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Business Media Selected for You: Week 8-14 Jan 2018

Business Media Selected for You: Week 8-14 Jan 2018

15 January 2018

Infrastructure

Ministry to lure foreign participation in LRT project

The Government has reiterated that is open to private investment for the second phase of the LRT project in Greater Jakarta. While the first phase of the project valued at IDR 29.9 trillion (USD 2.25 billion) was spearheaded and handled mostly by state-owned enterprises, the Government is to open the project to domestic and foreign investors.

Angkasa Pura II (AP II) to expand airports and non-aeronautics segment

AP II is keen to expand its airports and enlarge its non-aeronautics business segment by developing existing airports and is set to manage 7 more airports (it currently manages 13), including (i) Maimun Saleh in Aceh; (ii) Wirasaba in Central Java; (iii) Fatmawati Soekarno in Bengkulu; (iv) H.A.S. Hanandjoeddin in Bangka Belitung; and (v) BIJB in West Java.

Pelindo II prepares IDR 2 trillion to join Patimban Port bidding

Pelindo II has announced it will be bidding for the Patimban Port operatorship. The port is located in Subang, West Java, and worth USD 3 billion (Indonesia-Japan project). Indonesia is set to hold a majority share (51%) in the operatorship, while Japan will control 45%. The port will be located approximately 70 km from the Karawang Industrial Estate (where many Japanese firms, especially automotive producers, set up their manufacturing facilities). In 2017, Indonesia and Japan entered into a loan agreement, in which Japan would disburse 118.9 billion Yen (USD 1 billion) to kick off the first phase of the project, comprising of construction of a 8.1 km access road to the port, a terminal, a bridge, and a back-up area.

Separately, subsidiaries of Pelindo II (PT Jasa Armada Indonesia), Pelindo I, Pelindo III (PT Pelindo Marine Service) and Pelindo IV plan to merge as an initial step in the formation of a port management holding company.

Government to complete review of delayed railway project

The Government seeks to finish review of the construction of the China-backed Jakarta-Bandung railway project worth USD 5.9 billion this month, after a 2-year delay in construction. The project's ground breaking, primarily funded by a loan from China Development Bank (CDB) took place in early 2016, with construction slated to be completed in 2019. However, no significant progress was made due to issues, particularly land procurement and CDB's refusal to disburse USD 4.5 billion in 2017. To date, PT Kereta Api Cepat (KCIC) has secured 53% of the 600 hectares of land needed for the project. The project was initially estimated to cost USD 5.1 billion. President Jokowi has also asked local companies in KCIC (PT Wijaya Karya and PT Kereta Api Indonesia) to reduce their majority shares (60%) to minority shares (10%).

 

Energy and Natural Resources

Government to scrap 40 unfavourable decrees

The Ministry of Energy and Mineral Resources (MEMR) is preparing to scrap at least 40 regulations that it believes puts off investors or are irrelevant in the current business environment. It plans to revoke 10 regulations in the oil and gas, minerals and coal, and electricity and renewable energy sectors. Further details to be disclosed in February.

PLN to extend deadline for power projects

PLN, has decided to reschedule commercial operation dates for a number of contracted projects under the 35,000 MW program. If projects insist on moving forward with the original deadline, PLN may suffer losses arising from take-or-pay clauses. It is predicted that the total capacity of power plants operational in 2019 will be 22,000 MW.

Renewable power projects in limbo

Though PLN and 68 IPPs, in 2017, agreed to develop renewable power projects, this has failed largely as a result of financing difficulties. 13 of the 68 IPPs have reached financial closure with 8 having started construction.

Investor concerns have included interest rates for soft loans provided by domestic lenders, and unfavourable clauses in the PPAs with PLN (including the obligation to sell the plant upon PPA expiry to PLN for USD 1,000).

Government expands fuel contract duration

The Downstream Oil and Gas Regulatory Agency has extended the duration of distribution contracts from 1 year to 5 years in a bid to encourage private firms to supply fuel to less accessible regions.

Government ups pressure to amend Contracts of Work (CoWs)

The Government has refused to process or review the 2018 budget and working plans of miners that have yet to amend their CoWs since 2010. Consequently, the miners will not be able to reduce or increase production capacity this year.

Amendments pursuant to 2009 Mining Law generally require adjustment to royalties/taxes; a 51% divestment requirement after a 10 year production period; and conversion of their CoWs into a special mining permits (for mining operation extensions). CoWs and mining business agreements executed prior to the 2009 Mining Law remain valid until their expiry dates.

 

Business

Government steps up efforts to improve ease of doing business (EODB)

The Government plans to launch an online integrated business licensing system in March called the 'Single Submission' under Indonesia Investment Coordinating Board authority available at regional and national levels in a bid to make the top 40 of the World Bank's EODB ranking in 2018 (currently in the 72nd position; up from the 91st position in 2016).

 

Finance

Major lenders to submit plans for funding green projects

The Financial Services Authority (OJK) has obliged big and medium-scale lenders as well as branches of foreign banks to submit plans for funding sustainable projects this year pursuant to POJK Number 51/POJK.03/2017. Beginning 2019, lenders will also be obliged to issue sustainable financing reports describing sustainability-related financing programs carried out in the previous year.

Investors show interest in green bond scheme

The OJK issued its green bond rule on 29 December 2017. In terms of structure, the green bond is no different to conventional bonds except that it is aimed at financing environmentally friendly projects.

 

International Trade

Surakarta to host Indonesia-European Union Comprehensive Economic Partnership Agreement (I-EU CEPA) fourth round

The fourth round of the Indonesia-EU CEPA negotiations is scheduled for February 2018. The negotiations are to be concluded in 2019, and ratified in 2021. 

  

 

Compiled from the Jakarta Post.

Aston Goad - Foreign Legal Consultant, Indonesia : aston.goad@dnfp.com

Dewi Sawitri - Senior Associate, Indonesia : dewi.sawitri@dnfp.com

 

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