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Legal Updates | New Regulation in Indonesia Amends the Facilities Requirements for PPP

Indonesia’s Ministry of Finance (“MOF”) recently issued MOF Regulation No. 129/PMK.08/2016 regarding the amendment of MOF Regulation No. 265/PMK.08/2015 regarding Facilities for the Preparation and Implementation of Public-Private Partnership (“PPP”) Project Transactions for the Provision of Infrastructure (“MOF 129/2016”).

MOF 129/2016 amends MOF Regulation No. 265/PMK.08/2015 (“MOF 265/2015”) and introduces several new provisions.

MOF 265/2015 provides facilities to improve the implementation of PPP projects. These facilities are provided by the MOF to the Responsible Party for any given PPP project (Penanggung Jawab Proyek Kerjasama or “PJPK”). PJPK can be the Minister, Head of Institution, Head of Region, State-Owned Enterprise or Regional-Owned Enterprise as the provider or organiser of the infrastructure project.

Facilities include (a) facilities for the preparation of a PPP project (i.e., the (i) preparation of the final assessment of pre-feasibility study, and (ii) preparation for the review and/or supporting documents for the final assessment of pre-feasibility study), and/or (b) assistance facilities in a PPP transaction (i.e., the (i) implementation of the provision of business entity, (ii) implementation to execute the PPP contract, and (iii) financing for the PPP project).

These facilities can be given for the following:

  1. Priority PPP projects: PPP projects can be categorised as priority projects under the provisions of Presidential Regulation No. 75 of 2014 regarding Acceleration of the Provision of Priority Infrastructure.
  2. Other PPP projects: These are PPP projects where the PJPK has conducted a market assessment and such assessment indicates a substantial number of potential investors interested in taking part in the PPP project.

To obtain facilities, the PJPK must submit an application to the MOF for the intended and necessary facilities, and then enter into a Master Agreement (“Kesepakatan Induk”) with the MOF once the application is approved.

The provision of the facilities is funded by the state budget (herein after referred to as “Project Development Fund”).

The newly-issued MOF 129/2016 introduces additional provisions with the stated aim of improving the efficiency and effectiveness with which facilities are provided by authorising the MOF to:

  1. assign certain State-Owned Enterprises to implement the provision of the facilities;
  2. cooperate with International Organisations in the framework of implementing the provision of facilities for the construction and development of domestic oil refineries.

Assignment of a certain State-Owned Enterprise must be in the form of an Assignment Decree issued by the MOF.

In the event of forming the aforementioned cooperation with an International Organisation, the PJPK is required to submit an application to the MOF along with evidence of its communications with the International Organisation. Once the application is verified and approved by the MOF, the MOF will enter into a Master Agreement with the PJPK on the provision and implementation of the facilities, and then enter into a Provision of Facilities Cooperation Agreement (“Perjanjian Kerjasama”) with the International Organisation.

After these agreements have been fulfilled and executed, the PJPK and the International Organisation will then enter into an Implementation of Facilities Agreement (“Perjanjian Pelaksanaan Fasilitas”). Prior to entering this agreement, the PJPK must first obtain a Confirmation Letter (“Surat Konfirmasi”) from the Minister of Energy and Mineral Resources.

Expenses related to the cooperation with the International Organisation will be funded by the Project Development Fund. However, the PJPK must initially bear the costs for the implementation of the facilities before being reimbursed for such payments from the Project Development Fund.

SSEK - 31st january 2017

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Indonesia Snapshot

Capital: Jakarta
Population: 259 million (2016)
Currency: Indonesian Rupiah
Nominal GDP: $936 billion USD (IMF, 2016)
GDP Per Capita: $3,620 USD at Current Prices (IMF, 2016)
GDP Growth: 5.0% (2016)
External Debt: 36.80% of GDP (BI, Q2 2016)
Ease of Doing Business: 91/190 (WB, 2017)
Corruption Index: 90/176 (TI, 2016)