1. Collateral
What types of collateral are available?
- Collateral may include certain types of real property rights, moveable objects and certain intangibles. A mortgage on real property may encumber the right of ownership, the right to cultivate and the right to build, as well as the transferable right to use of state land. A fiduciary security may encumber certain intangibles (including proceeds, receivables, insurance claims and shares), immoveable objects that are not subject to the law on real property mortgages, and moveable objects (eg, inventory, machinery and equipment, except aircraft and registered maritime vessels with a gross volume of at least 20m3, each of which is subject to specific laws). A pledge may encumber any moveable object physically delivered to the secured party, such as share certificates. Contractual rights, leaseholds, concessions and licences, among other things, cannot be the object of a security device under Indonesian law.
How is a security interest in each type of collateral perfected and how is its priority established? Are any fees, taxes or other charges payable to perfect a security interest and, if so, are there lawful techniques to minimise them? May a corporate entity, in the capacity of agent or
trustee, hold collateral on behalf of the project lenders as the secured
party?
- A mortgage on real property is made effective by registration of a mortgage deed (akta pemberian hak tanggungan, APHT) by the relevant land office in the applicable mortgage book. The application for registration must be made within seven days of the execution of the APHT; the date of registration will be seven days after receipt of the requisite documents. The APHT must be in the Indonesian language and be executed before an applicable land deed official (PPAT). Additionally, the underlying loan agreement must provide that the mortgagor agrees to grant a mortgage to secure the debts arising thereunder. A fiduciary security interest is made effective by registration, at the Fiduciary Registry at the domicile of the fiduciary grantor, of a deed of fiduciary security, executed as a notarial deed in the Indonesian language. The deed of fiduciary security must state, among other things, the amount of the secured indebtedness and the value of the assets subject to the fiduciary encumbrance. Effectiveness of a fiduciary security interest in receivables also requires acknowledgment in writing by the applicable obligors or account debtors or notification of the obligors or account debtors by court bailiff. A pledge is made effective by physical delivery of the pledged collateral to the pledgee and giving notification of the pledge to the party with respect to whom the rights of the pledgee are to be exercised. A pledge of registered shares becomes effective on the recordation of the pledge on the shareholders’ register of the issuing company.
- In the case of shares in scriptless form listed on the Indonesian Stock Exchange, this is achieved by registering the pledge with the Indonesian central securities custodian agency. Execution of an APHT requires payment of fees to the land deed official and to the land office. Amounts vary from location to location. Execution of a notarial deed evidencing a fiduciary security interest requires payment of notarial fees, which are negotiated with the notary; registration of the deed in the applicable Fiduciary Registry requires payment of an additional fee and non-tax state income, the amount of which depends on the value of the secured indebtedness. For a pledge agreement and related documentation to be eligible for presentation as evidence in an Indonesian court or before a government agency, a nominal stamp duty must be paid.
Creditors may appoint a proxy (eg, a security agent) under contract to hold and enforce security interests on their behalf. The terms of the appointment would be governed by the applicable contract. In the case of an APHT, however, the lenders should be named as secured parties, in addition to the security agent. If the composition of the lenders changes, such change should be evidenced by a deed of assignment. Based on this, the National Land Agency (BPN) may
be requested to update the composition of the lenders identified in the APHT.
3. Existing liens
How can a creditor assure itself as to the absence of liens with priority to the creditor’s lien?
- A creditor may obtain evidence that certain real property is not subject to an APHT by conducting a search at the applicable land office. Conducting this search requires physical possession of the original certificate of title, which must be brought to the land office. The Fiduciary Registration Offices maintain records of fiduciary security interests in the form of a Fiduciary Register Book. However, these records are not frequently updated or organised. A creditor may obtain evidence that shares are not subject to a pledge by checking the share register book of the issuing company.
4. Foreclosure on and sale of collateral
What steps must a project lender take to foreclose on and sell collateral in your jurisdiction? (Are self-help remedies available? Is a public or private sale permissible or required? Is a judicial sale necessary? May the project lenders participate as buyers in any sale? May such sale be for foreign currency?)
