Kuliah IX:KERJASAMA PEMERINTAH-SWASTA

(PUBLIC-PRIVATE PARTNERSHIP)

Teguh Maramis, S.H., LL.M.

Importance of Infrastructure Provision

• RPJMN 2010 – 2014– Infrastructure as one of the 11 National Priorities.

• Masterplan for Acceleration and Expansion of Indonesia Economic Development (MP3EI)– Infrastructure provision constitutes an importance

component in the development of the Indonesia’s 6 economic corridor to transform Indonesia into a developed nation in 2025.

• RPJMN 2010 – 2014– Infrastructure as one of the 11 National Priorities.

• Masterplan for Acceleration and Expansion of Indonesia Economic Development (MP3EI)– Infrastructure provision constitutes an importance

component in the development of the Indonesia’s 6 economic corridor to transform Indonesia into a developed nation in 2025.

Inftrastructure Financing Gap

Extra Government effort required to enable private funding = Rp. 323,67 T

Private Participation in Infrastructure is Increasing

Source: World Bank Jakarta, May 2012

What is PPP?• An agreement or contract, between a public entity and a

private party, under which:(a) private party undertakes government function for

specified period of time, (b) the private party receives compensation for

performing the function, directly or indirectly, (c) the private party is liable for the risks arising from

performing the function and, (d) the public facilities, land or other resources may be

transferred or made available to the private party.

(William J. Parente, USAID Environmental Services Program)

“ Infrastructure Provision is conducted through Cooperation Agreement or Granting of Business Permit between a Minister/Institutional Head/Local Government Head with a Business Entity, namely a private business in the form of a limited liability company, state-owned enterprise, local government-owned enterprise, and cooperatives.”

(Article 1 (4) and(5) Perpres No. 67/2005)

PPP Project

“ The terminology of “Infrastructure Development” itself refers to the activity encompassing construction to build or improve the capacity of infrastructure and/or infrastructure management activities and/or infrastructure maintenance.”

Article 1 (3) Perpres No. 67/2005

Scope of Infrastructure Cooperations

8 Types of Infrastructure1. Transportation infrastructure, covering airport services, port services, rail

facilities and infrastructure;2. Road Infrastructure, covering toll roads and bridges;3. Irrigation infrastructure, covering raw water carrying channel;4. Drinking water infrastructure, covering raw water extraction structure,

transmissions network, distribution network, drinking water processing installation;

5. Waste water infrastructure covering waste water treatment installation, collection network and primary network, and waste facilities covering transport and final disposal;

6. Telecommunications and information infrastructure, covering telecommunications network and e-government infrastructure;

7. Electric power infrastructure, covering power plants, including geo-thermal electric power, transmission, or distribution of electric power; and

8. Oil and gas infrastructure, covering transmission and/or distribution of oil and gas.

PPP Regulations• Perpres No. 67/2005 jo. Perpres No. 13/2010 jo. Perpres No.

56/2011 regarding Cooperation between the Goverment and Business Entity in Infrastructure Provision.

• Regulation of the State Minister of National Development Planning Agency No. 3/2012 regarding General Guidelines for Implementation of Cooperation between Government and Business Entity in Infrastructure Provision.

• Regulation of the Minister of Transportation No. PM.83 of 2010 regarding Implementation Guidelines for Cooperation between Government and Business Entity in the Provision of Transportation Infrastructure.

• Regulation of the Minister of Finance No. 260/PMK.011/2010 regarding Guidelines for the Implementation of Infrastructure Guarantee in Cooperation Projects between the Government and Private Entity.

Sectoral RegulationsSector Laws and Government Regulations

Port (Operation of Terminal) - UU 17/2008 on Water Transportation- PP 61/2009 on Port Affairs- PP 20/2010 on Water Transportation

Rail Infrastructure (Railway, Station, and Train Facilities)

- UU 23/2007 on Railway Affairs- PP 56/2009 on Implementation of Railway Affairs- PP 72/2009 on Rail Traffic and Transportation

Airport - UU 1/2009 on Air Transportation- PP 70/2001 on Airport

Toll Road - UU 38/2008 on Roads- UU 22/2009 on Traffic and Road Transportation- PP 15/2005 jo. PP 44/2009 on Toll Roads

Piped Drinking Water (Water Treatment Plant, Transmission, Distribution)

- UU 7/2004 on Water Resources- PP 16/2005 on Development of Drinking Water Supply

Waste Management UU No. 18/2008 on Waste Management

Telecomunication - UU 36/1999- PP 52/2000

Electricity (Power Plant, Transmission, Distribution)

