The Republic of Indonesia

1. DRAFT STRICTLY CONFIDENTIAL The Republic of Indonesia Continued growth and stability February 2007

2. Disclaimer The presentation is being made to you on the basis that you have confirmed your representation to each of Citigroup, Deutsche Bank AG and UBS AG (the “Joint Bookrunners”) that (i) you are not resident in the United States nor a U.S. Person, as defined in Regulation S under the U.S. Securities Act of 1933, as amended (the “Securities Act”), nor acting on behalf of a U.S. Person and, to the extent you purchase the securities described herein you will be doing so pursuant to Regulation S under the Securities Act OR (ii) you are acting on behalf of, or you are, a qualified institutional buyer, as defined in Rule 144A under the Securities Act. THE SECURITIES HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE SECURITIES ACT, OR THE SECURITIES LAWS OF ANY STATE OF THE U.S. OR OTHER JURISDICTION AND MAY NOT BE OFFERED OR SOLD WITHIN THE U.S. OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT), EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE OR LOCAL SECURITIES LAWS. ANY INVESTMENT DECISION SHOULD BE MADE ON THE BASIS OF THE FINAL TERMS AND CONDITIONS OF THE SECURITIES AND THE INFORMATION CONTAINED IN AN OFFERING MEMORANDUM AND/OR OTHER MATERIALS THAT WILL BE DISTRIBUTED TO YOU PRIOR TO THE CLOSING DATE AND NOT ON THE BASIS OF THIS PRESENTATION. This presentation is confidential and has been prepared by the Republic of Indonesia (“RoI”) for selected recipient for information purposes only. The Joint Bookrunners do no warrant the completeness or accuracy of the information contained herein, nor have they independently verified such information. Opinions and estimates constitute the sole judgment of the RoI as of the date of this material and are subject to change without notice. Past performance is not indicative of future results. Any securities, financial instruments or strategies mentioned herein may not be suitable for all investors. The recipient of this report must make its own independent decision regarding any securities of financial instruments. The Joint Bookrunners may act as market maker or trade on a principal basis, or have undertaken or may undertake to trade for their own account, transactions in the financial instruments or related instruments of any issuer discussed herein and may act as underwriter, placement agent, advisor or lender to such issuer. The Joint Bookrunners and/or their employees may hold a position in any securities or financial instruments mentioned herein.

3. Summary terms of the offering Issuer The Republic of Indonesia Ratings Moody’s: B1 (stable)S&P’s: BB- (stable)Fitch: BB- (positive) Format RegS / 144A US$ benchmark Offering Size Instrument Senior fixed rate notes Maturity TBD Use of Proceeds General funding purposes Listing Singapore Stock Exchange Joint Bookrunner Citigroup, Deutsche Bank, UBS Investment Bank

4. Indonesia on the right track for continued growth GDP growth by 6.3% in 2007 Improved investment climate Progressing infrastructure development Prudent fiscal & monetary policy Implemented financial sector reforms Solid debt management Stable macro-economic and socio conditions

5. SECTION 1 Economic performance

6. Target 2007: Achieving 6.3 percent GDP Growth Strong growth driven by domestic consumption, improved export performance and rising consumer purchasing power Sources of GDP – demand side Sustainable economic growth Sources of GDP - Supply Side Notes: 1 Preliminary 2 Based on 2007 state budget Source: Ministry of Finance

7. Continued increase in consumer spending Domestic expenditures increased towards the end of 2006 by growing consumer spending % Rp trillion Source: Ministry of Finance

8. Investment to grow significantly in 2007 from the surge of approvals in 2006 PMDN approval value PMA approval value Investment Approval Rp Billion 2005 2006 Investment Implementation Rp Billion • Source: Ministry of Finance • PMA: Foreign investment • PMDN: Domestic investment

9. Further investment triggered by accelerated imports of capital goods VAT Import of Capital and Non-Capital Goods Rp billion %

10. Strong Performance of Non-Oil Export Export volumes increased despite the appreciation of the rupiah Export Value and Growth 2005-2006 Export Value and Volume 2005-2006 Oil/Metals Commodity Index USD IDR exchange rate Source: Ministry of Finance

11. Improve efficiency & effectiveness of government expenditure to stimulate growth Strong growth in goods and capital spending Infrastructure-related activities dominated government expenditure Rp Billion Source: Ministry of Finance