- A notice of default and demand of payment must generally precede any foreclosure action. APHT and fiduciary security interests may be enforced by either direct public auction or court proceeding to obtain a court order of foreclosure. It is possible, however, that an auction house may decline to implement a public auction until a court order of foreclosure has been issued. Moreover, in practice a debtor may interrupt an auction by a court filing requesting a stay of the auction on some basis. In the case of a pledge, there are no mandatory procedures for conducting an auction.
Public auctions may be conducted by the State Auction House or by a private company licensed to act as an auction agent. The project lenders may participate as buyers in any such auction.
Alternatively, the secured parties under an APHT or a fiduciary security interest may, with the approval of the debtor, sell the encumbered property directly to a third party purchaser after written notice to all concerned parties (including any holders of second or subsequent security interest) and announcement of the proposed sale in at least two newspapers at least one month prior to the proposed sale (if no objection to such sale has been filed). Any such sale by auction or otherwise can be made in foreign currency.
5. Foreign exchange
What are the restrictions, controls, fees, taxes or other charges on foreign currency exchange?
- There is no restriction on cross-border remittance of foreign currencies through the Indonesian banking system, but there is a reporting system administered by Bank Indonesia (BI), the central bank. For transactions not carried out through the Indonesian banking system, however, companies (non-bank and non-financial institutions) that have total assets or total annual gross revenues of at least 100 billion IDR are required to report to BI (i) any transaction affecting their offshore assets and/or liabilities and (ii) the changes in position of their foreign assets and/or liabilities.
Cross-border remittances of Rupiah funds through the Indonesian banking system are prohibited.
6. Remittances
What are the restrictions, controls, fees and taxes on remittances of investment returns or loan payments to parties in other jurisdictions?
- For any transfer of foreign currencies amounting to USD10,000 or more, the transferring customer must provide information to its bank as to the residency of the recipient. Payments to an offshore party in the form of dividends and interest are subject to a 20% withholding tax, unless there is a lower rate pursuant to a tax treaty.
7. Repatriation
Must project companies repatriate foreign earnings? If so, must they be converted to local currency and what further restrictions exist over their use?
- Neither repatriation nor currency conversion is required. Under the Investment Law, a foreign investor is given the right to freely transfer and repatriate in foreign currency, capital, profit, bank interest, dividend and other income, among other things.
8. Offshore and foreign currency accounts
May project companies establish and maintain foreign currency accounts in other jurisdictions and locally?
Yes, a project company may establish and maintain a foreign currency account in other jurisdictions and locally.
9. Foreign investment and ownership restrictions
What restrictions, fees and taxes exist on foreign investment in or ownership of a project and related companies? Do the restrictions also apply to foreign investors or creditors in the event of foreclosure on the project and related companies? Are there any bilateral investment treaties with key nation states or other international treaties that may afford relief from such restrictions? Would such activities require registration with any government authority?
- All business fields or sectors may be open to some foreign investment, except for (i) the production of weapons, ammunition, explosive materials, military equipment, and (ii) business sectors that are explicitly closed or otherwise restricted pursuant to a specific law or regulation (including, under the current DNI (defined below), gambling or casinos and the museum business sectors).
The activities of a foreign capital investment company must be approved by the Capital Investment Coordination Board (BKPM) and/or, if applicable, its regional equivalent.
The criteria and conditions for business sectors open under certain conditions or which are closed to investment are separately regulated in a presidential regulation, which is commonly known as the Negative List of Investment (DNI). The most recent DNI was issued – and subsequently amended – in 2007. The DNI is valid for 3 (three) years as of the issuance date, unless amended within such period, and may be re-evaluated if required.
The current DNI divides the types of business sectors in the following structure: - Business sectors totally closed to foreign investment (which currently includes 23 business sectors).