- UU 30/2009 on Electricity - UU 27/2003 on Geothermal- PP 59/2007 on Geothermal Business Activities- PP 14/2012 on Electric Power Supply Business Activities

Oil and Gas - UU 22/2001 on Oil and Gas- PP 36/2004 jo. PP 30/2009 on Oil and Gas Downstream Business

Method of Cooperation

a. Scope of Works;b. Work Duration;c. Performance Bond;d. Tariff and Adjustment Mechanism;e. Rights and Obligations including risk allocation;f. Service Standard;g. Transfer of Shares prior to commercial operation of PPP Project;h. Sanctions in the event breach of contract;i. Termination;j. Project Company Financial Statement;k. Mechanism for Dispute Resolution;l. Mechanism for Performance Supervisionm. Utilization and Ownership of Infrastructure Assets;n. Restoration of Infrastructure Assets and/or Management to Grantor;o. Force Majeure;p. Statement and Guaranteee that the agreement is consistent with the prevailing laws and regulations;q. Use of Language Bahasa Indonesia;r. Governing Law

Content of Cooperation Agreement (Vide article 23 (1) Perpres 67/2005 jo. Perpres 56/2011)

Form of CooperationPR No. 67/2005 does not set any specific guidelines on what form the

cooperation should take. PR No. 67/2005 only specifies that the form of cooperation be determined based on an agreement between the Grantor and business entity, insofar as it is not contrary to the prevailing laws.

Therefore, the cooperation in the PPP Project may be carried out in various forms such as:

• Build Own Operate (BOO)• Build Own Transfer (BOT)• Operate and Maintain,• Lease Develop Operate (LDO),• etc.

Parties involved in the PPPIn general, the parties involved in the PPP are:

1. Grantor is the Minister/Institution Head/Local Government Head serving as partner to investors in the PPP project. The Grantor should draw up a Cooperation Agreement with the Project Company or issue Business Licenses for the Project Company in the context of carrying out the PPP project.

2. Sponsors are Project Company shareholders who may comprise local or foreign investors. In the event that Sponsors are foreign investors, therefore provisions regarding limits to foreign capital ownership as set forth in Presidential Regulation Number 36 of 2010 concerning List of Business Fields Closed to Investment and Business Fields Open, With Conditions, To Investment (“Negative List”) must be taken into account.

3. Project Company is an Indonesian entity owned by Sponsors, which signs a Cooperation Agreement with the Grantor, or receives a Business Permit from the Government to carry out the PPP Project. In PPP Projects carried out through Cooperation Agreements, PM No. 3/2012 sets forth that the tender winner must establish a Project Company that will execute the Cooperation Agreement. The Project Company must be validly established no later than 6 months as of the issuance of the Stipulation of Tender Winner or Stipulation of Sole Winner by the Grantor.

4. Licensing Agencies are Government agencies responsible for issuing licenses in connection with the establishment and operation of Project Companies. For example, Ministry of Law and Human Rights, Indonesia Investment Coordinating Board (BKPM), and Manpower and immigrations agencies.

5. Lenders may comprise foreign or domestic commercial banks that provide loans for project financing.

6. Service Providers are parties that maybe involved in supporting the project, for example for procurement and construction.

7. Users may be single off-taker buyers, such as in electricity procurement in which PT Perusahaan Listrik Negara is the single off-taker, or public consumer

8. Minister of Finance has the authority to approve government support in the form of tax incentives and/or fiscal contributions based on the proposal of the Grantor. In addition, the Minister of finance is also authorized to provide Government Guarantees in the form of financial compensation and/or compensation in other forms through the risk distribution scheme for the PPP project.

9. Policy Committee for the Acceleration of Infrastructure Development (“KKPPI”) is an inter-ministerial committee established pursuant to Presidential Regulation Number 42 of 2005, and is chaired by the Coordinating Minister of Economic Affairs. This Committee is responsible for coordinating policies related to efforts at accelerating infrastructure provision. In connection with the granting of government support, the role of KKPPI is to provide input for the consideration of the Minister of Finance.

10. PT Penjaminan Infrastruktur Indonesia (“PT PII”) is the State-owned Enterprise established by the Government as part of the effort to effect acceleration of infrastructure provision in Indonesia by providing security support with regard to risks arising from the action or non-action of the government that result in the reduction of economic value of the PPP Project.

The PPP Project may originate from

• Solicited Project – Project compiled by the Government

• Unsolicited Project (Collaboration Agreement)Project proposed by private entity that must meet the following requisites:– Not included in the masterplan of the relevant sector;– Technically integrated to the masterplan of the

relevant sector; – Economically and Financially feasible; and– Does not require Government Financial Support

PPP Project Stages

Source: Dodi Miharjana, “Feasibility Analysis and Risks in PPP Projects”, Workshop on Fundamental Principles and Techniques for Effective Public Private Partnership, Jakarta, 2006.

