1. Public Private Partnership

According to article 1 number 6 Presidential Regulation Number 38 of 2015 (“PR 38/2015”) and article 1 number 1 Institutional Regulation of LKPP Number 29 of 2018, Public Private Partnership (“PPP”) is a cooperation between the government and private business entities in the Provision of Infrastructure for the public interest by referring to the specifications previously set by the Minister / Head Institutions / Heads of Regions / State Owned Enterprises / Regional Owned Enterprises, which partly or wholly use the resources of the Business Entity by taking into account the risk sharing among the parties.

Infrastructure that can be cooperated based on article 5 paragraph (1) of PR 38/2015 are economic infrastructure and social infrastructure. Types of economic infrastructure and social infrastructure including[1]: Transportation, Roads, Water Resources Infrastructure and Irrigation, Drinking Water Infrastructure, Centralized Wastewater Management Systems, Local Wastewater Management Systems, Solid Waste Management Systems, Telecommunications and Informatics, Electricity, Oil and Gas and Renewable Energy, Energy Conservation, Urban Facility, Educational Facilities, Sports Facilities and Infrastructure, as well as Arts, Areas, Tourism, Health, Prisons and Public Housing.

  1. PPP Stages

Based on article 40 of Ministry Regulation PPN Number 4 of 2015 as amended by Number 2 of 2020 (“MR PPN 4/2015”), PPP is implemented in several stages, namely as follows:

  1. PPP planning;
  2. PPP preparation; and
  3. PPP transactions.

PPP planning is carried out by the Minister / Head of Institution / Head of Region (“M / HoI / HoR”). In carrying out the planning, M / HoI / HoR conducted a public consultation. Government Contracting Agency (“GCA”) in carrying out their functions, the Minister / Head of Institution / Head of Region / Directors of State Owned Enterprises / Directors of Regional Owned Enterprises (“M / HoI / HoR / SOE / ROE”) carry out PPP preparations and transactions. In implementing the PPP preparation, the PJPK carries out public consultancy and can conduct Market Sounding. For PPP transactions, the GCA conducts Market Interest Assessment.

In implementing the PPP stages above, the GCA may carry out supporting activities simultaneously which are part of the PPP stage implementation. These supporting activities are:

  1. Planning and implementation of land acquisition;
  2. Environmental studies; and
  3. Requests for government support and / or government guarantees.
  4. Unsolicited PPP

Based on article 40 of PPN 4/2015, Business Entities can initiate PPPs. This initiative can be carried out on the types of infrastructure previously described. In order to initiate a PPP, the Business Entity submits the initiative to M / HoI / HoR accompanied by a feasibility study. Apart from the feasibility study, the initiating business entity also prepares an environmental study document. PPP on the initiative of a business entity must meet several requirements, namely:

  1. technically integrated with the master plan in the sector concerned;
  2. economically and financially feasible; and
  3. Business entities that propose the initiative have adequate financial capacity to finance the implementation of Infrastructure Provision.
  4. Government Support and Guarantee

Based on Article 15 of PR 38/2015, M / HoI / HoR can provide government support to PPP in accordance with the scope of PPP activities. Government Support is fiscal contribution and / or other forms provided by the Minister / Head of Institution / Head of Region and / or the minister who administers Government affairs in the field of finance and state assets in accordance with their respective authority based on statutory regulations in order to improve financial feasibility and PPP effectiveness. Such support must be included in the procurement document for the Implementing Business Entity.

Government support is provided in the form of [2]:

  1. PPP eligibility support;
  2. tax incentives; and / or
  3. other forms according to statutory regulations.

This government support can be approved by the Minister who organizes government affairs in the field of finance and state assets in the form of eligibility support and / or tax incentives based on the PJPK proposal[3].

Furthermore, the Government can provide Government Guarantee for PPP. Government Guarantee is a financial compensation given by the minister in charge of Government affairs in the field of finance and state assets to the Implementing Business Entity through a risk sharing scheme for PPP Projects. This Government Guarantee is provided in the form of an Infrastructure Guarantee. The PJPK submits the Government Guarantee proposal to the Minister of Finance through BUPI prior to the completion of the final Feasibility Pre-study study for the purpose of guaranteeing Infrastructure Provision.[4]

[1] Article 5 Paragraph (2) PR 38/2015

[2] Article 28 Paragraph (3) MR PPN 4/2015

[3] Article 16 Paragraph (1) PR 38/2015

[4] Article 29 Paragraph (2) MR PPN 4/2015

Aldjufri Gill Priscilla Rizki
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Jl. Jendral Sudirman Kav. 29-31
Setia Budi, Jakarta Selatan 12920
Tel: +6221 5790 7170
Email: mail@agpr.co.id
Website: www.agpr.co.id

Disclaimer: the information on this publication is for general information only and does not constitute legal advice or an opinion to specific matters and subject. Reader of this publication are advised to seek the professional legal advice by contacting Aldjufri Gill Priscilla Rizki (AGPR) lawyers.

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