1,237,9526,007,231

12,391,53219,636,715

794,4454,321,352

18,635,79923,751,596




The composition of investment portfolio of plan assets are as folllows:

D.10.2. Others

Other Non Policy-Related Liabilities were IDR12,391,532 million, including tax payable of IDR12,022,328 million.

D.11. Revaluation Reserves

Unrealized gains or losses as at December 31, 2019 and December 31, 2018 were IDR106,983,656 million and IDR129,230,959 million respectively, with details as follows:


Pensions Benefit

IDR Million

(1)

Housing Allowance

IDR Million

(2)

IDR Million

(3)

IDR Million

(4)

IDR Million

(5)

IDR Million

(6)

IDR Million

(7)

Post-Employment

Benefit - Medical

Other Post Employment

BenefitsLong-Term

Benefits

Tax on Post Employment Benefits and Long-Term

Benefits Total

(1,136,582)

246,832 (515,722)

(218,569)

- (1,624,041)

Asset/(Liabilities) Balance as at December 31,2018 Employee Benefit ExpensesRevaluation Reserves Expenses/(Revenue)Bank Indonesia's ContributionBenefit Payment Asset/(Liabilities) Balance as at December 31, 2019

-

6,032 (86,380)

80,348

- -

(1,058,682)

(73,524) (328,573)

(97,177)

- (1,557,956)

(516,739)

11,470 (105,406)

-

(50,296)(660,971)

(1,232,322)

75,757 -

-

(271,642) (1,428,207)

(377,026)

(304,287) (49,475)

-

(5,268) (736,056)

(4,321,351)

(37,720) (1,085,556)

(235,398)

(327,206)(6,007,231)

December 31, 2019 Investment Value

%

December 31, 2018 Investment Value

%

1083

7100

147115

100

Cash or Cash EquivalentsSecuritiesOthers



Gold Revaluation ReservesForeign Currency Revaluation Reserves:

Foreign Currency Revaluation Reserves - TranslationForeign Currency Revaluation Reserves - Transaction

Financial Instrument Revaluation Reserves Other Revaluation ReservesTotal Revaluation Reserves

48,981,84222,303,632(3,858,106)26,161,73823,489,987 12,208,195

106,983,656

42,386,84199,695,73762,385,75737,309,980

(25,972,611)13,120,992

129,230,959






The reconciliation of the amount of revaluation reserves at the beginning and end of the period are as follows:

The decrease in Foreign Currency Reserves - Translation of IDR9,289,152 million was realized as Net Result of Foreign Currency Transactions. The decrease in Foreign Currency Revaluation Reserves - Transaction of IDR12,120,566 million was realized as Net Result of Foreign Currency Transactions.

D.12. Capital

The amount of Capital and Monetary Liabilities used in calculating Capital Ratio as at December 31, 2019 and December 31, 2018 were as follows:

Pursuant to Bank Indonesia Act, in the event where the capital ratio reaches over 10%, Bank Indonesia shall transfer any remaining surplus to the Government. The use of the surplus received by the Government will be prioritized to settle the government's obligations to Bank Indonesia.



IncreaseIDR Million

ReductionIDR Million

Gold Revaluation Reserves:Foreign Currency Revaluation Reserves

Foreign Currency Revaluation Reserves - Translation

Foreign Currency Revaluation Reserves - Transaction

48.981.842 22.303.632 (3.858.106)

26.161.738

42.386.841 99.695.737 62.385.757

37.309.980

38.114.905 393.594.087 390.935.822

2.658.265

31.519.904 470.986.192 457.179.685

13.806.507



a. Capital- Capital - Revaluation of Fixed Assets - General Reserves - 90% Current Year Surplus (after tax) TOTAL

b. Monetary Liabilities - Currency in Circulation - Government Demand Deposits - Bank Demand Deposits - Other Demand Deposits - Securities Issued - Loans from the Government TOTAL

c. Capital Ratio

3,726,34914,121,816

169,008,70530,015,427

216,872,297

793,742,924162,911,500 406,335,957

1,181,132589,735,361

01,953,906,874

11.10%

3,726,34914,121,816

154,601,65943,214,374

215,664,198

749,183,201175,991,854417,622,296

733,606512,184,975

6,9761,855,722,908

11.62%





D.13. Accumulated Surplus/Deficit

Accumulated Surplus/Deficit as at December 31, 2019 and December 31, 2018 were IDR230,123,456 million and IDR226,864,889 million respectively, with details as follows:

The increase in General Reserves by IDR14,407,046 million was associated with the allocation from Bank Indonesia's surplus year 2018 amounting to IDR13,122,466 million and the use of Statutory Reserves amounting to IDR1,284,580 million.

The increase in Statutory Reserves by IDR3,517,017 million was associated with the allocation from Bank Indonesia's surplus year 2018 which amounted to IDR4,801,597 million. Meanwhile, the use of Statutory Reserves for the period of January 1 to December 31, 2019 amounted to IDR1,284,580 million.

The use of the Statutory Reserves was as follows:1. Renewal/replacement of fixed assets amounting to IDR995,937 million.2. Organizational and Human Resource Development amounting to IDR288,643 million.

D.14. Income Tax

D.14.1. Income Tax Revenues (Expenses)

D.14.2. Reconciliation

Bank Indonesia reconciles its Surplus /Deficit before income tax and income tax Revenues (Expenses) in accordance with the prevailing tax regulations.



General ReservesStatutory ReservesCurrent Year Surplus (Deficit)Total Accumulated Surplus/Deficit

169,008,70527,764,27633,350,475

230,123,456

154,601,65924,247,25948,015,971

226,864,889

Jan 1 - Dec 31, 2019 IDR Million


Current TaxDeferred Tax :

Deferred Tax IncomeDeferred Tax Expenses

Total Deferred Tax Income (Expenses)

(11,907,228)

33,963 0

(11,873,265)

(16,693,449)

0 (112,563)

(16,806,012)






For the period ended December 31, 2019, Bank Indonesia registered a fiscal surplus of IDR47,628,911 million. The income tax on this fiscal surplus was IDR11,907,228 million as of December 31, 2019. Meanwhile, Bank Indonesia held a tax credit of IDR10,055,390 million, thereby the income tax payable was IDR1,851,838 million.

D.14.3. Tax Payables

Bank Indonesia's tax payables as at December 31, 2019 were as follows:

D.14.4. Prepaid Taxes

Bank Indonesia's prepaid taxes as at December 31, 2019, were as follow:



Surplus (Deficit) before income tax Positive Fiscal Correction Negative Fiscal Correction Fiscal Surplus (Deficit)

Total Tax Payable Total Tax Credit Corporate Income Tax Net Payable (Credit)

45,223,740 3,218,277 (813,106)

47,628,911

11,907,228 10,055,390 1,851,838

64,821,983 2,946,441 (994,629)

66,773,795

16,693,449 14,769,782 1,923,667



Article 17Article 21Article 22Article 23Article 25Article 26Article 4 (2)Value Added Tax (VAT)Total

11,907,22853,997

04,735

0519

29,50826,260

12,022,247

16,693,44988,239

03,790

1,288,246364

34,2937,792

18,116,173



Article 22Article 23Article 25VATTotal

36,9390

10,018,45124,952

10,080,342

26,0970

14,743,685143

14,769,925





D.15. Income from Monetary Policy Implementation

Income from Monetary Policy Implementation for the period of January 1 to December 31, 2019 and January 1 to December 31, 2018, were as follows:

The Net Result on Foreign Currency Transactions for the period of January 1 to December 31, 2019 was IDR21,409,718 million. This was derived from foreign exchange translations to Rupiah under foreign exchange management and monetary policy implementation. The increased income was associated with policy implementation by Bank Indonesia in maintaining the stability of Rupiah value. The Net Result of Foreign Currency Transactions was associated with the realization of Foreign Currency Revaluation Reserves - Translation of IDR9,289,152 million and from the realization of Foreign Currency Revaluation Reserves - Transactions of IDR12,120,566 million.

D.16. Income from the Payment System Services

Income from the Payment System Services for the period of January 1 to December 31, 2019 and January 1 to December 31, 2018 were as follows:

D.17. Income from Macroprudential Supervision

Income from Macroprudential Supervision for the period of January 1 to December 31, 2019 and January 1 to December 31, 2018 amounts to IDR7,162 million and IDR6,434 million respectively.



Interest IncomeIncome from Sharia-based TransactionsNet Result on Financial TransactionsNet Result on Foreign Currency TransactionsOthersTotal Income from Monetary Policy Implementation

48,753,9351,188,060

18,700,45121,409,718

104,33690,156,500

43,625,026619,422

10,434,01049,813,107

154,221104,645,786



Cash Payment SystemNon-Cash Payment System

Fees and Commissions from Payment System ServicesFees and Commissions from Accounts Management Services

Total Income from Payment System Services

10,256363,314362,556

758373,570

12,243376,295327,829

48,466388,538






D.18. Income from Loans and Financing

Income from Loans and Financing for the period of January 1 to December 31 2019 and January 1 to December 31, 2018, were as follows:

D.19. Other Income

Other Income for the period of January 1 to December 31, 2019 and January 1 to December 31, 2018, were IDR1,118,500 million and IDR638,538 million respectively.

D.20. Expenses from Monetary Policy Implementation

Expenses from Monetary Policy Implementation for the period of January 1 to December 31, 2019 and January 1 to December 31, 2018 were as follows:



Interest Income from Non-Tradable Government BondsInterest Income from Loans to Banks Prior to 1999OthersTotal Income from Loans and Financing

145,140 2,721

0 147,861

183,899 6,038

18 189,955



Interest Expenses:Bank Indonesia CertificatesBank Indonesia Certificates of DepositBank Indonesia Foreign Exchange NotesTerm Deposits Denominated in Rupiah and Foreign CurrencyDeposit FacilitiesLiabilities to Banks arising from Securities Sold under Repurchase

Agreement Foreign BorrowingsRemuneration on Bank Demand DepositsDiscount Amortization on Bank Indonesia Foreign Exchange Notes

Interest Expenses from Sharia-based Transaction:Bank Indonesia Sharia CertificatesBank Indonesia Sharia Deposit FacilitiesLiabilities to Banks arising from the Sale of Marketable Securities

with Repurchase Agreement under Sharia ComplianceSharia-compliant Term Deposits Denominated in Foreign CurrencyBank Indonesia Sukuk

OthersTotal Expenses from Monetary Policy Implementation

20,275,3215,833,171

221,8800

3,932,0362,612,9116,638,106

00

1,037,2172,425,953

793,074786,530

5,313

94,390746,646

1,078,83923,780,113

20,044,525725,514

7,849,9360

965,3974,201,5265,016,109

0417,727 868,316

1,680,273 616,115 680,172339,357

44,6290

1,280,10423,004,902





D.21. Expenses from Payment System Services

Expenses from Payment System Services for the period of January 1 to December 31, 2019 and January 1 to December 31, 2018 were as follows:

D.22. Expenses from Macroprudential Supervision

Expenses from Macroprudential Supervision for the period of January 1 to December 31, 2019 and January 1 to December 31, 2018 were IDR257,010 million and IDR165,297 million respectively.

D.23. Expenses from Remuneration on Government Demand Deposits

Expenses from Remuneration on Government Demand Deposits for the period of January 1 to December 31, 2019 and January 1 to December 31, 2018 were IDR7,060,217 milllion and IDR5,464,668 million respectively.

D.24. General and Administrative Expenses

General and Administrative Expenses for the period of January 1 to December 31, 2019 and January 1 to December 31, 2018 were as follows:

Human Resource, Organizational, and Logistic expenses include Post Employment Benefits (THT) which take form in Home Ownership Benefits (Tuperum) and Post Employment Benefit - Medical (TKHT) as well as participation in the Social Security Agency (BPJS) as mandated by Act Number 24 of 2011 on the Social Security Agency, namely Health Insurance, Work Accident Insurance, Life Insurance, and Retirement Insurance.



Cash Payment SystemsCurrency Planning, Procurement, and PrintingCurrency Distribution, Cash Services and Destruction of Counterfeit

CurrencyNon-Cash Payment SystemTotal Expenses from Payment System Services

4,503,3964,483,509

19,887

149,0444,652,440

3,326,1233,090,112

236,011

147,9473,474,070



Human Resource, Organization, and Logistic Expenses Other ExpensesTotal General and Administrative Expenses

10,783,23946,834

10,830,073

8,806,478131,853

8,938,331






Nature of RelationsRelated Party Nature of Transaction

Government

Bank Indonesia Employee Welfare FoundationBank Indonesia Pension Fund Bank Rakyat Indonesia (BRI) Financial Institution Pension FundKey managementEmployees

a. Depositorb. DebtorPost Employment Benefits Program Management (THT)Employer's pension fundFinancial Institution Pension FundBoard of GovernorsEmployees

a. Government Demand Deposit Managementb. Government Bonds (SUP) SettlementContribution to Post-Employment Benefits Program (THT)Contribution to pension fundContribution to pension program

Loan facilityLoan facility

E. RELATED PARTY TRANSACTIONS

Bank Indonesia conducts transactions with related parties associated with the Government, management of employee benefits, pension fund, and employees, with details as follows:

F. COMMITMENTS AND CONTINGENCIES

As of December 31, 2019, Bank Indonesia has commitments and contingencies which consisted of:

F.1. Commitments

Regional Economic and Financial Cooperation

1. Bank Indonesia has currency swap facilities within the framework of regional financial cooperation, including the ASEAN Swap Arrangement (ASA) with ASEAN member countries, the Chiang Mai Initiative Multilateralization (CMIM) with ASEAN member countries along with China, Korea, and Japan (ASEAN + 3).

2. Bank Indonesia has a bilateral currency swap facilities which consist of:a. Bilateral Swap Arrangement (BSA) with Bank of Japan as agent of Japan's Ministry of Finance within the

context of resolving short-term liquidity;b. Bilateral Currency Swap Arrangement (BCSA) with the People's Bank of China within the context of resolving

short-term liquidity as well as supporting bilateral trade and direct investment between the two countries; c. BCSA with the Bank of Korea and the Reserve Bank of Australia within the context of supporting bilateral

trade with both countries; andd. Local Currency Bilateral Swap Agreement (LCBSA) with the Monetary Authority of Singapore within the

context of maintaining monetary stability.

This cooperation complements the existing financial safety networks, both regionally and globally, as well as supports the policy on implementation of local currency settlement.

3. Bank Indonesia has unrealized commitment claims equivalent to the amount of currency swap facility related to the cooperation with ASA, CMIM, BSA, BCSA, and LCBSA. Moreover, Bank Indonesia also has a commitment





liabilities equivalent to the currency swap facility that has not been drawn by partners related to the cooperation with ASA, CMIM, BCSA, and LCBSA.

4. In addition to currency swap facility, Bank Indonesa also has a bilateral repo cooperation with Monetary Authority of Singapore.