Business sectors open under certain conditions, which include those: - reserved for small-scale and medium businesses and cooperatives;
requiring a local partner; - for which foreign capital participation is limited to a specific percentage;
limited to a specific location; - requiring a specific license;
- reserved for 100% domestic investment;
- for which foreign capital participation is limited to a specific percentage and that are limited to a specific location; and
- for which foreign capital participation is limited to a specific percentage and that require a specific license.
There is no statutory minimum of foreign investment. However, BKPM has its policy that for a manufacturing company, a minimum of US$ 500,000 is required and for a non-manufacturing company (service company) a minimum of US$ 250,000 is required.
In connection with a foreign lender’s enforcement remedies, any prospective foreign purchaser of shares in a project company at a public auction would be subject to the applicable foreign investment regulations.
10. Documentation formalities
Must any of the financing or project documents be registered or filed with any government authority or otherwise comply with legal formalities to be valid or enforceable (eg, language, notaries. If not strictly required, please indicate if it is otherwise advisable).
- A notarial deed is a highly stylized type of legal document executed by an Indonesian notary that provides prima facie evidence in court regarding the matters set forth in the deed, including due execution and authorization, compliance with Indonesian law and that the parties understand the matters to which the deed relates.
Transaction documents that must be executed in notarial deed form include, among others, instruments conveying real property, mortgages on real property (except that they must be executed before a PPAT – who may or may not be a notary – rather than before a notary), a grant of a fiduciary security interest, a power of attorney to impose a mortgage on real property and an acknowledgment of indebtedness. Additionally, in some cases, it is advisable for lenders to have loan documentation (in addition to the acknowledgment of indebtedness), and for parties to obtain powers of attorney, in notarial deed form.
A nominal stamp duty of Rp. 6,000 per document must be paid for each document to be executed or used in Indonesia (including admission before an Indonesian court).
On 9 July 2009, Indonesia enacted Law No. 24 of 2009 on The National Flag, Language, Coat-of-Arms and Anthem, which requires, among others, (a) agreements with the government, private institutions or Indonesian citizens to be written in the Indonesian language (and by implication, all notices or reports pursuant to such agreements) and (b) requires all reports to be filed with the government to be made in the Indonesian language. Additionally, for court admission, any non-Indonesian language documents must also be accompanied by a sworn translation into the Indonesian language prepared by a sworn translator licensed in Indonesia.
11. Government approvals
What government approvals are required for typical project finance transactions (please cover investments, loans, operations, transactions and remittances by foreign parties or by local companies owned or controlled by foreign parties)? What fees and other charges apply?
A project finance transaction involving offshore equity participants and lenders typically will involve the following government approvals:
- Approval of the Ministry of Law and Human Rights in respect of the formation of the project company in the form of limited liability company;
- Approval of the foreign equity ownership in the project company by the Capital Investment Coordination Board (BKPM);
- Approval of the Offshore Loan (PKLN) Team, which consists of representatives from Bank Indonesia and the Ministry of Finance, in respect of financing of projects that have any connection with certain transactions involving the government or a state-owned enterprise (BUMN),
- Applicable technical, operational and environmental consents, approvals and/or licenses, which vary by sector; and
- Applicable regional and/or local consents, approvals and/or licenses, which vary by location.
Additionally, offshore borrowings are subject to various reporting requirements to the Offshore (PKLN) Team, Bank Indonesia and the Ministry of Finance.
Administration fees may apply in order to obtain approvals, which vary by respective authorities.
12. Foreign insurance
What restrictions, fees and taxes exist on insurance policies over project assets provided or guaranteed by foreign insurance companies (please consider whether local insurance is required and, if so, whether cut-through clauses or reinsurance is effective or customarily required by foreign investors or creditors)? May such policies be payable to foreign secured creditors?
