New Regulation in Indonesia Amends the Facilities Requirements for Public-Private Partnerships

Legal Updates
New Regulation in Indonesia Amends the Facilities Requirements for Public-Private Partnerships
16 January 2017

By Awang Fahrizal

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 "PPJK").

PJPK can be the Minister, Head of Institution, Head of Region, State-Owned Enterprise or Regional-Owned Enterprise, as the provider or organizer 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. 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 authorizing the MOF to: (i) assign certain State-Owned Enterprises to implement the provision of the facilities; (ii) cooperate with International Organizations 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 in the form of an Assignment Decree issued by the MOF. In the event of forming the aforementioned cooperation with an International Organization, the PJPK is required to submit an application to the MOF along with evidence of its communications with the International Organization.

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 Organization. After these agreements have been fulfilled and executed, the PJPK and the International Organization 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 Konfimasi) from the Minister of Energy and Mineral Resources. Expenses related to the cooperation with the International Organization 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.

This publication is intended for informational purposes only and does not constitute legal advice. Any reliance on the material contained herein is at the user's own risk. You should contact a lawyer in your jurisdiction if you require legal advice. All SSEK publications are copyrighted and may not be reproduced without the express written consent of SSEK.

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