Presidential Regulation on Infrastructure Guarantees for Public Private Partnership Projects

Presidential Regulation No. 78 of 2010 on Infrastructure Guarantees for Public Private Partnerships Under the Infrastructure Guarantee Fund (‘Regulation’) has been issued to improve the creditworthiness of infrastructure projects. The Regulation also aims to encourage private sector participation in infrastructure development.

Under Article 1 (1), an infrastructure guarantee is defined as the provision of a financial guarantee for the financial obligations of a public private partnership project. The guarantee, pursuant to Article 1 (2), provides financial compensation for infrastructure risks, as defined in Article 1 (3), that are the responsibility of the party under the risk allocation terms of the cooperation agreement.

Pursuant to Article 2, infrastructure guarantees are based on the principle of risk control and risk management of state finances, so as to maintain the sustainability of the state budget (fiscal sustainability). And are implemented by the Ministry of Finance via the Infrastructure Guarantee Fund (Badan Usaha Penjaminan Infrastruktur).

Article 4 sets out the types of risks that infrastructure guarantees will be provided for. To be eligible, cooperation agreements have to address the issues enumerated in Article 5, such as the allocation of risks, mitigation efforts, and others, as well as being governed by Indonesian law.

Under Article 6 (1), a Guarantee Proposal has to be submitted to the Infrastructure Guarantee Fund, and has to include a full description of risk allocation; a description of the government’s support for the project; and the proposed scope of the guarantee; as well as other supporting documentation, such as the draft cooperation agreement.

The Infrastructure Guarantee Fund, in accordance with Article 7 (1), will then evaluate the Guarantee Proposal, and issue, based on the requirements set out in Article 7 (3), either a rejection or an approval (in the form of a Willingness Statement, as elaborated on in Article 8, which will then form the basis of a Guarantee Agreement, as elaborated on in Article 10). The fees for infrastructure guarantees are addressed in Article 16, and will be further set out by future Minister of Finance regulation.

The filing of claims under the guarantees is addressed by Articles 11 through 14.

The Regulation has been in force since 21 December 2010.