Participation of an offshore entity in insurance activities in Indonesia can only be done through establishment of an Indonesian insurance company licensed by the Ministry of Finance, unless:
- there is no locally licensed insurance company, jointly or severally, which has the capacity to solely retain the risk over the relevant object;
- there is no locally licensed insurance company willing to underwrite insurance over the relevant object; or
- the title owner of the relevant object is not an Indonesian national or not an Indonesian legal entity.
Where domestic insurance is mandatory (or otherwise preferred), the locally licensed insurance company may obtain reinsurance from an offshore licensed reinsurance company.
Insurance policies may be payable to foreign secured parties under a loss payee clause, and the proceeds from insurance policies may be encumbered by a fiduciary security interest in favor of such secured parties.
13. Foreign employee restrictions
What restrictions exist on bringing in foreign workers, technicians or executives to work on a project?
- Each sector has different provisions on the limitations and restrictions on the employment of foreign workers, technicians or executives to work on a project, but generally foreign workers, technicians or executives are only permitted to work in Indonesia in certain positions and for an limited time. A company that employs foreign workers, technicians or executives must have an Expatriate Manpower Utilization Plan (RPTKA) and a work permit (IKTA) for each foreign employee. These documents are subject to approval by the Minister of Manpower. The RPTKA must provide information regarding the reason for employment, the position of the foreign workers, technicians or executives, the duration of employment, and the appointment of Indonesian employee(s) as the fellow worker of the foreign workers, technicians or executives.
14. Equipment import restrictions
What restrictions exist on the importation of project equipment?
- Project equipment use is subject to applicable local content requirements and government procurement rules. Importation will be subject to certain import duties.
15. Nationalisation and expropriation
What laws exist regarding the nationalisation or expropriation of project companies and assets? Are any forms of investment specially protected (from nationalisation or expropriation)?
- Pursuant to Investment Law, the government will not take any measures of nationalization or expropriation against the proprietary rights of investors, unless provided by law. If the government takes such measures of nationalization or expropriation, the government is obligated to pay compensation in an amount to be established by market value. Any disputes regarding such market value are to be resolved through arbitration.
16. Fiscal treatment of foreign investment
What tax incentives or other incentives are provided preferentially to foreign investors or creditors? What taxes apply to foreign investments, loans, mortgages or other security documents, either for the purposes of effectiveness or registration?
- The Investment Law provides specific provisions on fiscal incentives, known as facilities. There are various form of facilities, including (i) an investment allowance for income tax relief purposes, (ii) exemption or relief of import duty for capital goods, machinery or equipment for production purposes that can not be produced in Indonesia, and (iii) exemption or relief of import duty for raw materials or auxiliary materials for production purposes for a certain period and on certain conditions.
- Corporate income tax holiday or relief is provided and may be given to pioneering industry investments (i.e., those with substantial ripple effects, present high value added and positive externalities, introduce a new technology and are of strategic value to the Indonesian economy).
- Other than fiscal facilities, the Investment Law also provides the availability of certain concessions or facilities as to land title, immigration services and import permitting.
17. Government authorities
What are the relevant government agencies or departments (central and regional) with authority over projects in the typical project sectors (please cover oil and gas, and minerals extraction; chemical refining; water treatment; power generation and transmission; transportation; ports; telecommunications; or other typical project sectors)? What is the nature and extent of their authority? What is the history of state ownership in these sectors?
- To avoid the inherent conflict of interest in being both the national oil company and a regulatory body, PERTAMINA, in 2001, relinquished its role as a regulatory body and it now exists purely as an oil and gas company.
- Supervising and establishing Cooperation Contracts or Production Sharing Contracts, which was previously done by PERTAMINA, is now done by BP MIGAS, in respect of upstream oil and gas activities, while the regulator and the supervisory board for the downstream oil and gas sector is BPH MIGAS.
- The Directorate of Mineral, Coal and Geothermal under the Department of Energy and Mineral Resources is the relevant supervisory body and regulator for coal and mineral mining activities, as well as geothermal projects.
- For the energy and electricity sector, the relevant supervisory body and regulator is the Directorate General of Electricity and Utilization of Energy under the Department of Energy and Mineral Resources.
