In 2020, the government issued Regulation of the President No. 32 of 2020 on Infrastructure Financing Through Limited Management Rights (“Regulation 32/2020”). As its title suggests, Regulation 32/2020 primarily established various prerequisites that specifically relate to the optimization of state-owned assets (Barang Milik Negara – “BMN”) of relevant governmental ministries or agencies (Kementerian atau Lembaga – “K/L”) and/or the assets of state-owned enterprises (Badan Usaha Milik Negara – “BUMN”) through limited management rights (“Asset Management”).[1] It should be noted that Regulation 32/2020 was previously analyzed in the following edition of Indonesian Legal Brief (“ILB”): “Govt. Regulates Management of State Infrastructure by Business Entities”.

However, in an effort to further support the participation of business entities in an attempt to meet infrastructure financing needs while stimulating national economic growth, the government has now issued Regulation No. 66 of 2024 on the Amendment to Regulation 32/2020 (“Amendment”), which has been in force since 2 July 2024.[2] While maintaining the core Asset Management elements that originally featured under the framework of Regulation 32/2020, the Amendment has now clarified that BUMN assets are classified as state assets that have been separated, as well as owned and registered through BUMN financial statements in the respective BUMN’s operational and corporation interests.[3]

Against the above backdrop, this edition of ILB offers a summary of the new provisions that have been introduced under the Amendment and also makes a comparison with Regulation 32/2020, specifically in relation to the following matters:

1. Expanded Scope of Manageable Assets;
2. Business Entity Initiated Asset Management;
3. Selecting Asset Managers: Direct Appointments vs. Beauty Contests; and
4. Asset Management Transactions: Adjusted Agreements and Implementation.

Expanded Scope of Manageable Assets

The Amendment has now expanded the scope of BMN or assets of BUMN that are subject to Asset Management, as originally outlined under Regulation 32/2020. This expansion is summarized in the following table:

In addition to the above-outlined infrastructure, other types of infrastructure may also be determined as subjects of Asset Management based on proposals that are submitted by relevant ministers, heads of government agencies and/or members of the board of directors of BUMN (collectively referred to as “Officials”).[6]

The Amendment also provides an exemption to the requirement for BMN or assets of BUMN to have minimum utilization periods of 10 years, this specifically applies to assets of BUMN that are also outlined within audited financial statements for three consecutive years at the least. However, this exemption can only apply if relevant Officials have drafted a feasibility study that indicates that the assets in question have potential additional value if Asset Management efforts are carried out.[7]

Business Entity Initiated Asset Management

Newly featured under the Amendment, business entities are now permitted to propose Asset Management initiatives to K/L and/or BUMN as owners of the relevant assets.[8] However, business entities are only permitted to initiate types of Asset Management that meet the following criteria:[9]

1. Must provide added value to the assets being managed;
2. Must be technically integrated into the master plan within the relevant sector (if the Asset Management involves the development or construction of new assets);
3. Must be economically and financially viable; and
4. The proposing business entity must possess adequate financial capabilities.

In order to secure permission to engage in Asset Management initiatives, the relevant business entities must submit feasibility studies that address the proposed Asset Management in order to be evaluated by relevant Officials. Once approval has been granted for this feasibility study, the relevant Officials should subsequently develop an Asset Management Plan. It should be noted that any business entity that initiates Asset Management should receive compensation in the form of a right to match.[10]

Selecting Asset Managers: Direct Appointments vs. Beauty Contests

Previously, under Regulation 32/2020, the selection of business entities in order to engage in Asset Management was carried out via a pre-qualification tender scheme. However, the Draft Amendment has now redefined the applicable selection mechanism through the introduction of two new methods, which break down as follows:[11]

Asset Management Transactions: Adjusted Agreements and Implementation

The Amendment has now broadened the scope of clauses that are required to be specifically outlined under Asset Management agreements for BUMN assets. These adjustments are outlined in the following table:[13]

In terms of the implementation of Asset Management transactions, the Amendment has introduced no significant changes, i.e. business entities are still required to deposit all funds that derive from the Asset Management into the accounts of the relevant business service entities (Badan Layanan Usaha/BLU) or contracting agency (Penanggung Jawab Proyek Kerjasama/PJPK) within six months of signing Asset Management agreements.

However, the Amendment now requires the above deposits to be completed upfront.[14] In addition, it should be noted that business entities may now be subject to the obligation to pay shares of any excess profits (clawback), as stipulated in Asset Management agreements.[15]

Key Takeaways

The Amendment has introduced a number of substantial changes to the infrastructure management landscape by expanding the range of BMN or BUMN assets that are eligible to be subject to Asset Management. Said assets now encompass infrastructure relating to healthcare, government office buildings and housing. In addition, the introduction of the new selection methods of beauty contests and direct appointments will streamline the engagement of business entities.

By allowing Asset Management to be initiated by business entities, this new policy should encourage proactive participation and foster innovation regarding asset utilization. These collective changes are expected to boost participation from private entities and stimulate economic growth within the infrastructure sector.

Source: hukumonline.com