F.2. Contingencies

1. Reporting of Foreign Exchange Activities of Bank and Corporation (DHE, LLD and KPPK of Foreign Borrowings)

In a bid to support the formulation and implementation of Bank Indonesia policies, whether monetary, financial system stability, or cash and non cash payment system, Bank Indonesia conducts a monitoring on Foreign Exchange Activities (LLD).

For that reason, Bank Indonesia has established a regulation concerning the obligation of the banks and corporations to report their LLD, Foreign Exchange from Export Proceeds (DHE) and Implementation of Prudential Principles (KPPK) of Corporation Foreign Borrowings. In order to enforce banks and corporations' compliance with the regulation, Bank Indonesia has the authority to impose administrative sanction in the form of monetary penalty and sanction in the form of a recommendation to the custom authority to suspense a corporation's export activities. Bank Indonesia shall issue notification letter of penalty to banks, corporations and/or exporters that violate the stipulation on LLD, DHE and KPPK reportings.

During the period between January 2015 to 2019, Bank Indonesia has issued 7,265 notice of penalty on DHE reporting, 1,334 notice of penalty on LLD reporting and 6,390 notice of penalty on KPPK reporting. Bank Indonesia continuously monitor follow ups on those notices.

Notice of penalty on DHE cites initial information to the exporters and a penalty sanction to be imposed should they fail to meet the DHE reporting deadline. The issuance of the notice may result in a penalty waiver, a penalty payment by the exporters, or an export activity suspension, subject to the reporting of corporations' compliance with the provisions stipulated in the regulation.

Following the implementation of Integrated Foreign Exchange Monitoring System (SiMoDIS) on January 1, 2020, as stipulated in PBI No. 21/14/PBI/2019 dated November 28, 2019 concerning Export Proceeds and Import Payments, Bank Indonesia's enforcement on DHE reporting is carried out by imposing the sanction in a form of a suspension of export activities, without the imposition of administrative sanction in the form of a monetary penalty. The change is made based on the evaluation result of previous sanctions, concluded that suspension of export activities has proven to be the most effective sanction in this regard.

The receipt of penalty sanctions payment from the corporations violating the regulation for the period of 2015-2019 is recorded as an income in Bank Indonesia's Statement of Surplus Deficit.

2. Legal Disputes

a. Overseas Legal Disputes In 2019, Bank Indonesia was faced with 2 (two) overseas civil cases pertaining to bankruptcy settlement of Indover Bank Amsterdam.






The first case involved a lawsuit filed by Bank Indonesia in its capacity as the note issuance holder against Indover Bank's Trustees. This lawsuit started when Bank Indonesia, as a creditor, submitted a statement of claim over Bank Indonesia's term deposits and demand deposits in Indover Bank to the Amsterdam District Court. In response to Bank Indonesia's claims, the Trustees submitted a statement of counterclaim in April 2010 to the Amsterdam District Court, citing that as the sole shareholder of Indover Bank, Bank Indonesia is obliged to absorbing Indover Bank's deficit and offsetting its assets in Indover Bank. In this regard, Bank Indonesia firmly considers that in accordance with corporate law, Bank Indonesia's responsibility as a sole shareholder of Indover Bank is limited only to Bank Indonesia's investment in Indover Bank.

On August 27, 2014, the Amsterdam District Court has ruled in favour of Bank Indonesia and dismissed the statement of counterclaim submitted by Indover Bank's Trustees. Against this decision, the Trustees submitted a statement of appeal on November 26, 2014 and a Memorandum of Appeal on June 23, 2015.

Responding to the Trustees' Memorandum of Appeal, Bank Indonesia submitted a Statement of Defence and Cross Appeal on March 22, 2016. In response to Bank Indonesia's Cross Appeal, the Trustees submitted a Statement of Reply on July 5, 2016. Bank Indonesia has also submitted pleading notes during the Oral Hearing held on January 24, 2017.

On November 14, 2017, the Amsterdam High Court delivered its decisions on the appeal, reinforcing the verdict of the Amsterdam District Court, which in essence, reinforcing Bank Indonesia's legal position. The decisions on the appeal are as follows:1) Recognizing Bank Indonesia position as a creditor in the context of Indover Bank bankruptcy and

validating Bank Indonesia's claim of EUR43,542,510.95 to Indover Bank;2) Dismissing the entire claims from Indover Bank's Trustees;3) Granting Bank Indonesia with the right of immunity over its assets.

On February 14, 2018, Indover Bank's Trustees challenged the Amsterdam High Court's decisions by submitting a cassation claim for the case that was referred to by Trustees. Following the trial and examination by the Supreme Court of the Netherlands, on June 28, 2019 the Supreme Court of the Netherlands delivered its decision, which in essence, dismissing the cassation claim submitted by the Trustees to the Amsterdam High Court and ordering the Trustees to pay for the cassation processing fee to Bank Indonesia.

Pursuant to the Supreme Court's decision, the decisions of Amsterdam High Court on Bank Indonesia's lawsuit against Indover Bank's Trustees, citing:- that legally, Bank Indonesia was never proven to have offered a guarantee to Indover Bank for settling

Indover Bank's liabilities in its entirety; - that the application of Indonesian laws and/or Dutch laws in the examination of Bank Indonesia's claim

against Indover Bank's Trustees shall not affect the Decision of Bank Indonesia's claim against Indover Bank's Trustees;

have been reinforced by the Supreme Court of the Netherlands. Therefore, by legal procedures prevailing in the Netherlands, the case between Bank Indonesia against Indover Bank's Trustees has entered into force (inkracht van gewijsde).

Following this decision, Bank Indonesia in coordination with its Attorney-at-law in the Netherlands has ordered the Trustees to pay Bank Indonesia's claim at ex-Indover Bank amounting to EUR 43,542,510.95. In its development, the claim had yet to be exercised due to the attachment order in respect of Bank





Indonesia's claim against Indover Bank's Trustees requested by Credit European Bank (CEB) related to CEB claim against Bank Indonesia which was filed at Amsterdam District Court in 2019, the second civil case faced by Bank Indonesia within the period of 2009 and end of 2019.

The second case involved a lawsuit filed by CEB against Bank Indonesia. The last trial was held on December 23, 2009. As both parties (CEB and Bank Indonesia) had to wait for the verdict on the case of the Trustees against Bank Indonesia, since December 23, 2009 this case were inactive and categorized within the sleeping docket until a decision which have entered into force was made on June 28, 2019.

On August 2019, White & Case Law Firm, Bank Indonesia's Attorney-at-law, advised Bank Indonesia that Indover Bank's Trustees had withheld the claim payment to Bank Indonesia requested by CEB related to its lawsuit against Bank Indonesia which was filed at Amsterdam District Court in 2009 for the amount of EUR5,000,625.00, plus the interest.

In a bid to expedite the claim payment to Bank Indonesia, a coordination was made by Bank Indonesia and its Attorney-at-law on: i. requesting the Amsterdam District Court to reopen the trial on CEB against Bank Indonesia case and at

the same time requesting the cancellation of its attachment order in respect of Bank Indonesia's claim against Indover Bank;

ii. establishing a talk with CEB pertaining to the significance of the Amsterdam High Court's Decision made on June 28, 2019 that the attachment to Bank Indonesia's claim against Indover Bank has no longer legal implication, therefore it should not prevent the Trustees from paying Bank Indonesia's claim.

On December 21, 2019, Bank Indonesia's Attorney-at-law requested CEB to cancel its attachment in respect of Bank Indonesia's claim against Indover Bank filed in 2009. This request is made in pursuant of legal procedures in the Netherlands, citing that an attachment faced by the defendant may be cancelled upon a request made to the claimant.

Furthermore, on January 21, 2020, Bank Indonesia's Attorney-at-law advised Bank Indonesia that:i. On January 14, 2020, the CEB's Councel informed the Trustees (copied to Bank Indonesia's Attorney-at-

laws) that conservatory attachment in respect of Bank Indonesia's claim against Indover Bank's Trustees had been cancelled. In the correspondence between the Trustees and CEB's Councel, the Trustees particularly drew attention to the 2 (two) attachments by a third party submitted by CEB on April 8 and 17, 2009;

ii. CEB's Councel has underlined that no legal action shall be made on the remaining case filed by CEB against Bank Indonesia including the attachment in respect of Bank Indonesia's assets with DNB, ABN AMRO Bank NV and ING NV, given that the attachments had been cancelled.

As a follow up to the statement made by CEB's Councel citing that conservatory attachment in respect of Bank Indonesia's claim against Indover Bank's Trustees as well as Bank Indonesia's assets with DNB, ABN AMRO Bank NV and ING NV had been cancelled, Indover Bank's Trustees eventually paid out Bank Indonesia's claim amounting to EUR35,269,433.87. This amount equals to 81% of BI's total claim (EUR43,542,510.95), matching the percentage received by other Indover's creditors.

Henceforth, the 2 (two) civil lawsuits faced by Bank Indonesia in 2019, namely Bank Indonesia's claim against Indover Bank's Trustees and a lawsuit filed by CEB against Bank Indonesia are deemed resolved.






FSD PrincipalIDR Million

FSD InterestIDR Million

PT Bank Danamon Tbk.PT Bank PDFCI Tbk.PT Bank Tiara Asia Tbk.Total

16,691,8251,995,0001,442,916

20,129,741

4,379,861534,959407,428

5,322,248

b. Domestic Legal DisputesIn addition to the overseas legal disputes, Bank Indonesia was also faced with 85 (eighty five) domestic legal disputes during 2019, comprising civil cases at various levels of justice process (first, appeal, and cassation levels).The court have delivered the decisions for 23 (twenty three) cases out of the entire cases above and all of which has entered into force (inkracht van gewijsde).

3. Settlement on Ex-BPPN Assets

Bank Indonesia administers 90 certificates of lands and buildings as additional collaterals received from 14 frozen operation banks and suspended business activity banks (BBO/BBKU), meanwhile their physical assets are managed by the Ministry of Finance (previously under BPPN). Of those collaterals, 27 assets have been settled in 2016 and 2017, while the remaining 63 collateral assets from BBO/BBKU which have been transferred by BPPN to the government are still in the process of settlement. The settlement for the remaining collaterals is currently in the discussion between Bank Indonesia and the Ministry of Finance.

Upon the completion of the settlement, Bank Indonesia shall record the proceeds from the collateral settlements at the value as agreed by the Ministry of Finance and Bank Indonesia.

G. OTHER INFORMATION

Overdraft Facility (FSD) Interest Claims

In 1998/1999, Bank Indonesia disbursed BI Liquidity Assistance (BLBI) to the banks that encountered liquidity problems during the Indonesian monetary crisis in 1998 amounting to IDR144,536,094 million.

Following a Joint Agreement between the Governor of Bank Indonesia and the Minister of Finance dated February 6, 1999, the BLBI position as at January 29, 1999 was handed over from Bank Indonesia to the Government c.q. Indonesian Bank Restructuring Agency (BPPN) amounting to IDR144,536,094 million. This hand over was based on the Deed of Surrender and Transfer of Title (Cessie Deed) dated February 22, 1999, and for its part, the Government issued Government Bond SU-001/MK/1998 amounting to IDR80,000,000 million and SU-003/MK/1999 amounting to IDR64,536,094 million.

Included in the total of IDR144,536,094 million BLBI that was handed over to the Government c.q. BPPN was IDR54,460,896 million of FSD. This FSD included the FSD of ex-Bank Take Over (BTO) of PT Bank Danamon Indonesia (PT BDI), comprising PT Bank Danamon Tbk., PT Bank PDFCI Tbk., and PT Bank Tiara Asia Tbk., with the total amount of IDR20,129,741 million. Included in this IDR20,129,741 million of FSD was FSD's accrued interest amounting to IDR5,322,248 million, with details as follows:





Based on the Joint Agreement between the Governor of Bank Indonesia and the Minister of Finance dated February 6, 1999, the interest claims of IDR5,322,248 million were not transferred to the Government. However, the Minister of Finance through Letter Number SR-176/MK.01/1999 dated May 31, 1999 concerning General Letter of Authorization in regards to Government Guarantee Payment to Bank Liabilities stated that the FSD Interest was included in the interim amount of bank's liabilities that were entitled to be financed by the Government guarantees, subject to further discussion on the payment.

Bank Indonesia's endeavours to resolve the FSD interest claims arising from the ex. BTO PT BDI are as follows:

1. Submitting Letter of Claims to the ex. BTO PT BDI respectively through Letter Number 1/124/UK, Number 1/122/UK and Number 1/123/UK dated July 6, 1999 on FSD Interest Claims. Ex. BTO PT BDI responded respectively through Letter Number B.0741-DIR dated July 12, 1999 on FSD Interest Liabilities, Number BI-015/FA25/0799 dated July 13, 1999 on FSD/BLBI Claims amounting to IDR527,519 million and Number 238/BTA-CS/VII/99 dated July 12, 1999 on FSD Interest Liabilities, stating that the FSD Interest was incorporated into the amount of recapitalization exercised by BPPN and requested Bank Indonesia not to debit the Demand Deposit of ex. BTO PT BDI in Bank Indonesia for payment of the FSD Interest as well as requested Bank Indonesia to confirm with BPPN.

2. Submitting letters to BPPN pertaining to the resolution of FSD claims ex. BTO PT BDI, with the last being Letter Number 6/63/BKr dated March 10, 2004 on FSD Interest Liabilities of PT Bank Danamon Indonesia.

3. Submitting the issue of FSD Interest Claim in the discussion agenda between the Government and Bank Indonesia through the Coordinating Team that was established by the Joint Decision of the Minister of Finance with the Governor of Bank Indonesia Number 7/23/KEP.GBI/2005 dated April 29, 2005 concerning the Establishment of Coordinating Team on the Settlement of Financial Issues between Bank Indonesia and Ministry of Finance. However, no resolution was achieved until the Joint Decision expired on December 31, 2005.

4. Requesting PT BDI to provide data/documents pertaining to the recapitalization of ex. BTO by BPPN, through Letter Number 12/166/DKBU dated February 23, 2010 and Number 12/248/DKBU dated April 5, 2010 respectively concerning Bank Indonesia's FSD Interest Claims to PT Bank Danamon Indonesia Tbk., PT Bank Tiara Asia Tbk., and PT Bank PDFCI Tbk.

5. Submitting letters to the Minister of Finance pertaining to the Settlement of FSD Interest Claims for ex. BTO PT BDI, with the most recent being Letter Number 20/19/DpG-DOTP/Srt/B dated December 21, 2018 concerning Bank Indonesia's FSD Interest Claims to Bank Danamon amounting to IDR5.32 trillion.

Bank Indonesia continues its endeavours to pursue the FSD Interest Claims from ex. BTO, including collection efforts, given that these claims constitute assets that require a comprehensive resolution.