Implementation of Financing Alternatives on PPP Scheme

Source: Dr. Ir. Bastary Pandji Indra, “PPP Policy and Regulation in Indonesia”, 8 February 2011

Government Support for Private Investment in Infrastructure

Government Guarantee In addition to being able to provide Government Support, to improve the

creditworthiness of the PPP Project, the Government can also provide Government Guarantees. Pursuant to PR Number 67/2005, Government Guarantee shall be financial compensation and/or compensation in other forms provided by the Minister of Finance to the Project Company through a risk-sharing scheme for the PPP Project.

In technical terms, provisions regarding Government Guarantees are set forth in Presidential Regulation Number 78 of 2010 regarding Infrastructure Guarantees in PPP Project Effected through the Infrastructure Guarantee Agency (“PR No. 78/2010”), and PMK 260/2010. Pursuant to PMK No. 260/2010, there are 2 forms of Government

Guarantee in the PPP Project namely:

1. Government Guarantees given by the Government based on a Government Guarantee Agreement; and

2. Government Guarantees given through business entity specifically established to provide such guarantees, in this matter PT PII.

Whereas the provision of Government Guarantees may be effected in 2 (two) ways, namely:

1. Guarantees solely by PT PII which may comprise full or partial infrastructure risk in one PPP Project.

2. Guarantee PT PII in conjunction with Government Guarantees for different infrastructure risks in one PPP Project based on an infrastructure risk sharing between PT PII and the Minister of Finance.

However, it must be noted that in the context of mitigation of risk to state

finances in accordance with the mechanism for controlling and managing risks to state finances (ring fencing), the provision of Government Guarantees should be as optimum as possible through Guarantees by PT PII. Government Guarantee by PT PII in conjunction with the Government can only be conducted in the following conditions:

1. PT PII does not have adequate assets to cover loan in line with guarantee proposals, but such guarantees based on PT PII evaluation need to be effected for the sake of achieving the objectives of the infrastructure guarantee.

2. There is no collaboration between PT PII and multilateral financial institutions or other parties having similar purposes and objectives, or in the event that there is such a collaboration, the available facilities therein are not sufficient, not adequate or not consistent to support the implementation of the infrastructure guarantee; or

Efforts to comply with feasibility of PT PII assets cannot as yet be met, while the procurements of the Project Company for the PPP Project proposed

in the Loan Proposal can no longer be delayed.

Article 10 (1) Minister of Finance Regulation No. 260/Pmk.011/2010:

• An act or omission of an act by the party in charge of the project or by the Government, which pursuant to the prevailing laws and regulations, they are authorized to perform;

• Policy of the party in charge of the project or the Government;

• Unilateral decision of party in charge of the project or of the Government;

• Incapability of the party in charge of the project in filling its obligations under the cooperation agreement (breach of contract).

Risk Coverage

Source: “Toll Road Development in Indonesia Current Condition & Future Prospect” oleh Ir. Achmad Gani Ghazali Akman, M.Eng.Sc pada Indonesia International Infrastructure 2011, Jakarta 13 April 2011

PPP Projects Ready for Transaction in 2011No Projects Contracting Agency Investment Estimation

(US$ Million)

1. Tukad Unda Water Treatment Facility Bali Provincial Government 59.1

2. Purukcahu-Bangkuang Coal Railway Central Kalimantan Prov. 2,100.0

3. Maros Water Supply Maros Regency 12.9

4. Tanah Ampo Cruise Terminal Ministry of Transportation 36.0

5. Bandung Solid Waste Management (Unsolicited) Bandung City 86.0

6. Surakarta Solid Waste Management (Unsolicited) Surakarta City 7.4

7. Southern Banten Airport Banten Prov. Government 85.0

8. Umbulan Water Supply East Java Prov. Government 204.2

9. Medan - Kuala Namu - Tebing Tinggil Toll Road Toll Road Agency (BPJT) 475.5

10. Central Java Independent Power Producer PT. PLN 3,000.0

11. Jatiluhur Power Supply Ministry of Public Work 189.3

12. Sunda Strait Bridge Badan Pengembangan Kawasan Strategis Selat

25,000.0

13. Pandaan – Malang Toll Road Toll Road Agency (BPJT) 252.8

14. Pasir Koja – Soreang Toll Road Toll Road Agency (BPJT) 102.2

15. Pekanbaru – Dumai Toll Road Toll Road Agency (BPJT) 844.6

16. Development of Pondok Gede Water Supply Bekasi City 22

Thank You