12. SECTION 2 Prudent fiscal policy

13. Fiscal Consolidation on track Continued fiscal discipline Debt to GDP Key highlights • Improvement on revenue side (Tax and customs reforms) • Preparations under way for medium term budget and treasury reforms, including performance and multi year budget, treasury single account, accrual basis • Discipline approach to contingent liabilities including infrastructure projects • Consolidation of fiscal decentralization • Improved fiscal balance • Regional borrowing and municipal bonds, subject to Minister of Finance approval • Reduced debt to GDP Note: * Preliminary Source: Ministry of Finance Bank of Indonesia 8

14. 2006 State Budget State budget 20061 Note: 1 Preliminary Source: Ministry of Finance 8

15. 2007 State Budget Key assumptions • Aggressive target of GDP growth of 6.3% based on conservative oil price assumption (US$63/bbl) • Target deficit at 1.1% of GDP • Budget financing to rely more on domestic sources, primarily government debt • Increase expenditures for the regions State budget 2007 Source: Ministry of Finance 8

16. Fiscal Policy to Support Investment Tax policy and Administration Tax ratio on upward trend • Amendment of Tax Law • Establishment of Policy Unit MOF (FPO) • Modernize DGT: Expansion of LTO, MTO and HQ • Tax Incentives for Investment Tariff and Customs • Improve Tariff Setting (Import Duty) • Modernize Customs Office • Implement EPA and FTAs Infrastructure (PPP) • Establishment of Risk Management Unit • Risk Sharing Schemes • Infrastructure and Land Fund • Non-Compliant Project and High Profile Project • Support Model Project (Infrastructure Summit II) Note: * preliminary Source: Ministry of Finance 8

17. SECTION 3 Debt management strategy

18. Debt Management Strategy Objective • To target maximum net additional total debts (loan & debt securities) <1% of GDP • To prioritize debt securities issuance in domestic market for deficit financing & debt refinancing To minimize cost of debts at manageable risk External loan financing Portfolio Management Key highlights Domestic bond market development • To diversify debt instruments as to widen investors base • To develop market infrastructure as to support efficient price discovery mechanism • To meet Millenium Development Goals (MDGs), (E.g. poverty reduction) • To finance cost recovery projects • To enhance project readiness criteria • To issue benchmark bonds on regular basis (E.g. 5, 7, 10 and 20 years) • To aggressively conduct debt switching to extend duration • To buybacks bonds to reduce outstanding debt and stabilize market Effective Coordination Fiscal, Monetary and Capital Market Authority 8

19. Budget Financing Trend Improvement in debt position • More reliance on debt securities (positive net additional debt securities) • Reduction in external financial (negative net additional loans) • Net additional total debt less than 1% of GDP Source: Ministry of Finance

20. Improving Maturity Profile of Debt Securities Significant reduction of debt refinancing risk and enhanced government bond market liquidity Source: Ministry of Finance 8

21. Performance of domestic government bond market Investor base is getting more diversified with the increased ownership by foreign investors Ever-increasing daily transaction Diversified bond holders Source: Ministry of Finance Notes: 1 Offshore include banks, financial institutions, etc. 2 Others include individuals, corporate, foundations, etc.

22. Active debt management & pro-active market development policy Government bond yields decline faster than that of SBI rate The beginning of active debt debt management Source: Ministry of Finance 8

23. Reduced cost of international borrowing Spread over UST Source: Bloomberg

24. SECTION 4 Effective Monetary Policy

25. Prudent Monetary Measures Declining inflation supported by gradual easing of monetary policy BI Rate, IDR exchange rate in 2006 • Within ITF, BI continue to maintain inflation towards a moderate medium term range, while continuing to accelerate economic growth • BI supports incentives for long term capital flows Source: BPS, Bank Indonesia

26. SECTION 5 BoP Development

27. Strong External Position Supported by healthy rise in foreign exchange reserves BoP supported by strong current account surplus Source: Bank Indonesia

28. SECTION 6 Commitment in financial sector

29. Improvement of national banking industry Underpinned by growth in earning assets, high level of capital adequacy ratio, and improved NPL Commendable performance of commercial bank earnings assets Improved CAR and NPL Source: Bank Indonesia

30. Financial sector policy direction To continue strengthening banking institutions and to widen and deepen financial instrument, supported by secure and liquid financial market ACHIEVEMENTS IN 2006 KEY PLANS FOR 2007 • Enhance Credit Information Center (Credit Bureau) • Implement Risk Management Certification Program for bank’s commissioners • Speeding up banking consolidation to strengthen structure of national banking system • Improve intermediary function • Enhance bankers’ competence through certification of risk management • Improve customer protection in banking sector