- Foreign investors can only conduct electricity projects through cooperation with PLN, the state-owned grid company, under its Independent Power Producer (IPP) scheme. All power generated by independent power producers must be sold to PLN through a power purchase agreement. Only PLN can distribute electricity to consumers.
- The Department of Transportation is the government agency authorised to supervise and regulate business activities in the transportation sector, including ports.
- The Indonesian Toll Road Agency (BPJT) under the Department of Public Works is the government agency authorized to supervise the management of toll roads in Indonesia.
- Business activities in the telecommunication sector are supervised and regulated by the Department of Communication and Information through the Directorate General of Posts and Telecommunications.
18. International arbitration
How are international arbitration contractual provisions and awards recognised by local courts (eg, under what conditions and pursuant to what procedures, can an award be enforced)? Is the jurisdiction a member of the ICSID Convention or other prominent dispute resolution conventions (eg, the New York Convention)? Are any types of disputes not arbitrable? Are any types of disputes subject to automatic domestic arbitration?
- Indonesia is a party to the ICSID Convention and the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Generally, foreign arbitral awards will be enforced in Indonesia on the basis of reciprocity, provided that such awards pertain to disputes arising out of a legal relationship that is considered to be commercial under Indonesian law and are not contrary to the public order of Indonesia.
- To enforce a foreign arbitral award, it is necessary to obtain an exequatur (enforcement order) from the District Court of Central Jakarta (which has the authority to issue exequaturs in respect of foreign arbitral awards). To enforce a domestic arbitral award, the award must be registered with the relevant District Court within 30 days of the award’s issuance. In principle, all arbitral awards rendered in Indonesian territory will be regarded as domestic awards. Indonesia’s Arbitration Law does not stipulate a timeline for registering foreign arbitral awards for enforcement in Indonesia.
- Only disputes of a commercial nature or those “concerning rights which according to law are fully controlled by the parties to the dispute” are arbitrable under Indonesian law.
19. Applicable law
Which jurisdiction’s law typically governs project agreements? Which jurisdiction’s law typically governs financing agreements? Which matters are governed by domestic law (regardless of contractual provisions to the contrary)?
- Project agreements typically are governed by the laws of Indonesia. Financing agreements typically are governed by the laws of England and Wales or New York. The choice of foreign law to govern project agreements and financing agreements should each be upheld as a valid choice of law and be binding in any action in the courts of Indonesia, provided that there is a nexus between the chosen law and the parties to the agreements or the performance of the agreements. Agreements regarding security over assets located in Indonesia must be governed by Indonesian law. Additionally, the choice of foreign law cannot be made to derogate mandatory provisions of Indonesian law.
20. Jurisdiction and waiver of immunity
Is a submission to a foreign jurisdiction and a waiver of immunity effective and enforceable?
- A submission by a party to the jurisdiction of foreign courts should be valid and enforceable, provided that the relevant foreign courts would uphold their jurisdiction. However, foreign court judgments are not enforceable in Indonesia and will not be considered as res judicata by Indonesian court(s). Therefore, in order to execute against assets located in Indonesia, fresh proceedings would need to be initiated and the issue re-litigated in the Indonesian court system. A foreign judgment, however, could be tendered as evidence in support of the suit in Indonesia.
- Indonesian law is unclear as to the authority to waive sovereign immunity. It is accepted doctrine under Indonesian law that no immunity applies when a governmental instrumentality is a party to a commercial transaction. However, there is an express prohibition in the Indonesian State Treasury Law against attachment, seizure or execution over government property and assets.
21. Bankruptcy
What entities are excluded from bankruptcy proceedings and what legislation applies to them? What processes other than court proceedings (eg, appointment of a receiver) are available to seize the assets of a business? (Please discuss whether the claims of foreign creditors are treated the same as the claims of local creditors.)
- Generally, Indonesian law provides that claims of foreign creditors are to be treated the same as the claims of domestic creditors.
