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Ada Pertanyaan? Hubungi Kami Ari Pramuditya, Fitri Novia Heriani
Infrastructures in Indonesia. Photo by: SGP
In order to reform the economy amid the current global downturn, the Government of President Joko Widodo is currently making an intense effort to attract investment to Indonesia. Moreover, these efforts dovetail smoothly with the government’s desire to upgrade the country’s crumbling infrastructure.
Roro Widi Astuti, a partner at the Hermawan Juniarto law firm, stated recently that at least four matters had to be regulated and taken into account if investors were to build transportation infrastructure here in Indonesia. Firstly, investors should take note of the various regulations which pertain in each sector. This is essential so that any potential investors understand whether there are restrictions on investments or not, including such matters as licenses.
Secondly, potential investors should familiarize themselves with the public-private partnership (Kerjasama Pemerintah dengan Badan Usaha – “PPP”) initiative. Investors are supposed to understand the PPP’s mechanisms, which include, for instance, an auction mechanism, identification-of-assurance requirements, and the need for strong governmental support.
The PPP should thus be studied and understood by investors, as the procurement of infrastructure development in Indonesia is the domain of the PPP, Mrs. Astuti stated at a Workshop on Legal Matters Relating to Ports, Railways, and Toll-Road Projects, which was held by hukumonline on Tuesday, 27 October 2015.
Thirdly, potential investors should identify regulations which pertain across other sectors, such as investment regulations and restrictions, which may well relate to the country’s Negative Investment List(Daftar Negatif Investasi).
And finally, investors should thoroughly research the provisions that have to be met by local governments.
Moreover, before deciding to invest in Indonesia’s transportation infrastructure, Mrs. Astuti sought to remind investors that they should weigh up all of the risks, especially as regards political, operational and financial matters. Mr. Astuti cautioned that such investments always feature a certain amount of risk.
The political dimension of any investment, for example, may involve a change of regional head, which could in turn lead to decisions being altered or revoked. The operational dimension of any investment is also important and investors should thoroughly assess whether the putative infrastructure will be able to carry a large number of passengers. And finally, the financing of any project should be thoroughly mapped out.
Jamal Rizki, another partner from the Hermawan Juniarto Law Firm, added that any KPBU infrastructure-development scheme would have six main risks attached to it, which should be divided between the government and the business entities involved.
The first risk is political in nature and involves potential changes to laws and tax regulations. Such changes could severely affect the implementation of any KPBU project. The risk here is the responsibility of the government.
Secondly, location risks involving land procurement and site access should also be borne by the government.
Thirdly, construction risks, encompassing cost overruns, labor and materials should be borne by the business entities involved in the project. These business entities will be the ones hiring contractors and who will understand the work that needs to be completed, and so they should bear the risks in this case.
Fourthly, force-majeure risks, including the weather, natural disasters or unforeseen political circumstances, should be the responsibility of both parties.
Fifthly, operational and maintenance risks, encompassing operational and maintenance costs, as well as unanticipated requests, should be borne by the business entities, as estimations of operational and maintenance costs are made by the investors.
And last but not least, market risks, such as construction inflation and exchange-rate fluctuations should be borne by the business entities and should be managed through the careful monitoring of the construction process.
Parties to any potential infrastructure agreements and in charge of cooperation projects (PJPK) will be ministries, government institutions, local governments, state-owned enterprises, and regionally-owned enterprises. Limited liability companies established by business entities that have won at auctions or which are directly appointed to be executors will also be involved.
The Ministry of Finance will provide the necessary eligibility support and review any submissions relating to government assurances. PT. Sarana Multi Infrastruktur (PT SMI) will provide loans, refinancing, subordination loans, and credit-enhancement services. And finally, PT. Penjaminan Infrastruktur Indonesia (PT PII) will provide government assurance as it relates to any KPBU project.
(sp)
Ari Pramuditya, Fitri Novia Heriani
Infrastructures in Indonesia. Photo by: SGP
In order to reform the economy amid the current global downturn, the Government of President Joko Widodo is currently making an intense effort to attract investment to Indonesia. Moreover, these efforts dovetail smoothly with the government’s desire to upgrade the country’s crumbling infrastructure.
Roro Widi Astuti, a partner at the Hermawan Juniarto law firm, stated recently that at least four matters had to be regulated and taken into account if investors were to build transportation infrastructure here in Indonesia. Firstly, investors should take note of the various regulations which pertain in each sector. This is essential so that any potential investors understand whether there are restrictions on investments or not, including such matters as licenses.
Secondly, potential investors should familiarize themselves with the public-private partnership (Kerjasama Pemerintah dengan Badan Usaha – “PPP”) initiative. Investors are supposed to understand the PPP’s mechanisms, which include, for instance, an auction mechanism, identification-of-assurance requirements, and the need for strong governmental support.
The PPP should thus be studied and understood by investors, as the procurement of infrastructure development in Indonesia is the domain of the PPP, Mrs. Astuti stated at a Workshop on Legal Matters Relating to Ports, Railways, and Toll-Road Projects, which was held by hukumonline on Tuesday, 27 October 2015.
Thirdly, potential investors should identify regulations which pertain across other sectors, such as investment regulations and restrictions, which may well relate to the country’s Negative Investment List(Daftar Negatif Investasi).
And finally, investors should thoroughly research the provisions that have to be met by local governments.
Moreover, before deciding to invest in Indonesia’s transportation infrastructure, Mrs. Astuti sought to remind investors that they should weigh up all of the risks, especially as regards political, operational and financial matters. Mr. Astuti cautioned that such investments always feature a certain amount of risk.
The political dimension of any investment, for example, may involve a change of regional head, which could in turn lead to decisions being altered or revoked. The operational dimension of any investment is also important and investors should thoroughly assess whether the putative infrastructure will be able to carry a large number of passengers. And finally, the financing of any project should be thoroughly mapped out.
Jamal Rizki, another partner from the Hermawan Juniarto Law Firm, added that any KPBU infrastructure-development scheme would have six main risks attached to it, which should be divided between the government and the business entities involved.
The first risk is political in nature and involves potential changes to laws and tax regulations. Such changes could severely affect the implementation of any KPBU project. The risk here is the responsibility of the government.
Secondly, location risks involving land procurement and site access should also be borne by the government.
Thirdly, construction risks, encompassing cost overruns, labor and materials should be borne by the business entities involved in the project. These business entities will be the ones hiring contractors and who will understand the work that needs to be completed, and so they should bear the risks in this case.
Fourthly, force-majeure risks, including the weather, natural disasters or unforeseen political circumstances, should be the responsibility of both parties.
Fifthly, operational and maintenance risks, encompassing operational and maintenance costs, as well as unanticipated requests, should be borne by the business entities, as estimations of operational and maintenance costs are made by the investors.
And last but not least, market risks, such as construction inflation and exchange-rate fluctuations should be borne by the business entities and should be managed through the careful monitoring of the construction process.
Parties to any potential infrastructure agreements and in charge of cooperation projects (PJPK) will be ministries, government institutions, local governments, state-owned enterprises, and regionally-owned enterprises. Limited liability companies established by business entities that have won at auctions or which are directly appointed to be executors will also be involved.
The Ministry of Finance will provide the necessary eligibility support and review any submissions relating to government assurances. PT. Sarana Multi Infrastruktur (PT SMI) will provide loans, refinancing, subordination loans, and credit-enhancement services. And finally, PT. Penjaminan Infrastruktur Indonesia (PT PII) will provide government assurance as it relates to any KPBU project.
(sp)