31. SECTION 7 Conclusion

32. Indonesia on the right track for continued growth GDP growth by 6.3% in 2007 Improved investment climate Progressing infrastructure development Prudent fiscal & monetary policy Implemented financial sector reforms Solid debt management Stable macro-economic and socio conditions

33. SECTION 8 Extra slides

34. Sensitivity of 1US$ Decrease of Oil Price Domestic Oil consumption on 2007 Budget Energy price policy Exercise automatic adjustment on fuel Source: Ministry of Finance 8

35. Performance of Debt Portfolio Management • Notes: • FX = Foreign Exchange • ATM = Average Time to Maturity • FX include International Bonds 8

36. Positive ratings momentum BB Ba2 BB- Ba3 B1 B+ B B2 B- B3 Upgrade as of 27 January 2005 CCC+ Caa1 Upgrade as of 26 July 2006 CCC Caa2 Upgrade as of 29 May 2006 SD SD 2001 2002 2003 2004 2005 2006 S&P's Fitch's Moody's (RHS) Solid track towards an investment-grade rating (pre-1997 level) Ratings upgrades re-affirm that Indonesia is on the right track

37. Fiscal policy to support investment growth Tax ratio on upward trend Proposed tax and custom reforms Target benefits • Increased compliance • Increased number of taxpayers • Widened tax base • Increased taxable revenues Tax receipt as % of GDP [TBU] Administrative reforms Taxes • Implement database and on-line system • Improve current Large Tax Office Customs • Extend green lane facility to taxpayers • Tariff harmonization • Fighting against illegal products and smuggling Proposed tax law • Provide incentive and pro-business deregulation • Revise tax procedure and administration, income tax and VAT • Provide more legal certainty Source: Ministry of Finance Notes: 1 Preliminary 2 Based on proposed 2006 State Budget

38. SOE Capex and Opex Source: Ministry of Finance

39. Stable socio and political outlook Socio-political sector Real sector Financial sector • The signing of Aceh peace agreement in Helsinki on Aug 15, 2005 and enactment of New Law regarding Aceh Administration on July 2006 • Multi party system • Strong civil society and media role to check and monitor the work of government • No terror attack during the course of 2006. Ratified international convention on terrorism. • Meaningful crackdown on corruption which has generated fear factor to commit corruption. Ratified the UN Convention against Corruption. • Settlement with Newmont, Cepu and Cemex Case • Successful approach in resolving Freeport Case in Papua. • The World Economic Forum's 2006 Global Competitiveness Index on Indonesia up to 50th rank in 2006 from 69th rank in 2005 • Calpers has included Indonesia in the list of 19 countries that eligible as a destination for its pension fund investment. • Signing of Bilateral Swap Arrangement with China (USD 4 bn) on favorable terms • Established Secondary Mortgage Facility company with World Bank and Asian Development Bank • Financial Sector Policy Package to strengthen financial sector • Completion of IMF loans The figure of President and Vice President that remains popular gives administration the ability to push through reforms 8

40. New policies to support investment Investment climate improvement 1 Investment Law & Procedure Tax & Custom Reform 2 Labor & Immigration 3 Trade Licenses 4 Cross Sector Strategic Policy Reform 5 Infrastructure Sector Restructuring, Corporatisation and Policy Reform 6 Regulation on natural monopoly & investment protection 7 Clear separation on the role of policy maker, regulator, contracting agency, and operator 8 9 Financial Coordination Monetary & Fiscal Authority 10 Financial Institution (Banking & Non Banking) 11 Capital Market and SOE Privatization

41. Infrastructure policy package One important theme in these laws is the phasing out of the monopoly position of the SOEs in infrastructure services….. Wider opportunities will be open up for private investments in railways, harbors and airports and other sectors Energy & Power Telecommunication Road & Toll Road Water & Sanitation Transportation

42. Special economic zone An area which will have a certain regulation that will provide competitive business environment Establishment of an integrated investment unit to significantly reduce time, costs, and hassles in processing investment applications Customs & Excise Licensing and integrated investment services • Availability of well-developed infrastructure • Professional authority Tax Immigration & Labor Regulation • Attract investment; • Create employment; • Generate export revenue; • Improve export competitiveness; • Generate local resources, service and capital; • Facilitate technology transfer.