- A petition for a declaration of bankruptcy in respect of an insurance company or certain types of state-owned enterprises, a bank, or certain types of financial services institutions may only be filed by the relevant regulatory authority (Indonesia’s Minister of Finance, Bank Indonesia, the Capital Markets Supervisory Board, a.k.a. BAPEPAM-LK, respectively). A private creditor cannot initiate insolvency proceedings in respect of such entities.
- Debtors may also be subject to court-supervised workouts during a “suspension of payments” (prior to declaration of bankruptcy) or a workout in bankruptcy.
- In connection with enforcement actions outside of insolvency proceedings, Indonesian law provides for pre-judgment seizure of goods by way of conservatory attachment, as well as garnishment of property.
22. Title to natural resources
Who has title to natural resources (please cover oil and gas, minerals, water and other resources in the ground; land; and things that grow on or live on the land)? What rights may private parties acquire to these resources and what obligations does the holder have? May foreign parties acquire such rights? (Please discuss whether the acquisition or exercise of such rights is affected by the rights of aboriginal, indigenous or other recognised groups of people.)
- The Indonesian Constitution provides that “Land, water and their constituent natural resources are possessed by the State and are used for people's utmost wellbeing.” However, the State may transfer its duty to manage land, water, and natural resources to domestic or foreign parties, and foreign parties are entitled to natural resources, subject to the prevailing laws and regulations for each sector.
- Oil and gas exploration and exploitation are the responsibility of the State delegated to BP MIGAS, which then cooperates with oil and gas companies to share the oil and gas under production sharing contracts. Under such circumstance, the title of profit oil and gas split for the companies is transferred upon the point of export after it has been subjected to “First Tranche Petroleum” (FTP), Domestic Market Obligation (DMO), cost recovery, and income tax.
- Coal and other minerals mining activities are conducted through a licensing regime, under which both foreign and domestic investors are able to apply for licenses. After obtaining such license, the license holder has to pay concession fees/royalties and taxes to the government under the prevailing regulations. The transfer of title occurs after the payment of royalties has been conducted.
- Production sharing contracts or mining licenses do not give rights over land, however. All land matters including land ownership and land usage are covered by Indonesia’s Agrarian Law, which allows certain legal entities established under Indonesian Law and domiciled in Indonesia, to own land for a limited duration under right to cultivate, right to build, and right of use.
23. Royalties on the extraction of natural resources
What royalties and taxes are payable on the extraction of natural resources, and are they revenue- or profit-based? (Please discuss whether there is any distinction between the royalties and taxes on extraction payable by domestic and foreign parties.)
- The royalties payable on the extraction of minerals and coal mining consist of dead rent and production royalties from net profit. Furthermore, the Indonesian Mining Law introduces a mandatory additional payment obligation of 10% of net profit for production activities on state reserve areas.
- Royalties are not applicable for upstream oil and gas business activities. In this sector, the government non-tax revenue depends on the net profit sharing of oil and gas production agreed in the production sharing contracts.
- Taxes, duties or local government charges are also payable. However, under Indonesia’s Mining Law, the government may reduce taxes in some instances to increase investment in the mining sector.
24. Export of natural resources
What restrictions, fees or taxes exist on the export of natural resources?
- Exports of certain natural resources are subject to applicable measures, such as Domestic Market Obligations (DMO), export tax, domestic refining obligations (i.e., “value added” processes), production quotas and price floors (in each case to be set by applicable law(s), regulations and/or contractual arrangements). Additionally, under certain circumstances, payments in excess of certain amounts (depending on the type of commodity) by the offshore purchaser of a natural resource must be made by a letter of credit in favor of a domestic bank account.
25. Environmental, health and safety laws
What laws or regulations apply to typical project sectors (oil and gas and minerals extraction, refining, water, power generation and transmission, transport, ports, telecommunications, or other sectors)? What regulatory bodies administer those laws?