AboutBank Indonesia


POLICY SUMMARY AND FLASHBACK OF BANK INDONESIA’S JOURNEY

Dody Budi Waluyo Deputy Governor

“The management of a credible national policy mix becomes the key to achieve a good and resilient Indonesian economy amid the global uncertainty and slowdown phenomena”





Bank Indonesia Headquarter




AboutBank Indonesia


n 2019, Bank Indonesia issued several policies and provisions which supported

its task and authority implementation. The series of policies and provisions

presented in this chapter include: monetary policy easing by cutting the policy

rate and minimum reserve requirements, Rupiah stabilization policy through triple

intervention strategy, two-sided monetary operation strategy to maintain sufficient

liquidity and support policy mix transmission, accommodative macroprudential

policy through the improvement of Macroprudential Intermediation Ratio and

the easing of Loan to Value/Financing to Value (LTV/FTV) ratio, and payment

system policy strengthening to drive economic growth by issuing the Indonesian

payment system blueprint 2025 and maintaining the availability of fit money across

Indonesia equally. This chapter also presents the series of Bank Indonesia’s journey

in the international and national scope in 2019.

POLICY SuMMARY AND FLASHBACK OF BANK INDONESIA’S JOuRNEY




SuMMARY OF BANK INDONESIA’S POLICIES

In 2019, Bank Indonesia issued several policies and provisions which supported its task and authority implementation. The series of policies and provisions were:

JANuARY

FEBRuARY

1. Bank Indonesia decided to keep the BI 7-day Reverse Repo Rate (BI7DRR) at 6.00%, Deposit Facility rate at 5.25%, and Lending Facility rate at 6.75%. The decision was consistent with the effort to reduce current account deficit to a safe level and maintain the attractiveness of domestic financial assets.

2. Bank Indonesia decided the policy focus as follows:a. Optimizing policy mix and

strengthening coordination with the Government and related authorities to maintain economic stability and strengthen external resilience, including controlling current account deficit in 2019 to around 2.5% of GDP.

b. Watching the risks of global financial market uncertainties by keep making exchange rate stabilization moves according to the fundamentals by keep

1. Bank Indonesia kept the BI7DRR at 6.00%, Deposit Facility rate at 5.25%, and Lending Facility rate at 6.75%. The decision was consistent with the effort to strengthen external stability, especially to control current account deficit in a safe level and maintain the atrractiveness of domestic financial assets.

encouraging market mechanism, and supporting financial market deepening steps.

c. Maintaining price stability and strengthening policy coordination with the Government, to ensure inflation remained low and stable.

d. Strengthening coordination with related authorities to take part in maintaining financial system stability, including monitoring the sufficiency and distribution of liquidity in banking.

e. Ensuring a smooth and available national payment system, both operated by Bank Indonesia or industry.

3. Bank Indonesia issued Bank Indonesia Regulation (PBI) No.21/1/PBI/2019 on Bank External Debt and Other Bank Liabilities in Foreign Exchange.

4. Bank Indonesia issued PBI No.21/2/PBI/2019 on Reporting of Foreign Exchange Traffic Activities.

2. Bank Indonesia decided the policy focus as follows:a. Monetary operations strategy

to increase available liquidity in encouraging bank financing.

b. Accomodative macroprudential policy to promote economic financing and maintain financial system stability in coordination with related authorities.

5. Bank Indonesia issued PBI No.21/3/PBI/2019 on Export Proceed Revenues from Natural Resources Business, Management, and/or Processing Activities.

6. Bank Indonesia issued PBI No.21/4/PBI/2019 on the Amount and Nominal Value of Destroyed Rupiah Currency in 2017 and 2018.

7. Bank Indonesia issued Members of the Board of Governors’ Regulation (PADG) No.21/1/PADG/2019 on the Amendment of PADG No.19/6/PADG/2017 on Short-Term Liquidity Loans for Conventional Commercial Banks.

8. Bank Indonesia issued PADG No.21/2/PADG/2019 on the Amendment of PADG No.19/8/PADG/2017 on Sharia Short-Term Liquidity Financing for Sharia Commercial Banks.

c. Coordination with the Government and related authorities was strengthened to maintain economic stability to guard economic growth momentum in the future and strengthen external sector resilience, including controlling current account deficit to around 2.5% of GDP in 2019.




AboutBank Indonesia


d. Consistent maintaining price stability and strengthening policy coordination with the Government, in the central and regional levels, to control a low and stable inflation within the target range of 3.5% ± 1%.

e Strengthening payment system policy in expanding economic

financing by keep supporting consumer protection and maintaining macroeconomic stability.

3. Bank Indonesia issued PADG No.21/3/PADG/2019 on Bank External Debt and Other Bank Liabilities in Foreign Exchange.

1. Bank Indonesia kept the BI7DRR at 6.00%, Deposit Facility rate at 5.25%, and Lending Facility rate at 6.75%. The decision was consistent with the effort to strengthen economic external stability, especially to control current account deficit in a safe level and maintain the attractiveness of domestic financial assets.

2. Bank Indonesia also decided the policy focus as follows:a. Continue pursuing monetary

operations strategy to increase available liquidity through regular and scheduled term repo transactions, in addition to FX swap.

b. Strengthening accommodative macroprudential policy by increasing the limit range of Macroprudential Intermediation Ratio (RIM) from 80–92% to 84–94% to support bank financing for businesses.

c. Accelerating financial market deepening policy by strengthening market conduct through the fulfillment of treasury certificates requirement for market players, and promoting the use of hedging instruments to the change of domestic interest rates through the issuance of implementation provision on Rupiah rate derivative instrument Interest Rate Swap (IRS) – Overnight Index Swap (OIS).

d. Strengthening payment system policy to support economic and financial inclusion activities, by expanding electronification program for the channeling of social aids, transportation, and regional governments’ finances; and preparing QR Code Payment standardization with the MPM (Merchant Presented Mode) model into the QRIS to expand interconnection in supporting digital finance economy.

e. Coordination with the Government and related authorities to maintain economic stability, especially in controlling inflation and current account deficit, as well as maintaining economic growth momentum in the future, especially in driving domestic demand and maintaining external stability by promoting export, tourism and foreign capital flow.

3. Bank Indonesia issued PADG No.21/5/PADG/2019 on the third amendment of PADG No.20/11/PADG/2018 dated 31 May 2018 on Macroprudential Intermediation Ratio and Macroprudential Liquidity Buffer for Conventional Commercial Banks, Sharia Commercial Banks, and Sharia Business Unit.

4. Bank Indonesia issued PADG No.21/4/PADG/2019 on Reporting of Foreign Exchange Activities in form of External Debt and Risk Participation Transactions.

FEBRuARY

MARCH




APRIL

MAY

1. Bank Indonesia kept the BI7DRR at 6.00%, Deposit Facility rate at 5.25%, and Lending Facility rate at 6.75%. The decision was in line with the move to strengthen external stability of Indonesian economy.

2. Bank Indonesia set accommodative policy mix to encourage domestic demand by:a. Increasing available liquidity

and supporting financial market deepening through monetary operations strategy strengthening.

b. Promoting retail payment efficiency through the expansion of Bank Indonesia’s National Clearing System (SKNBI).

c. Encouraging the supply side of Domestic Non Deliverable

1. Bank Indonesia on 15-16 May 2019 decided to keep the BI7DRR at 6.00%, Deposit Facility rate at 5.25%, and Lending Facility rate at 6.75%. The decision was in line with the move to guard external stability of Indonesian economy amid increasing uncertainties in the global financial market.

2. Bank Indonesia decided the policy focus as follows:a. Ensuring the availability of

bank liquidity;

Forward (DNDF) transactions through the simplication of underlying transaction requirement provisions.

d. Promoting the implementation of market operator for transactions in the money market and forex market.

e. Developing the commercial papers market as an alternative source of short-term financing by corporates.

f. Encouraging the expansion of electronification for non-cash social aids, village funds, transportation modes, and government finance operations.

g. Strengthening coordination with the Government and related authorities in maintaining economic stability and guarding economic growth momentum in the future.

b. Pursuing accommodative macroprudential policy such as by setting the Countercyclical Capital Buffer (CCB) ratio at 0 %, the Macroprudential Liquidity Buffer (PLM) ratio at 4% with repo flexibility of 4%, and the range of Macroprudential Intermediation Ratio (RIM) at 84–94%;

c. Strengthening payment system policy and financial market deepening to support economic growth; and

3. Bank Indonesia issued PBI No.21/5/PBI/2019 on Market Operator for Transactions in the Money Market and Forex Market.

4. Bank Indonesia issued PBI No.21/6/PBI/2019 on the Third Amendment of Bank Indonesia Regulation No.20/5/PBI/2018 on Monetary Operation.

5. Bank Indonesia issued PADG No.21/6/PADG/2019 on the Third Amendment of PADG No.20/6/PADG/2018 on Open Market Operations Implementation.

6. Bank Indonesia issued PADG No.21/7/PADG/2019 on Reporting of Foreign Exchange Traffic Activities of Non-Bank Institutions.

d. Tightening coordination with the Government and related authorities to maintain economic stability.

3. Bank Indonesia issued PBI No.21/7/PBI/2019 on the Amendment of PBI No.20/10/PBI/2018 on Domestic Non-Deliverable Forward Transaction.

4. Bank Indonesia issued PBI No.21/8/PBI/2019 on the Third Amendment of PBI No. 17/9/PBI/2015 on Fund Transfer Operations and Scheduled Clearing by Bank Indonesia.




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JuNE

1. Bank Indonesia kept the BI7DRR at 6.00%, Deposit Facility rate at 5.25%, and Lending Facility rate at 6.75%.

2. Bank Indonesia decided to cut the Rupiah Minimum Reserve Requirements for Conventional Commercial Banks and Sharia Commercial Banks/Sharia Business Units by 50 bps, respectively to 6.0% and 4.5% with Averaging minimum reserve requirements remaining at 3%.

3. Bank Indonesia decided the policy focus as follows:

a. Ensuring available liquidity in the money market through monetary operation strategy;

b. Pursuing accommodative macroprudential policy to encourage bank lending and expand financing for the economy;

c. Strengthening payment system policy and financial market deepening to support economic growth;

d. Increasing the MSME quality improvement program and expanding MSME export access; and

e. Tightening coordination with the Government and related authorities to maintain economic stability.

4. Bank Indonesia issued PADG No.21/14/PADG/2019 on the Second Amendment of PADG No.20/10/PADG/2018 on Minimum Reserve Requirements in Rupiah and Foreign Exchange for Conventional Commercial Banks, Sharia Commercial Banks, and Sharia Business Units.

5. Bank Indonesia issued PADG No.21/8/PADG/2019 on the Third Amendment of PADG No. 20/5/PADG/2018 on Open Market Operation Instruments.

6. Bank Indonesia issued PADG No.21/9/PADG/2019 on the Second Amendment of PADG No. 20/9/PADG/2018 on Standing Facilities.

7. Bank Indonesia issued PADG N o . 2 1 / 1 0 / PA D G / 2 0 1 9 o n

1. Bank Indonesia cut the BI7DRR by 25 bps to 5.75%, Deposit Facility rate by 25 bps to 5.00%, and Lending Facility rate by 25 bps to 6.50%. The policy was taken in line with low inflation estimate

Customer Service Standard in the Implementation of Fund Transfer and Scheduled Clearing through the Bank Indonesia National Clearing System.

8. Bank Indonesia issued PADG No.21/11/PADG/2019 on the Nominal Transaction Value Limit through Bank Indonesia System-Real Time Gross Settlement and Bank Indonesia National Clearing System.

and the need to boost economic growth momentum, amid reduced uncertainties in the global financial market and controlled external stability.

2. Bank Indonesia performed the policy focus as follows:

9. Bank Indonesia issued PADG No.21/12/PADG/2019 on Fund Transfer Operations and Scheduled Clearing by Bank Indonesia.

10. Bank Indonesia issued PADG No.21/13/PADG/2019 on Rupiah Rate Derivative Transactions in form of Interest Rate Swap Transactions.

a. Monetary operation strategy was directed to ensure available liquidity in the money market and strengthen accommodative monetary policy transmission.

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b. Making accommodative macroprudential policy to boost lending in line with the credit cycle which was below the optimal level;

c. Increasing the role of payment system in supporting economic growth, while having positive contribution to the acceleration of Indonesian digital finance economy transformation, promoting electronification expansion program and encouraging MSME transformation toward payment, finance and digital trade platform applications;

d. Accelerating financial market deepening, both in the money or forex market; and

1. Bank Indonesia decided to cut the BI7DRR by 25 bps to 5.50%, Deposit Facility rate by 25 bps to 4.75%, and Lending Facility rate by 25 bps to 6.25%. The policy was consistent with the low inflation forecast which fell below the median target range, still attractive investment return of domestic financial assets which supported external stability, and as pre-emptive measure to drive economic growth momentum in the future against the impact of global economic slowdown.

2. Bank Indonesia decided the policy focus as follows:a. Monetary operation strategy

was aimed at ensuring sufficient liquidity and

e. Strengthening coordination with the Government and related authorities to maintain economic stability, promote domestic demand, as well as increasing export, tourism, and foreign capital inflow, including Foreign Direct Investment (FDI).

3. Bank Indonesia issued PADG No.21/15/PADG/2019 on Export Proceed Revenue from Natural Resources Business, Management, and/or Processing Activities

4. Bank Indonesia issued PADG No.21/16/PADG/2019 on the Monitoring of Foreign Exchange Traffic Activities of Banks and Customers.

5. Bank Indonesia issued PADG No.21/17/PADG/2019 on Money

increasing monemy market efficiency to strengthen accommodative monetary policy transmissions;

b. Accommodative macroprudential policy to boost bank lending and expand financing for the economy, including environmental-friendly financing.

c. Payment system policy and financial market deepening policy were strengthened to support economic growth, including by actively supporting digital finance and economy transformation.

d. Coordination between Bank Indonesia and the Government and related authorities is strengthened to maintain

Market and Forex Market Brokerage Firms.

6. Bank Indonesia held forex reserves management transformation by expanding class and asset type portfolio but maintaining risk and governance aspects.

7. Bank Indonesia completed the Rupiah Management (PUR) Framework 2019-2025 with the vision to prepare fit money, in appropriate denominations, just in time and central bank driven, in line with the non-cash policy and monitoring efficiency and the national interest.

economic stability, promote domestic demand, as well as increasing export, tourism, and foreign capital flow, including FDI.

3. Bank Indonesia issued PBI No.21/9/PBI/2019 on Integrated Commercial Banks Report.

4. Bank Indonesia issued PBI No.21/10/PBI/2019 on Rupiah Currency Management.

5. Bank Indonesia issued PADG No.21/18/PADG/2019 on the Implementation of National Standard Quick Response Code for Payment.




