Government Regulation No. 10 of 2011 on Procedures for Receiving of Foreign Loans and Grants (“Regulation”) has been issued as an implementation of Article 38 (4) of Law No. 1 of 2004 on State Assets. The Regulations comprises of 11 Chapters and 86 Articles.
The Regulation aims to set out the authorities, constraints and obligations for government institutions seeking to receive foreign loans and/or grants. It also addresses the channeling of the loans and/or grants and the steps required to be fulfilled by the parties.
The purpose of receiving foreign loans, pursuant to Article 7, is to:
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a.
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Fund the State Budget deficit, such as the fuel subsidy deficit that amounted to IDR 80 trillion in 2010;
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b.
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Fund government institutions;
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c.
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Manage the debt portfolio, whereas as of December 2010 Indonesia has around IDR 1,000 trillion of debt, both government and private;
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d.
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Channel loans to district governments;
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e.
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Channel loans to state owned enterprises; and
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f.
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Grants to district governments.
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Chapter II stipulates the procedures for receiving foreign loans and the authority and constraints of the Minister of Finance, the Ministry of National Development, the Minister of Internal Affairs, district government, and state enterprises. In order to receive foreign loans, pursuant to Article 8, the House of Representatives (Dewan Perwakilan Rakyat / DPR) approval is required.
The topics covered under Chapter II are:
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a.
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Types and sources of foreign loans (Chapter II Part 1);
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b.
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Use of the foreign loans (Chapter II Part 2);
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c.
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Foreign loan plans (Chapter II Part 3);
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d.
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Plans for channeling foreign loans (Chapter II Part 4);
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e.
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Cash loans and activities funded by loans, referring to government activities that are funded by the loans as per Article 15 (1) (Chapter II Part 5);
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f.
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Negotiations and Agreement (Chapter II Part 6); and
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g.
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Fund allocation, loan withdrawal, and payment (Chapter II Part 7).
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Grants are governed by Chapter III, which covers the following topics:
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a.
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Types and sources of grants (Chapter III Part 1);
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b.
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Use of the grants (Chapter III Part 2);
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c.
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Grant plans (Chapter III Part 3);
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d.
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Plans for channeling grants (Chapter III Part 4);
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e.
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Negotiation regarding the grants (Chapter III Part 5);
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f.
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Grant Agreement (Chapter III Part 6);
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g.
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Fund allocation and realization of grants (Chapter III Part 7).
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In order to comply with good corporate governance practices, parties funded by foreign loans or grants are required to submit quarterly reports to the Minister of Finance and the Minister of National Development, with the report covering the topics enumerated in Article 76.
Information regarding foreign loans and grants will be publicized every 6 months by the Minister of Finance pursuant to Article 82.
The Regulation repeals and replaces Government Regulation No. 2 of 2006 on the same subject matter. However, the prior regulation’s implementing regulations remain valid, to the extent that they are not replaced by and do not conflict with the Regulation’s provisions.
The Regulation has been in force since 12 February 2011.
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