In 2021, the Minister of Industry (“Minister”) introduced Regulation No. 18 of 2021 (“Regulation 18/2021”) on the Program for the Restructuring of Machinery and/or Equipment for the Fabric Finishing Industry and Fabric Printing Industry (“Restructuring”). As its title suggests, Regulation 18/2021 set out the applicable prerequisites for the implementation of Restructuring.

However, in an effort to ensure that the applicable Restructuring framework is in line with current industrial and legal requirements, the Minister has now decided to issue Regulation No. 20 of 2024 (“Regulation 20/2024”) on the Program for the Restructuring of Machinery and/or Equipment for Textile and Textile Product (Tekstil dan Produk Tekstil – “Textiles and textile products”) Industries. Upon entering into force on 10 July 2024, Regulation 20/2024 simultaneously repealed and replaced Regulation 18/2021.[1]

While maintaining the majority of core provisions that were originally introduced under Regulation 18/2021, the new framework of Regulation 20/2024 has now adjusted and clarified a number of provisions that specifically relate to Restructuring, including a reaffirmation that the Restructuring program is aimed at TPT industries. In this regard, the new framework of Regulation 20/2024 has expanded the list of TPT industries from the previous two categories set under the Standard Classification of Indonesian Business Fields (Klasifikasi Baku Lapangan Usaha Indonesia – “KBLI”) to 30 KBLI TPT industries, as comprehensively listed under the Appendix to Regulation 20/2024.[2]

Moreover, Regulation 20/2024 has also clarified the various duties that are mandated for parties that support the implementation of Restructuring, including:[3]

1. The Operational Program Management Agency (Lembaga Pengelola Operasional Program – “LPOP”);
2. Independent Appraisal Agencies (Lembaga Penilai Independen – “LPI”); and
3. Teams that are authorized to assess the results of LPOP and LPO verifications and to provide recommendations for the issuance of approvals or rejections for submitted applications (Technical Teams).

Against the above backdrop, this edition of Indonesian Legal Brief (ILB) offers a concise analysis of the various matters that are addressed under the framework of Regulation 20/2024. However, due to the broad nature of the provisions set out therein, our discussion has been limited to the following topics:

1. Adjusted Requirements for Restructuring Participants;
2. Clarified Reimbursement Mechanism; and
3. Expansion of Applicable Sanctions.

Adjusted Requirements for Restructuring Participants

Regulation 20/2024 has now adjusted the requirements that have to be met by TPT industries in order for them to be deemed eligible industries for enrolment in the Restructuring program, as originally outlined under the framework of Regulation 18/2021. Highlights of these requirements, as featured under both frameworks, break down as follows:

Clarified Reimbursement Mechanism

Both Regulation 18/2021 and Regulation 20/2024 state that the above-described Restructuring program involves the granting of price discounts through a partial reimbursement mechanism.[6] In this regard, a reimbursement ceiling of Rp. 1 billion per Restructuring recipient company per fiscal year has been set.[7]

However, it should be noted that Regulation 20/2024 has now adjusted the applicable limits that apply in relation to the above-described reimbursements, as granted to Restructuring recipient companies. These reimbursement limits are highlighted in the following table:

Expansion of Applicable Sanctions

While retaining the majority of the potential violations committed by Restructuring applicants and/or recipients that can be subject to the imposition of administrative sanctions that originally featured under Regulation 18/2021, the new framework of Regulation 20/2024 also states that any parties that provide false statements or documents in relation to the Restructuring and that have therefore been subject to the imposition of administrative sanctions may re-enroll in the Restructuring program the following year after the relevant sanction obligations have been met. Previously, a two-year non-enrollment prohibition applied in this regard.[10]

In addition to the above-described sanctions, Regulation 20/2024 now states that LPOP and/or LPI may also be subject to the imposition of administrative sanctions if they are found to have committed certain violations. In this regard, the following table highlights the aforementioned violations and the applicable administrative sanctions:

Key Takeaways

Unfortunately, the current Indonesia’s TPT industries are in dire conditions as TPT industries nationwide are facing multiple challenges in competing with the overwhelming rate of imported textile products.[13] Given such condition, the expansion of KBLI that may participate in the Restructuring program may ultimately assist more businesses in the TPT sector in acquiring their needed machinery and/or equipment, thus Indonesia’s TPT industries to strive in today’s market.

Source: hukumonline.com