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SEPTEMBER

OCTOBER

1. Bank Indonesia cut the BI7DRR by 25 bps to 5.25%, Deposit Facility rate by 25 bps to 4.50%, and Lending Facility rate by 25 bps to 6.00%. The policy was consistent with the low inflation forecast below the median target range and still attractive investment return of domestic financial assets, and as a pre-emptive move to drive domestic economic growth momentum amid slowing global economic conditions.

2. Bank Indonesia decided the policy focus as follows:a. Macroprudential policy

relaxation by improving the provision on Macroprudential Intermediation Ratio (RIM)/

1. Bank Indonesia decided to cut the BI7DRR by 25 bps to 5.00%, Deposit Facility rate by 25 bps to 4.25%, and Lending Facility rate by 25 bps to 5.75%. The policy was consistent with controlled inflation expectation and still attractive yield of domestic financial investment, and as a pre-emptive move to drive domestic economic growth momentum amid slowing global economic conditions.

2. Bank Indonesia decided the policy focus as follows:a. Monetary operation strategy

Sharia RIM and easing the Loan to Value/Financing to Value (LTV/FTV) ratio;

b. Strengthening payment system policy;

c. Accelerating financial market deepening both in the money or forex markets through the issuance of CCP operation provision for interest rate derivative transactions and Over The Counter exchange rate and market operator for transactions in the money market and forex market.

d. Strengthening monetary operation strategy by standardizing opem market monetary operation (OPT)

to maintain sufficient liquidity and support accommodative policy mix transmission;

b. Macroprudential policy remaining accommodative to drive bank lending and expand financing for the economy;

c. Strengthening payment system policy to support economic growth, including digital finance and economy development;

d. Strengthening financial market deepening policy to support the effectiveness of exchange rate policy and strengthen domestic financing to support economic growth; and

instruments through the implementation of government bonds reverse repo for all tenors from 7 days to 12 months; and holding the auction of 12-month the government bonds reverse repo to replace the 12-month SBI.

3. Bank Indonesia issued the CCP establishment as regulated by Bank Indonesia Regulation No 21/11/PBI/2019 on the Central Counterparty (CCP) Operation for Interest Rate Derivative Transactions and Over the Counter Exchange Rate.

e. Coordination with the Government and related authorities is strengthened to maintain economic stability, promote domestic demand, and increase export, tourism, foreign capital inflow, including FDI.

3. Bank Indonesia issued PADG No.21/19/PADG/2019 on Electronic Trading Platform Provider.

4. Bank Indonesia issued PADG No.21/20/PADG/2019 on Systematic Internalisers.




NOVEMBER

1. Bank Indonesia decided to keep the BI7DRR at 5.00%, Deposit Facility rate at 4.25%, and Lending Facility rate at 5.75%.

2. Bank Indonesia cut the Rupiah minimum reserve requirements for Conventional Commercial Banks (BUK) and Sharia Commercial Banks/Sharia Business Units (BUS/UUS) by 50 bps, respectively, to 5.5% and 4.0%.

3. Bank Indonesia decided to hold the Averaging minimum reserve requirements for BUK at 3.0%.

4. Bank Indonesia held the CCB at 0% and PLM ratio at 4%.

5. Bank Indonesia decided the policy focus as follows:a. Setting accommodative

monetary policy in consistency with controlled inflation expectations within the target range, manageable external stability, and effort to guard domestic economic growth amid the global economic slowdown;

b. Strengthening monetary operation strategy to maintain sufficient liquidity and support accommodative policy transmission.

c. Setting accommodative macroprudential policy to boost bank lending and expand financing for the economy, by still maintaining financial system stability.

d. Continue strengthening payment system policy and financial market deepening policy to support economic growth.

e. Strengthening coordination between Bank Indonesia and the Government and relevant authorities to maintain economic stability, promote domestic demand, and increasing export, tourism, and foreign capital inflow, including FDI.

6. Bank Indonesia issued PBI No.21/12/PBI/2019 on the amendment of PBI No.20/4/PBI/2018 on the Macroprudential Intermediation Ratio and Macroprudential Liquidity Buffer for Conventional Commercial Banks, Sharia Commercial Banks, and Sharia Business Units.

7. Bank Indonesia issued PBI No.21/13/PBI/2019 on the Amendment of PBI No.20/8/PBI/2018 on the Loan to Value Ratio for Property Loan, Financing to Value Ratio for Property Financing, and Down Payment for Automotive Loan or Financing.

8. Bank Indonesia issued PBI No. 21/14/PBI/2019 on Export Proceeds and Import Payments.

9. Bank Indonesia issued PADG No.21/21/PADG/2019 on the Amendment of Members of the Board of Governors Regulation No 19/5/PADG/2019 on Treasury Certification Implementation and Market Conduct Application.

10. Bank Indonesia issued PADG No.21/22/PADG/2019 on the Macroprudential Intermediation Ratio and Macroprudential Liquidity Buffer for Conventional Commercial Banks, Sharia Commercial Banks, and Sharia Business Units.

11. Bank Indonesia issued the 2025 Indonesian Payment System Blueprint which is a form of Bank Indonesia’s support for the national digital economy-finance integration, which can also guarantee the central bank’s function in money circulation process, monetary policy, and financial system stability.




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DECEMBER

1. Bank Indonesia kept the BI7DRR at 5.00%, Deposit Facility rate at 4.25%, and Lending Facility rate at 5.75%.

2. Bank Indonesia decided the policy focus as follows:a. Monetary policy remaining

accommodative and consistent with controlled inflation expectation with the target range, manageable external stability, and the effort to guard domestic economic growth momentum amid the global economic slowdown;

b. Monetary operation strategy was strengthened to maintain sufficient liquidity and support accommodative policy transmission;

c. A c c o m m o d a t i v e macroprudential policy to drive economic growth in line with the less-optimal financial cycle by still prioritizing prudential principle;

d. Payment system policy and financial market deepening policy were strengthened to support economic growth; and

e. Coordination between Bank Indonesia and the Government and related authorities was strengthened to maintain economic stability, promote domestic demand, and increasing export, tourism, and foreign capital inflow, including Foreign Direct Investment (FDI).

3. Bank Indonesia issued PBI.4. Bank Indonesia issued PBI No.21/16/

PBI/2019 on the Competence Standardization on Payment System and Rupiah Currency Management.

5. Bank Indonesia issued PADG No. 21/23/PADG/2019 on Integrated Commercial Banks Report.

6. Bank Indonesia issued PADG No. 21/24/PADG/2019 on the Fourth Amendment of Members of the Board of Governors Regulation No 20/6/PADG/2018 on Open Market Operations Implementation.

7. Bank Indonesia issued PADG No.21/25/PADG/2019 on the Loan to Value Ratio for Property Loan, the Financing to Value Ratio for Property Financing, and Down Payment for Automotive Loan or Financing.

8. Bank Indonesia PADG No.21/26/PADG/2019 on Export Proceeds and Import Financing.

9. Bank Indonesia issued PADG No.21/27/PADG/2019 on the Third Amendment of Members of the Board of Governors Regulation No 20/10/PADG/2019 on Minimum Reserve Requirements in Rupiah and Foreign Exchange for Conventional Commercial Banks, Sharia Commercial Banks, and Sharia Business Units.

10. Bank Indonesia issued PADG No.21/28/PADG/2019 on the Monitoring of Foreign Exchange Traffic Activities of Banks and Customers.




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FLASHBACK OF BANK INDONESIA’S JOuRNEY

4. Bank Indonesia Pushed Synergy with Stakeholders in China Bank Indonesia Governor held a face-to-face meeting with Indonesian business players in China. The event was held in the

Indonesian Embassy Beijing, China. The event was jointly organized with the Embassy and attended by Indonesian Ambassador for China, H.E. Djauhari Oratmangun, and representatives from SOEs. As Indonesia’s largest trading partners, China’s economy will give large impact to Indonesia. Therefore, Indonesia should implemented strategy in economic relationship with China.

1. SiMoDIS: Integrating Foreign Exchange Transactions Bank Indonesia and the Finance Ministry agreed on the cooperation of

integrated utilization and monitoring on data and/or information of foreign exchange related to export and import activities through the Instant Integrated Foreign Exchange Monitoring Information System (or SiMoDIS). With the integration, SiMoDIS will be able to provide comprehensive Indonesian export and import information for the Finance Ministry and BI.

2. TPIP Agreed on Three Strategic Steps to Guard Inflation The Government and Bank Indonesia agreed on three strategic steps to

guard CPI inflation within the target range of 3.5±1% in 2019 and 3±1% in 2020 and 2021. The three strategic steps were performed by (i) controlling inflation through four main policies strategy (4K): Price Affordability, Supply Availability, Smooth Distribution, and Effective Communication; (ii) strengthening the implementation of National Inflation Control Roadmap 2019-2021 and, (iii) strengthening coordination of the Central and Regional Governments.

3. Kick-Off of Muslim BI Religious Program Bank Indonesia Governor, with Members of the Board of Governors

kicked off Muslim BI Religious Program in Baitul Ihsan Mosque at Bank Indonesia. The BI Religious program is designed as a Bank Indonesia’s work culture which can create professional, competent employees with strong leadership based on noble characters. The BI Religious program is a work culture which can engage BI employees to give their time and worship ability for the institution. The kick off of BI Religious for other religions was done in different times.

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5. Bank Indonesia Strengthened Coordination with Financial Services Authority and Supreme Court

Bank Indonesia, OJK and Supreme Court were committed to continue strengthen coordination and cooperation in increasing the insight and knowledge of judges in centralbanking and financial services sector and as a medium for exchange of thoughts and views, as well as inputs on legal aspects intersecting with task implementations of Bank Indonesia or OJK.




6. Fitch Reaffirmed Indonesia’s Ratings on BBB/Stable Outlook Fitch affirmed Indonesia’s ratings on BBB with stable outlook amid global economic uncertainties. The key factors which

supported the decision were good economic growth prospects and relatively low government debts amid challenges such as still-strong dependency on external source of financing, low government revenues, and other structural indicators which were still below peer countries.

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09 9. Local Currency Settlement Strengthens Indonesia-Thailand Trade Indonesia-Thailand bilateral meetings discussed abouth the

development of Local Currency Settlement (LCS) implementation, economic development of both countries, and the Central Banks’ policy implementation in payment system. Bank Indonesia and the Bank of Thailand regularly exchanged views and experience to enrich and strengthen capacity of both parties in managing risks and challenges in the future as well as strengthening bilateral cooperation.

MARCH

7. Six Strategic Steps to Boost Tourism Forex Income The Government and Bank Indonesia agreed on six strategic steps as

joint priority policy strategy to boost tourism forex income in 2019: (i) accelerating the completion of infrastructure projects, (ii) driving the development of tourism attractions, (iii) increasing the quality of amenities in tourism destinations, (iv) strengthening the national tourism promotion, (v) promoting investment and financing, and (vi) designing the standard of procedure for Tourism Crisis Management and forming the Regional Tourism Crisis Management.

8. The Importance of Central Bank’s Credibility to Support Policy Effectiveness

Good central bank’s credibility will affect public rationality, that the central bank’s policy moves especially in controlling inflation will be positively responded by the public. This became a topic of discussion in the Economic Leadership Forum under the theme “Consistent Economic Policy and Economic Development” held by Bank Indonesia and the International Peace Foundation (IPC), Indonesian Economic Scholars Association (ISEI), BRIDGES, and Bandung Institute of Technology (ITB).

10. Synergy, the Key Factor in Increasing National Economic Performance Bank Indonesia issued the Indonesian Economic Report (the LPI) 2018 book with the theme “Synergy for Resilience and

Growth”. The book is Bank Indonesia’s routine publication which covers Indonesian economic journey and performance in one year. The Governor of Bank Indonesia, Perry Warjiyo expected the LPI 2018 book can become a useful reference for all stakeholders in the future.




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11. Bank Indonesia and the Bank of Thailand Strengthened Cooperation in Payment System, Financial Innovation and Anti-Money Laundering

To further strengthen central banks’ policy implementation and answer more complex challenges, Bank Indonesia and the Bank of Thailand agreed on cooperation strengthening through synergy in the development of payment system and Financial Innovation as well as Anti-Money Laundering and Terrorism Funding Prevention.

12. Commitment of Four Central Banks in Promoting Local Currency Settlement Framework

Bank Indonesia, Bank Negara Malaysia, Bangko Sentral ng Pilipinas, and the Bank of Thailand tied commitment to continue promoting local currency settlement framework in bilateral trade. The LCS framework is expected to facilitate economic and financial activities in the three countries more efficiently.

13. Commitment by ASEAN Countries to Achieve Financial Integration ASEAN Central Bank Governors and Finance Ministers were committed to

achieve ASEAN financial integration in supporting economic growth and strengthening financial stability in the region, through: (i) international trade and investment as an important engine for economic growth, (ii) financial technology utilization, and (iii) strengthening financial cooperation Chiang Mai Initiative Multilateralisation (CMIM) as the regional financial safety net.

14. Bank Indonesia Welcomed IMF Integrated Policy Framework Plan IMF planned to establish an integrated policy framework from

inputs of emerging economies including Indonesia amid IMF’s policy recommendations in dealing with global volatility which tended to prioritize approach using traditional instruments (such as interest rate and exchange rate). Moreover, Indonesia with other G20 countries agreed to strengthen international cooperation to help achieve a strong, sustainable, balanced and inclusive economic growth.

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15. Rating and Investment Information Inc Affirmed Sovereign Credit Rating of the Republic of Indonesia

Policy measures taken through the synergy of Bank Indonesia, the Government, and other stakeholders consistently could increase investor confidence on Indonesian economic prospect and resilience in the future as reflected in the affirmation of Sovereign Credit Rating on BBB/Stable Outlook. The affirmation was supported by (i) solid economic growth, (ii) decreasing fiscal deficit to GDP ratio and low Government debt to GDP ratio, and (iii) Government’s and Bank Indonesia’s policy support against external shocks.

16. Japan Credit Rating Agency Improved Indonesia’s Outlook Rating from Stable to Positive

Bank Indonesia and the Government were considered able to increase their policy response and guard fiscal discipline, which became the basis for Japan Credit Rating Agency, Ltd. to improve the Sovereign Credit Rating Outlook of the Republic of Indonesia from Stable to Positive, while affirming rating on BBB (Investment Grade). The rating reflected a solid and resilient economic growth against external shocks.




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17. Bank Indonesia and IFSB Initiated Strategy Transformation and International Standard of Global Sharia Finance Bank Indonesia Governor, as Chairman of the Executive Committee, with members of the Islamic Financial Services Board

initiated strategy transformation and international standard of global sharia finance to strengthen sharia financial resilience and create infrastructure in form of guidelines and standard regulations equal to the conventional financial industry.