43. Promising new energy policy Demand side: • Target main consumers: • State electricity company (PLN) • Diversification toward non- petroleum based generation • Households • Kerosene reduction program through city gas and LPG • Transportation • CNG-based public transportation in Jakarta and Surabaya Supply side: • Promote new development in oil and gas sector • Improvements to investment climate in oil and gas sector • Green Energy Program • Fiscal incentives for green energy (bio-fuel) • New Energy, Electricity and Mining Laws under preparation • Reduces subsidies • Reduces costs • Creates employment • Diversifies energy sources • New Steam Power Plant, Cap : 2X660MW • New Hydro Power Plant , Cap : 3X 70MW • Power Plant Crash Program : 10.000 MW • 5 New Contract Oil & Gas Project was signed with value of US$ 14,25 million

44. Debt Management Unit - strategy Active and Liquid bond market Widening Investor Base • Product diversification retail, sukuk • Incentive to hold Absorption capacity Efficient price/yield Market Making • Primary dealership • Retail agency Marketing Deepening • Regular (benchmark bond) calendar of issuance • Regular debt switch • Buyback off-the-run bonds Facilitating Efficient Price Discovery Mechanism • Price transparency Demand & Supply Market Infrastructure Fiscal policy and debt strategy • Net additional debt • Tax incentive Monetary Policy • OMO instrument • Secondary reserve • REPO (government securities) Removing regulatory distortions: e.g. pension reform Regulation and supervision • Reporting requirements • Trading platform • Borrowing and lending (facilities) • Governance • SRO empowerment (inter-dealers market) • Derivatives market • Clearing & settlement • Market surveillance

45. Banking policy in 2007 Direction of banking policy in 2007 • To be more active in functioning as a catalyst in the process of increasing bank intermediation function towards the real sector • To reorganise the national banking through the revitalisation of existing banks and their role, especially state-owned banks • To facilitate the merger process between banks that are deemed in need of assistance • To facilitate a smooth banking intermediary function, which has become the main problem faced by Indonesia’s banking industry recently • To provide guidance to foreign banks to contribute more optimally to the development of the Indonesian economy • To more proactively develop the financial market as well as financial instruments • To accelerate the expansion of Indonesian Sharia banking • To redirect the role, function and operational design of rural banks to serve the common people, particularly those in informal sectors

46. Budget 2007 Sensitivity Analysis Source: Ministry of Finance 8

47. Medium Term Budget 2007 – 20091 Note: 1 Very Preliminary Number Source: Ministry of Finance 8

48. Banking Industry (Reserve slide) Gross NPL of 15 largest banks (as of November 2006) Source: Bank Indonesia

49. Statemen Para Analisis, Investor dan Pemeringkat • Stabilitas eksternal merupakan fokus utama penilaian rating Indonesia. Hal ini terkait dengan kerentanan Indonesia terhadap international capital flow khususnya portfolio investment dimana investor sangat dipengaruhi aksi profit taking • Terkait dengan indikator eksternal tersebut, investor melihat sejauh mana income generating dalam bentuk valas dapat men-suport beban hutang luar negeri Pemerintah • Walaupun posisi reserve Indonesia mengalami peningkatan namun sebagian besar bersumber dari portfolio investment yang rentan terhadap sentimen pasar. Oleh karena itu non debt inflow dalam bentuk direct FDI sangat diharapkan untuk membangun ketahanan perekonomian terhadap shock eksternal • Upaya Pemerintah untuk memperbaiki investment climate guna menarik FDI dalam bentuk berbagai paket kebijakan diniai sangat baik, namun ketika masuk tahap implementasi, proses ini berjalan sangat lambat

50. Statement Para Analisis, Investor dan Pemeringkat • Untuk negara seperti Indonesia, normalnya current account masih defisit karena sebagian besar impor Indonesia adalah barang modal yang diperlukan untuk kegiatan industri. Hal ini menunjukkan bahwa perekonomian Indonesia cenderung masih stagnan • Walaupun kebijakan di bidang fiskal mampu menghasilkan defisit APBN yang terkendali namun potensi masalah yang mungkin timbul dari contingent liabiilty menjadi fokus perhatian. Titik berat penilaian contingent liabiilty terletak pada sejauh mana keterlibatan Pemerintah sebagai back up terhadap masalah keuangan yang mungkin timbul dari entitas tersebut diatas