- Any activity having a major or significant impact on the environment must undertake an analysis of the environmental impact of the development. The process is known as an "AMDAL," which consists of the preparation of an "Andal Report" (Environmental Impact Analysis Report), a "RKL"(Environmental Management Plan), and a "RPL"(Environmental Monitoring Plan). The State Minister of Environmental Affairs decides which development activities require a full AMDAL, based on the scope of the work, the proximity of the development to protected zones and its potential impact on the environment. Those activities that do not require an AMDAL are required to undertake an environmental management effort ("UKL") and an environmental monitoring effort ("UPL"). Additional licenses are required for the production, transportation, storage, using, processing and disposal of hazardous and toxic waste. Moreover, parties that dispose of waste water must submit reports concerning the disposal of their waste water detailing their compliance with the relevant regulations to the relevant regional head, with a copy provided to the Minister of Environmental Affairs, on a quarterly basis. Regulations of the Minister of Energy and Mineral Resources also require a reclamation plan in connection with a mining operation, which is to be prepared in accordance with the approved AMDAL documents and is a part of the feasibility study. Projects are also subject to general emission standards relating to air, water and sound.
26. Project companies
What are the principal business structures of project companies? What are the principal sources of financing (including a domestic public securities market) available to project companies?
- Project companies are typically limited liability companies that have been approved for foreign investment. Additionally, in certain sectors, including oil and gas and public works, business activities may be carried out through an unincorporated joint venture. Financing may be through equity sponsors, passive equity investment, private financing, financing and/or credit support from multilateral organizations, some form of government credit support (which may be limited to a comfort letter or, in limited circumstances, a financial guarantee). Financing may also be obtained from domestic and foreign capital markets.
27. Public-private partnership legislation
Has PPP enabling legislation been enacted and, if so, at what level of government (eg, national, provincial or state or municipal or other local government) and is the legislation industry-specific (toll roads, power, social infrastructure, etc)?
- PPP have been enabled by a Presidential Regulation, which applies nationwide. The regulation specifically provides that the types of infrastructure available for PPP include, among others, infrastructure for transportation, toll roads/bridges, irrigation, drinking water, waste management, telecommunications, electricity, and oil and gas. The partnership can be conducted by way of a cooperation agreement or business license in accordance with the prevailing regulations in the respective sectors.
28. PPP – limitations
What, if any, are the practical and legal limitations on PPP transactions (limitations on the state to contract with private participants, to incur long-term fiscal obligations, to divest public functions or duties to private participants, etc)?
- Further provisions regarding principles, procedures, guidance and/or limitations are provided in the law and regulations for the respective sectors and regions (provinces). Each sector and region has different policies regarding the limitations and the obligations for private entities engaged in a PPP. These limitations and the obligations may include long-term fiscal obligations, partial ownership divestment, corporate social responsibilities and others, depending on the relevant regulations. Additionally, the Indonesian Company Law requires a company that engages in business activity in and/or related to natural resources to implement “Social and Environmental Responsibility,” the details of which are to be governed by relevant implementing regulations in each sector.
- The form of cooperation between the relevant ministries and/or regional governments and private entities will be determined by the agreements among such parties, so long as their terms are not contrary to prevailing regulations or Indonesian public policy.
29. PPP – transactions
What have been the most significant PPP transactions completed to date in your jurisdiction (in terms of size, complexity, novelty, etc)?
- The most significant PPP concession project awarded is for toll roads infrastructure, which consists of 17 projects, demands Rp.57,696.83 billion in total investment and involves land acquisition stage with a total length of 671.63 km. Other significant PPP concession projects awarded are 38 Independent Power Producer (IPP) projects with a total capacity of 3,441 MW, consisting of 18 IPP projects in Sumatera, 7 IPP projects in Java, Madura, Bali, East / West Nusa Tenggara and 8 IPP projects in Sulawesi and Eastern Indonesia.
As published by the International Bar Association (Law Business Research)-in 38 jurisdictions worldwide