18 18. Tan Sri Dr. Zeti Akhtar Aziz: “Leading with Purpose and Values” Tan Sri Dr. Zeti Akhtar Aziz, Bank Negara Malaysia (BNM) Governor for the

2000–2016 period who was also a Bank Indonesia Institute’s Honorary Board Member emphasized that a leader should have a clarity of purpose and values in line with the organizational vision. This was revealed on the BI Leadership Forum 2019 with the theme ”Leader’s Transformation in The Digital Era: ASEAN Strategic Perspective”.

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19. ASEAN+3 Agreed on the “Strategic Directions of ASEAN+3 Finance Process” Vision

ASEAN+3 agreed to adopt the “Strategic Directions of ASEAN+3 Finance Process” vision, in form of ASEAN+3 working plan and initiative in the medium-long term to explore potential area in strengthening regional resilience. The countries were optimistic of economic growth sustainability and regional finance resilience amid growing protectionism policy, weakening global demand, and tightening global financial condition.

20. Bank Indonesia Served Money Exchange up to 3T Areas (Foremoest, Outermost, and Remote)

Bank Indonesia synergized with banking to provide prime service to customers during the Ramadan/Idulfitri 1440 H period. The activities used the theme ”Rupiah for the Nation: Point of Synergy of Bank Indonesia and Banking Serving the Nation” by opening cash service activities in 2900 points of exchange across Indonesia including the 3T areas (Foremost, Outermost, and Remote).

21. BI Accelerated Commercial Papers as an Alternative Source of Financing for the National Economy

Bank Indonesia accelerated the issuance and transactions of Commercial Paper instruments as a source of short-term financing for non-banks to drive increasing domestic demand. This was done through the signing of administration agreement and the settlement of Commercial Paper transactions between Bank Indonesia and PT. KSEI. Through this partnership, it is expected that commercial securities can be an alternative short-term funding for nonbank corporations and as an attractive money market instrument for investors.




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MAY

22. The Government and Bank Indonesia Agreed 12 Synergy Programs to Promote Innovation and Expand Government Transactions Electronification

The Government and Bank Indonesia as well as the Financial Services Authority agreed 12 synergy programs to promote innovation and expand Government Transactions Electronification focused on three areas: Social Aid, Regional Government Transactions, and Transportations. Those were raised in the Coordination Meeting of Government, Regional Government, and Bank Indonesia, with the theme “Innovation and Expansion of Government Transactions Electronification in Promoting Economic Growth and Digital Transformation.

23. S&P Raised Investment Grade Rating of the Republic of Indonesia to BBB/Stable Outlook Ratings agency Standard and Poor’s (S&P) raised the Sovereign Credit Rating of the Republic of Indonesia from BBB-/Stable

Outlook to BBB/Stable Outlook. This indicated that S&P has high confidence on Indonesian economic prospect. One of the key factors supporting the decision was strong Indonesian economic growth prospect and authorities’ policy support which would likely continue post-Election. Moreover, the improvement of Indonesia’s sovereign credit rating was supported by relatively-low government debt and good fiscal performance.

24. Bank Indonesia and the Indonesia Halal Lifestyle Center agreed to strengthen Halal Industry in Indonesia

Bank Indonesia was strongly committed to promote sharia finance and economy development to guard an inclusive and sustainable economic growth momentum. This was stated in the Memorandum of Understanding (MoU) between Bank Indonesia and the Indonesia Halal Value Chain (IHLC). Bank Indonesia saw the halal industry ecosystem which drove the growth of halal industry as a joint homework for the government, Bank Indonesia, business players, and related authorities.

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25 25. The Indonesian Creative Works 2019 Exhibition Promoted MSME to Go Export dan Go Digital

Bank Indonesia held the Indonesian Creative Workd 2019 Exhibition under the theme “Promoting Economic Growth through MSME Go Export and Go Digital”. The exhibition was a real contribution by Bank Indonesia in promoting national economic growth by accelerating the creation of new economic activities through the development of regional leading products to support Indonesian Micro Small and Medium Enterprises toward international market and using digital platform (marketplace).

26. Bank Indonesia’s Economic Journal Accreditated in the Scopus Index Bank Indonesia’s economic journal, the Bulletin of Monetary Economics and Banking (BMEB), managed by the Bank Indonesia

Institute has officially become a Scopus-indexed economic journal since July 2019. The accreditation of BMEB into Scopus Journal index is an achievement for Indonesia considering currently only 47 journals in Indonesia are indexed in Scopus, and BEMB is the only economic journal in Indonesia indexed in Scopus. This is a reflection that BI research publication is world class and is expected to be able to promote research activities in the country to further develop.




27 27. Synergy, Innovation, and Technology utilization are Keys in Controlling Inflation

Bank Indonesia with the Government held the Rakornas on Inflation Control with the theme “Synergy and Innovation in Controlling Inflation for an Inclusive Economic Strengthening “. Inflation control was performed by strengthening policy synergy, increasing supply availability, and ensuring smooth food distribution. There were three policy strategies which became the focus of discussion in Rakornas: (i) continuing and accelerating the development of agriculture infrastructure and supporting facilities, (ii) increasing innovation of inflation control program and (iii) expanding integrated use of information technology.

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28. IMF Praised Indonesian Economic Policy Bank Indonesia welcomed the assessment of International Monetary Fund (IMF) on Indonesia’s economy as submitted in the Article

IV Consultation report of 2019. IMF assessed the policies implemented by Bank Indonesia, the Government, and related authorities managed to mitigate the impact of external pressure from early 2018 and praised the policy mix focus aimed at supporting macroeconomic stability and financial system, safeguarding buffers, and overcoming vulnerability.

AuGuST

20. Bank Indonesia Launched Quick Response Code Indonesian Standard Bank Indonesia launched the QRIS standard for payments via server-

based electronic money application, electronic wallter, or mobile banking which carried the spirit UNGGUL (Universal, Easy, Beneficial, and Direct), in conjunction with the 74th Independence Day of Indonesia. QRIS aims to encourage transaction efficiency, accelerate financial inclusion, develop MSME for Developed Indonesia.

30. Destry Damayanti Officially Became the Senior Deputy Governor of Bank Indonesia

Destry Damayanti was sworn in as the Senior Deputy Governor of Bank Indonesia in front of the Supreme Court Justice, Prof. Dr. H. Muhammad Hatta Ali S.H, M.H, on 7 August 2019.

21. Driving Manufacturing, Toward a High Income Country The manufacturing sector is very strategic to drive Indonesian economic

growth higher and sustainable to avoid the middle income trap and then transform to a high income country. This was revealed in the seminar jointly held by the Coordinating Economics Ministry and Industry Ministry at the beginning of Coordination Meeting of Central and Regional Government series of activities aimed at driving manufacturing, toward a high income country.

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32. Bank Indonesia Gave Special Tribute to National Heroes In commemorating the 74th Indonesian Independence Day, Bank Indonesia

gave special tribute to the national heroes in Public Cemetery Tanah Kusir and Taman Makam Pahlawan. The activity was a momentum for Bank Indonesia leaders and employees to always remember the patriots, grow love for the country and spirit to have real contribution to the nation, including in daily task implementations.

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33. EMEAP Agreed to Strengthen Regional Policy Coordination EMEAP Central Bank Governors agreed to strengthen policy coordination

in facing global financial and economic uncertainties amid increasing trade protection. In that opportunity, Bank Indonesia stated two measures taken in facing global economic uncertainties: (i) policy mix and (ii) policy communication and coordination.

34. Bank Indonesia Expanded Business Matching for Sharia Finance and Economy Development

Bank Indonesia expanded the business matching scheme for sharia business to investors and sharia business players in promoting the creation of halal value chain ecosystem in sharia finance and economy development. This became a focus in the organization of Sharia Economy Festival (FESyar) 2019 in Sumatra regional level in Palembang. The FESyar Sumatra Region organization was a series toward FESyar Indonesia 2019.

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35. FESyar of Indonesian Eastern Region Encouraged Sharia Business Players to Go Digital

The FESyar of Indonesian Eastern Region in Banjarmasin, South Kalimantan, carried the theme “Move with Sharia Economy”. During the event, Bank Indonesia encourages sharia business players/sharia based MSME to market their products digitally (e-commerce) to expand market access through the MSME online marketing preparation program, covering coaching, assistance, capacity building, and MSME facilities in line with the class classifications.

36. Bank Indonesia and the Government Agreed on Six Strategic Steps to Accelerate Manufacturing Industry Strengthening

The Government and Bank Indonesia agreed on six strategic steps to strengthen the performance of manufacturing industry to drive higher, sustainable, and inclusive economic growth in the September 2019 Coordination Meeting of Central and Regional Government. The product development focus began in the automotive industry, textile & textile products, and footwear, as well as other industries which supported product developments in those industries.

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37. Bank Indonesia and Bank Negara Malaysia Strengthened Financial and Payment System Cooperation

Bank Indonesia and Bank Negara Malaysia agreed the financial and payment system cooperation to strengthen bilateral relationship between both central banks. The cooperation agreement covered two areas: Local Currency Bilateral Swap Agreement (LCBSA) and Memorandum of Understanding in Payment System and Innovation of digital monet, including supervision of anti-money laundering and terrorism funding prevention (APU/PPT).

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OCTOBER

38. BI Governor Received the Governor of the Year Asia Pacific 2019 Award Bank Indonesia Governor Perry Warjiyo received the Governor of the Year Asia

Pacific award from Global Markets media. The award was given to the Bank Indonesia Governor for the achievement in maintaining Indonesian economic stability amid volatile economic and political conditions as well as the digital transformation implemented by Bank Indonesia.

39. Bank Indonesia Agreed to Strengthen International Cooperation and Implement Policy Mix

In the Annual Meeting of International Monetary Fund and World Bank (IMF-World Bank) in Washington D.C., US, Bank Indonesia agreed there should be joint efforts to increase cooperation, mitigate risks, increase resilience and implement policy to promote growth through policy mix. Bank Indonesia also supported continued study on Integrated Policy Framework performed by IMF to increase understanding and effectiveness of economics policy taken by each country according to the characteristics and conditions.

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40. Bank Indonesia and the Monetary Authority of Singapore Agreed Extension of Central Banks’ Cooperation Bank Indonesia and the Monetary Authority of Singapore agreed the extension of bilateral finance cooperation. The cooperation

allowed both central banks to access foreign currency liquidity between both central banks totaling US$10 billion for the next one year period to maintain monetary and financial system stability.

41. The Financial System Stability Committee Determined Indonesian Financial System Stability under Control

The Financial System Stability Committee’s meeting stated the financial system stability in Quarter III 2019 was under control amid high global economic uncertainties. This was based on the monitoring of KSSK members on economic development, financial system stability, monetary, fiscal, financial services sector, and deposit guarantee.

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42. Bank Indonesia Institute Received International Accreditation Bank Indonesia Institute received Internasional Corporate Learning Improvement Process Accreditation from the European

Foundation for Management Development as an international learning institution. Bank Indonesia was the first central bank worldwide which received accreditation from the international learning institution, which can become reference for other learning institutions in the global level. The accreditation is a recognition on the strategic position of BI Institute as a learning institution which prepares the competence and capability of central bank’s main asset, human resources.




AboutBank Indonesia


43 42. Bank Indonesia Supported Regional Economy by Caring for the Environment

Bank Indonesia supported regional economic development by caring for environmental sustainability. The support was given through Bank Indonesia’s Social Program in form of communal Wastewater Processing Installation to Koperasi Batik Kajang Lako in Jambi.

OCTOBER

44. Bank Indonesia Held Bank Indonesia’s Education Festival (FESKABI) Bank Indonesia held Bank Indonesia’s Education Festival (FESKABI)

with the theme “QRIS: Digital Payment ala Millenial” in Tondano, North Sulawesi. This FESKABI theme was in line with Bank Indonesia’s policy which gave full commitment to support payment system development and facilitate digital economy development and Indonesia’s financial inclusion.

46. Synergy and Innovation as the Keys of National Sharia Economi Development

Synergy between institutions supported by innovative program implementations became keys in sharia finance economy to actualize Indonesia as the global eksyar center. The FESyar Indonesia event in Surabaya became the peak of all series of FESyar activities in 2019. Lifting the theme “Synergy to Build Indonesian Sharia Economy”, FESyar Indonesia was part of the Road to Indonesia Sharia Economic Festival (ISEF) 2019.

47. Make Sharia Economy as New Stream The Government and Bank Indonesia were committed to directly lead joint

measures in actualizing sharia economy as the new stream of Indonesia’s economy through the ISEF event. As an annual event, ISEF 2019 carried the theme ”Sharia Economy for Stronger and Sustainable Growth”. ISEF was the largest event in Indonesia which became a pot of integration for activities in the sharia finance economy sector to realize Indonesia as a center of excellence for global sharia finance economy.

45. Bank Indonesia was Officially Accepted as Members of the Network for Greening the Financial System Bank Indonesia’s membership in NGFS was in line with Indonesia’s commitment in the Paris Agreement and Sustainable

Development Goals (SDGs). NGFS aims to define and promote best practices and analysis related to green financing to achieve an environmental-friendly sustainable growth.

NOVEMBER

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46

47




NOVEMBER

48. Indonesian Economic Prospect for 2020 was Stable Bank Indonesia held Bank Indonesia’s Annual Meeting (PTBI) 2019

which carried the theme “Synergy, Transformation, and innovation: Toward Developed Indonesia”. The PTBI presented the 2019 economic performance evaluation and economic prospect and policy direction for 2020. Bank Indonesia stated the optimism on Indonesian economic prospect for 2020 was stable with continuing growth momentum.

48

49. LTBI 2018 Received International Award Bank Indonesia’s Annual Report 2018 received three international awards from the League of American Communications

Professionals: (i) Platinum award, for the category of corporate/institution printed report in finance with valuation of more than US$10 billion, (ii) Rank 8, in the Top 100 worldwide classification, and (iii) Most Improved, for the category of Introduction & Special Achievement Winners.

DECEMBER

50. Japan’s Finance Ministry and Bank Indonesia Agreed on Cooperation to Boost Local Currency use

Japan’s Finance Ministry and Bank Indonesia agreed on the cooperation framework of local currency settlement for bilateral trade and direct investment. The collaboration signified important milestone in strengthening bilateral financial cooperation between Japan and Indonesia.

51. Bank Indonesia, OJK, and LPS Implemented Bank Reporting Integration

Bank Indonesia, OJK, and LPS agreed to integrate reporting in the banking sector through one portal mechanism called Pelaporan.id, starting from 31 December 2019. The integration is built to minimize redundant and inconsistent information while increasing efficiency in bank operations, considering banks usually submit reports to the three authorities through different applications.

52. SiMoDIS Implementation, Integrating Forex Transactions Bank Indonesia with the Finance Ministry increased business compliant

through SiMoDIS implementation to support policy making with more accurate and recent information on export proceeds and import payments. With the integrated system, the Government and Bank Indonesia can make synergy and reconciliation of export/import data with forex transactions in a comprehensive and integrated manner as an effort to increase compliance to forex reporting requirement.

53. Leadership Camp 2019 Prepared Millenials as Indonesian Future Leaders

The Leadership Camp for Bank Indonesia’s scholarship recipients grouped in Generasi Baru Indonesia (GenBI), carried the theme Millenial as Indonesian Future Leaders: Leading HR of Developed Indonesia. The Leadership Camp aims to provide motivation and inspiration to scholarship recipients from Bank Indonesia to become generations with superior character and religious leadership to support the accomplishment toward high income country in 2045.

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51

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AboutBank Indonesia


BANK INDONESIA SuPERVISORY BOARD

Mohamad Fadhil Hasan BSBI Chairman

“We extend our appreciation to the Board of Governors and employees of Bank Indonesia for the task perfor-mance and achievement in 2019 both from policy and governance aspects”




Bank Indonesia Representative Office Sibolga




AboutBank Indonesia


he Bank Indonesia Supervisory Board (or BSBI) is an organ formed to assist

DPR-RI in supervising Bank Indonesia. In 2019, BSBI has performed some

reviews to increase the accountability, independency, transparency, and

credibility of Bank Indonesia.

BSBI appreciated achievements made by Bank Indonesia in 2019, such as Bank

Indonesia’s success in strengthening policy synergy between Bank Indonesia, the

Government and other authorities, its success in achieving the highest governance

maturity level, as well its success in achieving Unqualified audit opinion in Bank

Indonesia’s Annual Financial Statements.

BANK INDONESIA SuPERVISORY BOARD




REMARKS FROM THE BANK INDONESIA SuPERVISORY BOARD CHAIRMAN

We are grateful that amid a worsening global economy, the Indonesian economic performance in 2019 was good enough at 5.02%, although lower than the 2018 level at 5,17%. The economic growth was supported by good domestic demand. Bank Indonesia managed to implement its tasks as mandated by the Law. Domestic economic performance was positive, amid volatile global finance and economic conditions. This is a result of accommodative policy mix in 2019 by Bank Indonesia with other related authorities.

With low inflation and stable Rupiah, all policy mix instruments of Bank Indonesia in 2019 were aimed at supporting growth momentum. Monetary policy rate was reduced by 100bps to 5.0%, liquidity was relaxed through monetary operation expansion and Rupiah minimum reserve requirements reduction by 100bps to 5.5%, as well as performing Rupiah stabilization. Macroprudential policy was also eased. The effectiveness of accommodative monetary and macroprudential policies was strengthened with the acceleration of money market deepening both in Rupiah and forex, including promoting infrastructure financing. Payment system policy was directed to support electronification and efficiency in economic transactions as well as to develop payment system innovation to support digital finance and economy by launching the 2025 Indonesian Payment System Blueprint.

Global economic conditions in 2019 were signified by slowing global demand, low commodity prices, and continued trade wars between the US and China which widened to other countries, inward-looking policy. The Brexit saw a dead end, while some geopolitical risks were taking turns. The inconducive global economic conditions required accurate and credible economic policy decisions. In this regard, we appreciated the efforts taken by Bank Indonesia, the Government and other Authorities to continue strengthening policy synergy. The synergy created could increase the domestic economy resilience in facing the multiplying global economic impact and maintain the momentum of domestic economic growth.

In internal Bank Indonesia, we are certain the achievement was due to Bank Indonesia’s effort in implementing thorough transformation in policy, organization and wprk process, and human resources (HR) and work culture since last year. Bank Indonesia’s policies were translated into strategic programs to realize the new vision: to have real

contribution to the national economy and become the the best in Emerging Markets. The success was supported by strong commitment from the Board of Governors and ranks in implementing the task and responsibility as mandated for the interest of the nation and also the key of success of Bank Indonesia in implementing its task.

The Bank Indonesia Supervisory Board (or BSBI) as an organ formed based on the Law on Bank Indonesia to assist the House of Representatives in running supervision function in certain sectors, regularly makes reviews and gives recommendations to Bank Indonesia. In 2019, BSBI submitted reviews for four periods: Quarter II 2018, Quarter III 2018, Quarter IV 2018, and Quarter I 2019. The reviews were very beneficial for Bank Indonesia to increase governance implementation in the daily task implementations. The coordination and communication process with Bank Indonesia was held intensively to strengthen the reviews.

In response to BSBI recommendations, Bank Indonesia conveyed its responses elaborating on the conditions and challenges faced as well as follow-ups for future improvements. Besides submitting response reports, Bank Indonesia actively initiated meetings with BSBI. In 2019, Bank Indonesia held two meetings between the Board of Governors of Bank Indonesia and members of BSBI. The meetings discussed about task implementations and recent issues. We believe that the reviews and recommendations could increase accountability, independency, transparency, and credibility of Bank Indonesia.

We also appreciate the good governance practices applied by Bank Indonesia in implementing its tasks. Governance strengthening programs were continuously held in 2019. Some of which were new approaches used by Bank Indonesia in managing strategic programs and work programs, business process mapping and formulation of risk control matrix to support the implementation of risk-based internal audit, as well as improvement of value chain-based Bank Indonesia’s risk management framework.

One tangible result of Bank Indonesia’s efforts was Bank Indonesia’s capability in building synergy for economic transformation such as through the Coordination Meeting of Central Government, Regional Governments, and Bank




AboutBank Indonesia


Indonesia to strengthen the performance of manufacturing industry to support higher, sustainable, and inclusive economic growth.

Moreover, we also appreciate other task implementations by Bank Indonesia in 2019. From the financial management aspect, we support the move to increase good governance principles and maintain Bank Indonesia’s financial sustainability toward the Integrated Application System Direction for Front Office Middle Office-Back Office (FOMOBO) as part of the Bima Sakti implementation, as well as the Expected Credit Loss (ECL) application. Furthermore, we appreciate that Bank Indonesia’s financial management has been performed in an accountable and responsible manner.

One of Bank Indonesia’s achievements in financial management was the acknowledgement of external auditor’s Unqualified Opinion for 17 consecutive years. We believe the achievement was a result of Bank Indonesia’s hard work to continue prioritizing compliance to all requirements which was materialized in the Unqualified Opinion. In the future Bank Indonesia will certainly be able to maintain and increase the achievement.

In this opportunity, we give appreciation to the Board of Governors and all employees of Bank Indonesia for the performance achievement in 2019. In this opportunity as well, we representing all Members of BSBI, extend our highest gratitude for the cooperation. We expect the good collaboration can be furher increased in the coming years to achieve common goals. We also appreciate the follow-up responses by Bank Indonesia to the reviews and recommendations of BSBI.

Entering 2020, the Indonesian economy will still face global and domestic challenges. The resilience of domestic economy needs to be increased to face the risks of global economic uncertainties. In response, we expect Bank Indonesia to continue strengthening synergy and collaboration with the government and related authorities including in mitigating the impact of COVID-19 to ensure inflation remains low and stable, macroeconomic and financial system stability remains vigilant, and economic growth can be maintained.

M. Fadhil HasanChairman of the Bank Indonesia Supervisory Board

Wassalamu’alaikum Wr. Wb.




BSBI ORGANIZATION

The Bank Indonesia Supervisory Board (BSBI) is an organ formed according to the Law on Bank Indonesia, to assist DPR-RI in supervising Bank Indonesia. In the task implementation, BSBI is directly responsible to DPR-RI and BSBI’s status is out of Bank Indonesia’s organizational structure.

BSBI’s supervisory function is aimed at increasing accountability, independency, transparency, and credibility of Bank Indonesia. BSBI supervision coverage includes review on Bank Indonesia’s Annual Financial Statements, operational budget, investment budget, procedure of operational activities decision making, and Bank Indonesia’s asset management, as well as other reviews requested by DPR-RI Commission XI. The supervisory function does not include assessment on policies issued by Bank Indonesia. BSBI reports its reviews to DPR-RI quarterly or whenever requested.

BSBI membership consists of five people: a chairman concurrently a member, and four members elected by DPR-RI and appointed by the President. BSBI members are selected people with integrity, morality, skills/capability/

expertise, professionalism, and experience in economics, finance, banking, or legal for a three-year term period and may be reelected once for the next term.

In 2017, five BSBI members passed the fit and proper test and were appointed for the 2017-2020 period. The BSBI members are M. Fadhil Hasan as BSBI chairman concurrently a member, and Muhammad Edhi Purnawan, Candra Fajri Ananda, A. Hikmahanto Juwana, and A. Tony Prasetiantono (deceased on 16 January 2019), respectively, as members.

In 2019, BSBI performed four reviews: for the period of Quarter II 2018 to Quarter I 2019. Total recommendations for each review were seven reviews for Quarter II 2018, eight recommendations for Quarter III 2018, nine recommendations for Quarter IV 2018, and 11 recommendations for Quarter I 2019. In response to the recommendations, Bank Indonesia made necessary follow-ups to strengthen good governance implementation in Bank Indonesia. Moreover, Bank Indonesia also held continuous monitoring on the follow-ups to the recommendations.

Table 6. BSBI 2019 Reviews

Scope of reviews Quarter II 2018

Quarter III 2018

Quarter IV 2018

Quarter I 2019

Total recommendations

per scope of reviews

Bank Indonesia’s Annual Financial Statements

1 2 1 4 8

Operational Budget 1 2 3 2 8

Investment Budget 1 1 2 2 6

Governance 2 2 2 1 7

Special Issues 2 1 1 2 6

Total Recommendations per period 7 8 9 11




AboutBank Indonesia


Mohamad Fadhil Hasan was born in Bogor in 1959. He graduated from the Bogor Agricultural Institute in 1983, and received Master of Science degree from the Department of Economics, Iowa State University, Ames, USA, in 1989 and PhD degree from the Department of Agricultural Economics, University of Kentucky, Lexington, USA, in Agricultural Policy and International Trade expertise in 1999.

Mohamad Fadhil Hasan has more than 30-year experience in making research and consultation of economics policy, especially in Macroeconomics and Public Policy, both in the public and private sectors. Besides serving as BSBI chairman for the 2017-2020 period, Mohamad Fadhil Hasan was also directly appointed by the President to become a member of the National Committee for Economy and Industry (KEIN) for the 2016-2019 period.

Mohamad Fadhil Hasan, Ph.D.Chairman

Hikmahanto Juwana was born in Jakarta in 1965. He received Bachelor or Law degree in 1987 from the University of Indonesia. Then in 1992 Hikmahanto Juwana obtained Master’s degree in law (LL.M) from Keio University in Japan. In 1997, he received Doctor of Philosophy (PhD) degree from the University of Nottingham, UK.

Hikmahanto Juwana was appointed as BSBI member for the 2017-2020 period. He started his career as a lecturer in the University of Indonesia’s Law School in 2001. He earned the title of International Law Professor in the university. As well as being a professor, Hikmahanto Juwana also served as an independent commissioner in PT. Unilever Tbk, once an independent commissioner in PT. Aneka Tambang, Tbk and in an Honorary Council in the Indonesian Capital Market Arbitration Board (BAPMI). As a law professor, he is often invited as an expert in government or corporate forums.

Prof. Hikmahanto Juwana, SH., LL.M, Ph.DMember

PROFILE OF BSBI MEMBERS




Candra Fajri Ananda was born in Lumajang in 1964. He received Bachelor of Economics and Development Study degree from the Brawijaya University in 1988. Candra Fajri Ananda continued his postgraduate degree at the Institute of Rural Development University in Gottingen, Germany, in 1994. Then in 1998 in the same university, he received his doctoral degree.

Candra Fajri Ananda was selected as BSBI member for the 2017-2020 period. Besides being BSBI member, Candra Fajri Ananda also served as the Dean of Economics and Business School of Brawijaya University. Candra Fajri Ananda is actively involved as Focus Group Discussion member for regional development in the Central Economic Scholars Association. Candra Fajri Ananda has also published several articles and researches in national media and international journals.

Prof. Candra Fajri AnandaMember

Muhammad Edhie Purnawan was born in Yogyakarta in 1968. He obtained Bachelor of Economics from the Gadjah Mada University in 1991. Then he continued his postgraduate degree and received Master of Arts in Economics from Monash University, Australia, in 1995. He obtained a Doctor of Philosophy (PhD) in Monetary and Financial Economics from the University of Melbourne, Parkville, Victoria, Australia, in 2009.

Muhammad Edhie Purnawan was appointed as BSBI member for the 2017-2020 period. Moreover, he has become the deputy dean at the Economics and Business School, Gadjah Mada University, since 2012. Muhammad Edhie Purnawan has experience of more than 25 years as lecturer in Economics School, UGM. Moreover, Muhammad Edhie Purnawan is also actively involved in the stewardship of central Economic Scholars Association (ISEI) and has become speakers in economics and finance in cooperation with various institutions.

Muhammad Edhie Purnawan, PhDMember

Laporan Tahunan Bank Indonesia 2019

Manajemen Kelembagaan

Pelaksanaan TugasBank Indonesia

Tentang Bank Indonesia

Arah StrategisBank IndonesiaPengantar Gubernur

218

REFERENCES

219Laporan Tahunan Bank Indonesia 2019

Rangkuman Kebijakan dan Kilas Balik Perjalanan Bank Indonesia 2019Laporan Keuangan Badan Supervisi

Bank IndonesiaLampiran



AboutBank Indonesia



LiSt oF WoRk UNit HEadS (pER dECEmbER 2019)

No Name position title Work Unit

moNEtaRY

1 Aida S. Budiman Assistant Governor Department Head Monetary & Economics Policy Department

2 Nanang Hendarsah Executive Director Department Head Monetary Management Department

3 Hariyadi Ramelan Executive Director Department Head Foreign Exchange Department

4 Agusman Executive Director Department Head Financial Market Development Department

5 Suhaedi Executive Director Department Head Sharia Finance & Economy Department

maCRopRUdENtiaL

6 Juda Agung Assistant Governor Department Head Macroprudential Policy Department

7 Sempa Arih H.Sitepu Executive Director Department Head Financial System Surveillance Department

8 Budi Hanoto Executive Director Department Head Consumer Protection & Msme Development Department

paYmENt SYStEm aNd RUpiaH CURRENCY maNagEmENt

9 Filianingsih Hendarta Assistant Governor Department Head Payment System Policy Department

10 Edi Susianto Executive Director Department Head Payment System Operation Department

11 Heru Pranoto Executive Director Department Head Currency Management Department

12 Rahmat Hernowo Director Department Head National Payment Gateway & Electronification Department

13 Arrow P. Siagian Director Department Head Special Unit For Development Of Currency Management Center, Data Center, And Business Resumption Site

poLiCY SUppoRt

14 Doddy Zulverdi Executive Director Department Head International Department

15 Yati Kurniati Executive Director Department Head Statistics Department

16 Peter Jacobs Executive Director Department Head Treasury Operations And Licenses Banking Services Department

17 Farida Peranginangin Executive Director Department Head Report Compliance And Management Department

18 Eni V. Panggabean Executive Director Department Head Risk Management Department

19 Onny Widjanarko Executive Director Department Head Communication Department

oRgaNizatioNaL SUppoRt

20 Dyah N.K. Makhijani Assistant Governor Department Head Governance & Strategic Management Department

21 Mubarakah Assistant Governor Department Head Finance Department

22 Rosalia Suci H. Executive Director Department Head Legal Department

23 Dicky Kartikoyono Executive Director Department Head Human Resources Department

24 Diah Purnama Bulan Azhar L. Siregar

Executive Director Department Head Information System Management Department





25 Marlison Hakim Executive Director Department Head Strategic Procurement Department

26 Damayanti Johan Executive Director Department Head Internal Audit Department

27 Suzanna G. Hamboer Executive Director Department Head Facilities & Logistics Management Department

28 Solikin M. Juhro Executive Director Department Head Bank Indonesia Institute

29 Budianto Executive Director Department Head Special Unit For Information System Transformation

domEStiC oFFiCES NEtWoRk

30 Dwi Pranoto Assistant Governor Department Head Regional Department

31 Wiwiek Sisto W. Executive Director Representative Head Bank Indonesia Representative Office North Sumatra Province

32 Hamid Ponco Wibowo Executive Director Representative Head Bank Indonesia Representative Office Dki Jakarta Province

33 Doni Primanto Joewono Executive Director Representative Head Bank Indonesia Representative Office West Java Province

34 Soekowardojo Executive Director Representative Head Bank Indonesia Representative Office Central Java Province

35 Difi Ahmad J. Executive Director Representative Head Bank Indonesia Representative Office East Java Province

36 Herawanto Executive Director Representative Head Bank Indonesia Representative Office South Kalimantan Province

37 Bambang Kusmiarso Executive Director Representative Head Bank Indonesia Representative Office South Sulawesi Province

38 Wahyu Purnama A. Director Representative Head Bank Indonesia Representative Office West Sumatra Province

39 Decymus Director Representative Head Bank Indonesia Representative Office Riau Province

40 Yunita Resmi Sari Director Representative Head Bank Indonesia Representative Office South Sumatra Province

41 Budiharto Setyawan Director Representative Head Bank Indonesia Representative Office Lampung Province

42 R. Erwin Soeriadimadja Director Representative Head Bank Indonesia Representative Office Banten Province

43 Hilman Tisnawan Director Representative Head Bank Indonesia Representative Office Yogyakarta Province

44 Tutuk S.H. Cahyono Director Representative Head Bank Indonesia Representative Office East Kalimantan Province




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45 Trisno Nugroho Director Representative Head Bank Indonesia Representative Office Bali Province

46 Arbonas Hutabarat Director Representative Head Bi Representative Office North Sulawesi Province

47 Naek Tigor Sinaga Director Representative Head Bank Indonesia Representative Office Papua Province

48 Zainal Arifin Lubis Deputy Director Representative Head Bank Indonesia Representative Office Aceh Province

49 Yufrizal Deputy Director Representative Head Bank Indonesia Representative Office Lhokseumawe Province

50 Edhi Rahmanto Hidayat Deputy Director Representative Head Bank Indonesia Representative Office Pematangsiantar

51 Suti Masniari Nasution Deputy Director Representative Head Bank Indonesia Representative Office Sibolga

52 Fadjar Majardi Deputy Director Representative Head Bank Indonesia Representative Office Riau Islands Province

53 Bayu Martanto Deputy Director Representative Head Bank Indonesia Representative Office Jambi Province

54 Joni Marsius Deputy Director Representative Head Bank Indonesia Representative Office Bengkulu Province

55 Tantan Heroika S. Deputy Director Representative Head Bank Indonesia Representative Office Bangka Belitung Islands Province

56 Heru Saptaji Deputy Director Representative Head Bank Indonesia Representative Office Tasikmalaya

57 Fadhil Nugroho Deputy Director Representative Head Bank Indonesia Representative Office Cirebon

58 Muhammad Taufik Amrozy

Deputy Director Representative Head Bank Indonesia Representative Office Tegal

59 Agus Chusaini Deputy Director Representative Head Bank Indonesia Representative Office Purwokerto

60 Bambang Pramono Deputy Director Representative Head Bank Indonesia Representative Office Solo

61 Azka Subhan Aminurridho

Deputy Director Representative Head Bank Indonesia Representative Office Malang

62 Hestu Wibowo Deputy Director Representative Head Bank Indonesia Representative Office Jember

63 Musni Hardi K. Atmaja Deputy Director Representative Head Bank Indonesia Representative Office Kediri

64 Rihando Deputy Director Representative Head Bank Indonesia Representative Office Central Kalimantan Province

65 Prijono Deputy Director Representative Head Bank Indonesia Representative Office West Kalimantan Province

66 Hendik Sudaryanto Deputy Director Representative Head Bank Indonesia Representative Office North Kalimantan Province

67 Bimo Epyanto Deputy Director Representative Head Bank Indonesia Representative Office Balikpapan






68 Achris Sarwani Deputy Director Representative Head Bank Indonesia Representative Office West Nusa Tenggara Province

69 I Nyoman Ariawan Atmaja

Deputy Director Representative Head Bank Indonesia Representative Office East Nusa Tenggara Province

70 Budi Sudaryono Deputy Director Representative Head Bank Indonesia Representative Office West Sulawesi Province

71 Mohamad Abdul Majid Ikram

Deputy Director Representative Head Bank Indonesia Representative Office Central Sulawesi Province

72 Budi Widihartanto Deputy Director Representative Head Bank Indonesia Representative Office Gorontalo Province

73 Suharman Tabrani Deputy Director Representative Head Bank Indonesia Representative Office Southeast Sulawesi Province

74 Noviarsano M. Deputy Director Representative Head Bank Indonesia Representative Office Maluku Province

75 Gatot Miftakhul Manan Deputy Director Representative Head Bank Indonesia Representative Office North Maluku Province

76 S. Donny H. Heatubun Deputy Director Kepala Perwakilan Bi Representative Office West Papua Province

ovERSEaS oFFiCES NEtWoRk

77 Donny Hutabarat Deputy Director Representative Head Bank Indonesia Representative Office London

78 Causa Iman Karana Deputy Director Representative Head Bank Indonesia Representative Office Tokyo

79 Dwityapoetra S. Besar Director Representative Head Bank Indonesia Representative Office New York

80 Arief Hartawan Director Representative Head Bank Indonesia Representative Office Beijing

81 Ramdan Denny Prakoso Director Representative Head Bank Indonesia Representative Office Singapore




AboutBank Indonesia



gLoSSaRY

Administered Prices The price of goods and services regulated by the government, such as fuel price and electricity base tariff.

Bank Indonesia Real-Time Gross Settlement Electronic fund transfer system between participants of BI-RTGS System in Rupiah whose settlement is made in real time per transaction individually.

Bank Indonesia – Scripless Securities Settlement System

Means of transaction with Bank Indonesia including its administration and electronic Securities administration connected directly between Participants, Operators, and BI-RTGS System.

Intermediary Bank Commercial bank established by the Deposit Insurance Corporation to be used as a resolution tool by accepting transfers of part or all assets and/or obligations of the Bank managed by the Deposit Insurance Agency, then running banking business activities and will have its ownership passed to other parties.

Bi-7 Day Reverse Repo Rate Policy rate which reflects the monetary policy stance of Bank Indonesia and is transactional. The rate is used in the buy/sell of Government Bonds between Bank Indonesia and commercial banks in the money market. The bonds are traded under repurchase agreement with 7 days tenor.

Foreign Exchange Reserves State foreign exchange reserves controlled by Bank Indonesia and are registered on Bank Indonesia’s balance sheet as assets, including gold, foreign banknotes, and billing in form of current account, time deposits, money order, foreign securities, and others in foreign currencies to foreign parties which can be used as overseas payment tools.

Capital Adequacy Ratio Capital adequacy ratio which covers the risk of losses banks may encounter.

Central Counterparty Clearing institutions for over the counter derivative transactions.

Third Party Funds Funds entrusted by the public to banking based on fund saving agreements in form of current account, deposit, deposit certificate, saving, and or other equal forms.

Current Account Deficit The condition in which a country’s imports of goods and services exceeds its exports, or the difference between deficit/surplus in trade account and deficit/surplus in services account.

Deposit Facility Bank funding placement facility in Bank Indonesia as part of monetary operations.

Export Proceeds Proceeds received by exporters from export activities.





Domestic Non-Deliverable Forward Plain vanilla foreign exchange derivative against Rupiah in form of forward transaction with fixing mechanism implemented in the domestic market.

Emerging Market A group of countries with rapidly developing economies as reflected in the development of financial market and industrialization.

Financial Inclusion Financial services with affordable cost for the low-income segment.

Financial System Stability Coordinating Forum

A forum which aims to strengthen coordination between institutions in maintaining financial system stability in order to support a sustainable economic growth, while strengthening resilience against economic shocks. The members of this forum are the Finance Ministry, Bank Indonesia, Deposit Insurance Corporation, and Financial Services Authority.

Minimum Reserve Requirements The minimum amount of funds a bank must hold which is determined by Bank Indonesia at a certain percentage of third party funds.

Green Financing An environmental-friendly financing to reduce the potential of disruption to the financial system stability coming from environmental damage.

Gross Domestic Product Economic indicators which reflect the final amount of goods and services produced by all economic units in a country in a certain time period.

Hedging The use of derivatives or other financial instruments to protect a company from risks related to the change of fair value of assets or obligations.

Financial System Stability Index The overall performance indicator of Indonesia’s financial system stability which covers banking, stock and bond markets, and helps identifying potential pressures in the financial system.

Indonia Interest rate index on interbank Rupiah borrowing transactions without collateral for an overnight period in Indonesia.

Inflation Economic conditions signified by fast price increase which causes lower purchasing power. There are two types of inflation: cost-push inflation and demand-pull inflation.



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Core Inflation Persistent inflation components in an inflation movement and are affected by fundamental factors, such as supply-demand interaction, exchange rate, international commodity price, inflation of trading partners, and inflation expectation. Core inflation is obtained from the CPI inflation figure after taking out the components of volatile foods and administered prices.

Interest Rate Swap Contracts/agreements between 2 (two) parties to exchange interest rate flow in a period during the contract period or at the end of contract period based on a certain principal value.

Investment Grade Investment grade rating as given by rating agencies.

Jakarta Interbank Offered Rate (Jibor) An indicative offered rate in Interbank Money Market transactions in Indonesia which is derived from JIBOR contributor.

Jakarta Interbank Spot Dollar Rate (Jisdor) A USD/IDR reference rate according to interbank rate of foreign exchange to Rupiah in the domestic market and real time.

International Financial Safety Net International financial cooperation by Bank Indonesia and/or the Republic of Indonesia to meet the sufficiency of forex reserves and/or to overcome short-term liquidity issues in crisis mitigation and/or resolution, both in bilateral, regional, or multilateral ways with central banks or monetary authorities and/or other authorities, organizations or international institutions and international forums.

Cash Services Bank Indonesia’s rupiah distribution activity handed to an operating bank to cover the needs of participating banks in order to fill the cash of participating banks to meet the people’s demand in a certain area.

Clearing The amount of debts between clearing participants are centralized in one place, by handing securities and trade securities which have been set for clearing.

Lending Facility Lending facility in Rupiah from Bank Indonesia to Banks in relation to monetary operations.

Liquidity The ability to pay off all liabilities in a short period of time; a company is classified as liquid if it has liquid assets more than the sum of all of its liabilities.

Local Currency Settlement Trade transaction settlements between two countries done in the area of one country, using the country’s currency.

Loan to Value/Financing to Value The ratio between credit/financial value which can be given to Conventional or Sharia Commercial Banks against collateral value in property during the credit/financing disbursement based on current assessment results.





Macroprudential Financial regulation approach that aims to mitigate overall financial system risks.

Microprudential Financial regulation approach related to individual financial institution management to avoid harming its business sustainability.

Indonesia’s Balance of Payments A summary of transactions between residents of a country and residents of other countries in certain period of time (usually one year). The balance of payment includes purchase and sale of goods and services, grants from individuals and foreign governments, and financial transactions. Generally, balance of payment consists of current account and financial and capital account, and financial items.

Current Account Part of the balance of payments which records the goods and services traffic of a country.

Non Performing Financing NPL term is designated for commercial banks, while NPF for sharia banks.

Non Performing Loan Bad loans that consist of loans classified as substandard, doubtful, and loss.

Monetary Operations Bank Indonesia’s monetary operation implementation for monetary management through the Open Market Operation and Interest Rate Corridor (Standing Facilities).

Overnight Index Swap Contracts/agreements between 2 (two) parties to exchange interest rate flow In rupiah periodically during the contract period or at the end of contract based on a certain principal value whose calculation used the basis of daily compounding.

Interbank Money Market Borrowing activities in Rupiah and/or foreign exchange between Conventional Banks in an overnight period.

Short Term Liquidity Loans Loans from Bank Indonesia to Banks to settle their short-term liquidity issues.

QR Code Indonesia Standard The payment QR Code standard set by Bank Indonesia to facilitate payment transactions in Indonesia.

Macroprudential Intermediation Ratio Macroprudential instruments aimed at managing bank intermediation function to be in line with the capacity ad target of economic growth while maintaining prudential principles.

Regulatory Sandbox A secure limited trial room to test financial technology operators along with the products, services, technologies and/or business models.



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Repurchase Agreement Financial instrument sales transactions between two parties based on a contract that at a later date there will be repurchases on the same financial instrument at an agreed price.

Policy Risk Risk of policy statements and setting, and regulations, by Bank Indonesia to the public.

Credit Risk Risk caused by the failure of one or more parties having the obligation to pay based on agreements, deals, or contracts, but excluding the obligation to pay in fulfilling existing regulations.

Liquidity Risk Risk due to Bank Indonesia’s inability to meet maturing financial obligations and execute asset transactions in real time at a fair price.

Operational Risk Risk due to the impact of weaknesses in internal process, human resources, system, and external factors that affect the policies and/or operations of institutions.

Market Risk Risk due to market movements in form of interest rates, exchange rates, equities, and commodities.

Bank Indonesia Certificate Short-term promissory notes in Rupiah issued by Bank Indonesia.

Bank Indonesia National Clearing System Electronic fund transfer system which includes debit clearing and credit clearing through national transaction settlement.

Sovereign Credit Rating Credit rating of a sovereign state institution, which is the government. Sovereign Credit Rating indicates the risk level of an investment environment in a country and is used by foreign investors wanting to invest in the country.

Stress Test The estimate of potential losses against credit and liquidity exposure based on various scenarios of price change and volatility.

Commercial Papers Securities issued by non-financial corporations or financial institutions in form of promissory notes with maturities of up to one year registered in Bank Indonesia.

Government Bonds Securities that consist of Government Debts in Rupiah and Government Sharia Debts in Rupiah issued by the Government of the Republic of Indonesia.

Government Debts Debt securities in Rupiah and foreign currencies issued by the Republic of Indonesia, as stated in the laws.





Swap Exchange transactions of two currencies through buying or selling in cash (spot) with future buying or selling held simultaneously with the same party at a premium or discounted rate and exchange rate made and agreed upon the date of transactions.

Financial Technology Technology utilization in the financial system which creates products, services, technology, and/or new business model which can impact monetary stability, financial system stability, and/or the efficiency, smoothness, security, and reliability of payment system.

Regional Inflation Control Team A cross-Institution team that monitors regional inflation development and identifies various issues on inflation control.

Two Sided Monetary Operation Monetary operation in two sides, both absorption or injection.

Circulated Currency M0 is the primary currency or core currency or reserve money. M1 covers banknnotes held by the people and deposit money (Rupiah denominated account). M2 covers M1, quasi money (covering savings, time deposits in rupiah and forex, and current account in forex), and commercial papers issued by the monetary system owned by the domestic private sector with a period of up to one year.

Banknotes Paper money and coins that are issued and circulated by Bank Indonesia and used as legal tender in the Republic of Indonesia.

Circulated Banknotes Money in the public and bank vaults.

Unqualified Opinion Unqualified opinion, issued by auditors if there are no limitations in audit coverage and no significant exceptions in fairness and application of general accounting principles in the financial statements, consistency of general accounting principles application, as well as sufficient disclosure in financial statements. The financial statement are considered to fairly present the financial positions and business outcomes of an organization, according to generally accepted accounting principles.

Virtual Currency Digital money issued by parties other than monetary authority which is acquired through purchases, reward transfers, or mining (the process to produce some new virtual currencies, involving complicated mathematical process).

Volatile Food Dominant CPI inflation components affected by shocks in the food category such as harvest and nature, whose prices fluctuating.

Yield Return.



AboutBank Indonesia



3D Look, Feel, See Through

3T Foremost, Outermost, and Remote

4K Price Affordability, Supply Availability, Smooth Distribution, and Effective Communication

5J Do Not Fold, Do Not Write, Do Not Staple, Do Not Squeeze, Do Not Wet

ACC Alternate Command Center

AIBR Risk-Based Internal Audit

AMRO ASEAN+3 Macroeconomic Research Office

AP Administered Price

APBN State Budget

API Application Programming Interface

APMK Card-Based Payment Instruments

APOLO Online Reporting Application

APU/PPT Anti Money Laundering and Terrorism Funding Prevention

AS United States

ASEAN The Association of Southeast Asian Nations

ATM Automated Teller Machine

Balinusra Bali-Southeast Nusa

Bansos Social Aid

BAPMI Indonesian Capital Market Arbitration Body

BCMS Business Continuity Management System

BCP Business Continuity Plan

BI Bank Indonesia

BI-7DRR Bank Indonesia 7-Day Reverse Repo Rate

BI-ANTASENA

Bank Indonesia National Metadata-Based Integrated Reporting Application

BI-CAC Bank Indonesia - Counterfeit Analysis Center

BI-ETP Bank Indonesia – Electronic Trading Platform

BI-RTGS Bank Indonesia – Real Time Gross Settlement

BI-SAK Bank Indonesia – Cash Application System

BI-SILK Bank Indonesia - Cash Services Information System

BI-SSSS Bank Indonesia – Scripless Security Settlement System

BIG-Eb Bank Indonesia - Government Electronic Banking

BIMASAKTI Bank Indonesia Toward Integrated Application System Direction

BIS Bank for International Settlements

BMEB Bulletin of Monetary Economics and Banking

BNM Bank Negara Malaysia

BoG Board of Governors

BoT Bank of Thailand

Bopo Operation Cost against Operation Income

BPJS National Social Security Agency

BPK-RI Supreme Audit Agency of the Republic of Indonesia

BPNT Non-Cash Food Aid

Bps Basis Point

Brexit British Exit

BRS Business Resumption Site

BSBI Bank Indonesia Supervisory Board

BUMN State Owned Enterprise

CAD Current Account Deficit

CAR Capital Adequacy Ratio

CBS Core Banking System

CCB Countercyclical Capital Buffer

CCP Central Counterparty

CDM Cash Deposit Machine

CEPA Comprehensive Economic Partnership Agreement

CIT Cash In Transit

CLIP Corporate Learning Improvement Process

CMIM Chiang Mei Initiative Multilateralisation

CPO Crude Palm Oil

CoA Chart of Accounts

COLA Cost of Living Adjustment

CSSP SP Cyber Security Sharing Platform Sistem Pembayaran

CRM Cash Recycling Machine

DAPENBI Bank Indonesia Pension Fund

DJB De Javasche Bank

DJP Taxation Directorate General

DKE Electronic Financial Data

DKU Main Cash Depot

DMFAS Debt Management and Financial Analysis System

DNDF Domestic Non-Deliverable Forward

DNI Negative Investment List

DPI Positive Investment List

DPK Third Party Funds

DQM Data Quality Management

DPR-RI House of Representatives of the Republic of Indonesia

DWP Digital Workplace

LiSt oF abbREviatioNS





ECB European Central Bank

ECL Expected Credit Loss

EDC Electronic Data Capture

EFMD European Foundation for Management Development

EMEAP Executive’s Meeting of East Asia Pacific Central Banks

EPU Economic Policy Uncertainty

ERP Enterprise Resources Planning

ERP/HRIS Enterprise Resource Planning and Human Resources Information System

ESS Electronic Security System

ETT Mid-Year Evaluation

ETP Electronic Trading Platform

FATF Financial Action Task Force

FESKABI Bank Indonesia Education Festival

FeSyar Sharia Economy Festival

FFR Federal Funds Rate

FGD Focus Grup Discussion

Finconet Financial Consumer Protection Organisation

Fintech Financial Technology

FK-PPPK Coordination Forum on Development Financing through the Financial Market

FKPISP Coordinating Forum on Information Exchange and Reporting System

FLI Intraday Liquidity Facility

FMI Financial Market Infrastructures

FOMC Federal Open Market Committee

FOMOBO Front Office Midle Office Back Office

FSB Financial Stability Board

FSSK Financial System Stability Forum

FTV Financing to Value

FX Foreign Exchange

GCG Good Corporate Governance

GENBI Indonesian New Generation

GNNT Non-Cash National Movement

GPN National Payment Gateway

GoA Gallery of Achievement

GRC Governance, Risk, and Compliance

HA End Result

HBKN Reiligious and National Holidays

HRIS Human Resources Information System

HVC Halal Value Chain

ICO Internal Control Officer

ICoFR Internal Control over Financial Reporting

IDB Islamic Development Bank

IFSB Islamic Financial Service Board

IHK Consumer Price Index

IHLC Indonesia Halal Value Chain

IHT In House Training

IILM International Islamic Liquidity Management

IMF International Monetary Fund

IORWG International Operational Risk Working Group

IoT Internet of Things

IPAL Wastewater Processing Installation

IPC International Peace Foundation

IPPF International Professional Practices Framework

IRS Interest Rate Swap

IRU Investor Relation Unit

IS-EA Information System Enterprise Architecture

ISEF Indonesia Shari’a Economic Festival

ISEI Indonesian Economic Scholars Association

ISIRT Information Security Incident Response Team

ITB Bandung Institute of Technology

JF Job Family

JIBOR Jakarta Interbank Offered Rate

JIMF Journal of Islamic Monetary and Finance

JPKI International Financial Safety Net

KAKBI Bank Indonesia’s Financial Accounting Policy

KAI Indonesian Train

KCI Indonesian Commuter Line

KEIN National Industry and Economic Committee

Kemenkeu Finance Ministry

KIP Public Information Disclosure

KKI Indonesian Creative Works

KKN Corruption, Collusion, Nepotism

KKS Prosperous Family Card

Kms Circuit kilometer

KNKS Sharia Finance National Committee

KOPERBI Bank Indonesia’s Office Complex

KPK Corruption Eradication Commission

KPKK Prudential Principles Implementation Activity

KPM Beneficiary Recipient Family

KPP Potential Employees Group



AboutBank Indonesia



KPwBI Bank Indonesia’s Representative Office

KSEI Indonesian Central Securities Depository

KSSK Financial System Stability Committee

KUPVA BB Non-Bank Money Changer Business Activity

KRI Key Risk Indicator

KTI Indonesian Easter Part

KU Main Activity

LBBU Commercial Banks Regular Report

LBU Commercial Banks Report

LCBSA Local Currency Bilateral Swap Agreement

LCS Local Currency Settlement

LHKPN Wealth Report of Civil Servants

LKBBU Commercial Banks’ Monthly Financial Statements

LKBI Bank Indonesia’s Financial Statements

LKPBU Commercial Banks’ Headquarters Report

LKTBI Bank Indonesia’s Annual Financial Statements

LNPRT Non-profit Institution serving Households

LPEI Indonesian Export Financing Agency

LPP Regulatory and Supervisory Agency

LPR Loan Prime Rate

LPS Deposit Insurance Corporation

LRT Light Rail Transit

LSMK Monetary Stability and Financial System Report

LTBI Bank Indonesia’s Annual Report

Ltd. Limited

LTV Loan to Value

MA Supreme Court

MBS Mortgage Backed Security

ME Mutual Evaluation

Mendikbud Education and Culture Minister

MFT Managed File Transfer

MKTBI Bank Indonesia’s Task Sustainability Management

MLE Multi Level Entry

MLF Medium-term Lending Facility

MLFF Multi Lane Free Flow

MoU Memorandum of Understanding

MPM Merchant Presented Mode

MRBI Bank Indonesia’s Risk Management

MRT Mass Rapid Transit

MVA Mega Volt Ampere

MW Megawatt

NDF Non Deliverable Forward

NFGS Network for Greening the Financial System

NFR Nett Favorable Ratio

NK Memorandum of Understanding

NKRI Republic of Indonesia

NPL Non Performing Loan

OIS Overnight Index Swap

OJK Financial Services Authority

OPT Open Market Operation

OTC Over The Counter

PADG Members of the Board of Governors Regulation

PAUD Early Childhood Education

PBI Bank Indonesia Regulation

PboC People’s Bank of China

PCS Prospective Staff Education

PDB Gross Domestic Product

PDG Board of Governors Regulation

PELNI Indonesian National Ship

PERUM PERURI

Indonesian Money Printing Firm

PhD Doctor of Philosophy

PJSP Payment System Services Operator

PKH Family Hope Program

PLM Macroprudential Liquidity Buffer

PLN State Electricity Firm

PMA Foreign Direct Investment

PMK Crisis Management Protocol

PMKLN Overseas Competence Improvement Program

PMKTBI Bank Indonesia’s Task Implementation Management Protocol

PPK Special Empowerment Program

PPS Staff Development Program

PS Strategic Program

PSBI Bank Indonesia’s Social Program

PSN National Strategic Project

PT Limited Company

PTBI Bank Indonesia’s Annual Meeting





PTD Fund Transfer Operator

PTD BB Non-Bank Fund Transfer Operator

Ptp Point to point

PUAB O/N Overnight Interbank Money Market

PUAS Interbank Money Market Based on Sharia Principle

PUR Rupiah Currency Management

QE Quantitative Easing

QRIS Quick Response Code Indonesia Standard

Rakornas National Coordination Meeting

RBI Reserve Bank of India

RBIA Risk Based Internal Audit

RSCA Revealed Symmetric Comparative Advantage

Repo Repurchase Agreement

RIKOPERBI Bank Indonesia’s Office Complex Masterplan

RIM Macroprudential Intermediation Ratio

RIPABI Bank Indonesia’s Asset Utilization Masterplan

RIRBI Bank Indonesia’s Housing Masterplan

RISIBI Bank Indonesia’s Information System Masterplan

RK Detail of Activities

RKT Annual Work Meeting

RoA Return on Assets

Rp Rupiah

RPP Government Regulation Draft

SARS Severe Acute Respiratory Syndrome

SBI Bank Indonesia Certificate

SBN Government Bonds

SDGs Sustainable Development Goals

SDM Human Resources

SE Circular Letter

SEACEN The South East Asian Central Banks

SEAVG South-East Asia Voting Group

SEP Summary of Economic Projection

SESPI Leadership School

SESMABI Sekolah Pimpinan Madya Bank Indonesia’s Middle Leadership School

SESMABI Bank Indonesia’s Young Leadership School

SESPIBI Bank Indonesia’s High Leadership School

SESTABI Bank Indonesia’s Main Leadership School

SI Information System

SI-DHN National Blacklist Information System

Simkrinas National Crisis Simulation

SIMODIS Real Time Integrated Forex Monitoring Information Syste,

SIMONEV Monitoring System and Regulaion Evaluation in Bank Indonesia

SINAS Customer Information System

SKNBI Bank Indonesia’s National Clearing System

SLFF Single Lane Free Flow

SMART CC Specific, Measureable, Achievable, Relevant, Time-bound, Consistent Continuous improvement

SN-PPPK National Strategy for Financial Market Deepening and Development

SOP Standard Operating Procedure

SoU Story of Us

SOE State-Owned Enterprise

SPAMK Budget Planning and Performance Management System

SP2D Fund Disbursement Warrant

SPNS Sharia Government Bonds

SPT Tax Return

SPU Cash Management Center

SSI Stakeholders Satisfaction Index

SSK Financial System Stability

Sulampua Sulawesi-Maluku-Papua

SUN Government Debt

Tbk. Ltd.

ToT Trick of Three

TBI Trade Balance Index

TKA Foreign Worker

TMF Capital and Financial Transaction

TNI-AL Indonesian Military – Navy

TP Main Job

TPAK Workforce Participation Level

TPID Regional Inflation Control Team

TPIN National Inflation Control Team

TPIP Central Inflation Control Team

TPPU Money Laundering Crime

UGM Gadjah Mada University

E-Money Elektronic Money

ULE Fit Money



AboutBank Indonesia



UNGGUL Universal, Easy and Direct

UPB Large Value Denominations

UPK Small Value Denominations

USD United States Dollar

UTLE Unfit Money

UU PPKSK Law on Financial Crisis Mitigation and Resolution

Valas Foreign Exchange

VF Volatile Food

VIX Volatility Indeks

WBS Whistle Blowing System

WG Working Group

WHO World Health Organization

WTP Unqualified Opinion

YoY Year on Year

ytd Years to Date

www.bi.go.id @bank_indonesia bank_indonesia Bank Indonesia Channel Contact Center: 131

Address : Jalan M.H. Thamrin No. 2 Jakarta 10350 IndonesiaPhone : 131 / +62 21 1500 131 Facsimile : +62 21 386 4884e-mail : [email protected]

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