Amendments on Infrastructure Financing Through Limited Management Rights Regulation
To optimize State-Owned Goods and assets of State-Owned Enterprises (Badan Usaha Milik Negara or “BUMN“) and to finally enhance the operational function of such State-Owned Goods and assets of BUMN, Presidential Regulation No. 32 of 2020 on Infrastructure Financing Through Limited Management Rights was issued in the year 2020.
In relation to the above, Presidential Regulation No. 66 of 2024 regarding Amendment to Presidential Regulation Number 32 of 2020 on Infrastructure Financing Through Limited Management Rights (“PR 66/2024“) was recently issued to support the participation of business entities in fulfilling the financing needs for infrastructure provision through limited management rights.
The key amendments under the PR 66/2024 are set out below.
♦ Asset Management Criteria
The asset management can be conducted on the following objects:
- State-Owned Assets (Barang Milik Negara or “BMN“) of Ministries/Agencies; and
- Assets of BUMN, which assets are separated state assets owned by and recorded in the financial statements of BUMNs to be used for operational and corporate purposes of BUMNs.
PR 66/2024 also adds new BMN or BUMN assets that may be subject to asset management, among others:
- Health infrastructure;
- Regional infrastructure;
- Tourism infrastructure;
- Government office buildings; and
- Housing infrastructure
In addition to the above assets, the Minister/Head of Agency or the Board of Directors of BUMN may propose other types of infrastructures that may be subject to the asset management.
PR 66/2024 also adjusted the minimum requirements for BMN or BUMN’s assets that are subject to asset management:
- assets which have been declared suitable for operation either partially or fully;
- assets which require partners for the improvement of commercial value and/or operational efficiency in accordance with generally accepted international standards;
- assets which have a useful life of infrastructure assets of at least 10 (ten) years;
- for BMN, shall be recorded in the financial statements of Ministries/Agencies which have been audited based on government accounting standards in the previous period; and
- for BUMN’s assets, shall be recorded in audited books for at least 3 (three) consecutive years based on the guidelines for the statement of Indonesian financial accounting standards.
♦ Asset Management Planning and Initiative of Asset Management by Business Entities
The asset management planning shall be conducted by:
- Minister/Head of Agency as user of BMN in the relevant ministry/agency; or
- The Board of Directors of BUMN as the responsible party for the management of the BUMN assets.
Business entities may submit the asset management initiatives to Ministries/Agencies, that act as the user of BMN and/or BUMN as asset owners, with the following criteria:
- to provide added value to assets that become the object of asset management;
- technically integrated with the master plan of the relevant sector in the event that the asset management includes the development or construction of new assets;
- economically and financially feasible; and
- business entities that submit the initiatives must have sufficient financial capacity to finance the implementation of asset management.
The initiating business entities must submit a feasibility study to the Minister/Head of Agency or Board of Directors of BUMN to be reviewed. Once approved, the Minister/Head of Agency or Board of Directors of BUMN shall prepare the asset management planning. Further, the initiating business entities for asset management on BMN assets are given compensation in the form of the right to make an offer by the initiating business entities to match the best offer (right to match).
♦ BMN Assets Management Transactions
BMN asset management transactions shall include preparation and execution of the transaction. PR 66/2024 does not amend any articles regarding the preparation of the transaction regulations. However, for the execution of the transaction, PR 66/2024 provides a new scheme for selecting Assets Management Business Entities (Badan Usaha Pengelola Aset), which are through the following methods:
- Beauty contest method
Article 1 (13) of PR 66/2024 defines beauty contest as a selection method to select BMN Asset Management Business Entity with the best financial and/or technical offer based on criteria that have been determined by Contracting Agency (“PJPK”). Article 16(3) of PR 66/2024 stipulates that beauty contests may be conducted electronically which is organized by Ministries/Agencies. - Direct appointment
Article 16(4) of PR 66/2024 stipulates that direct appointment shall be conducted in the event of:- expansion of asset management for BMN which was previously managed by the same business entity;
- extension of asset management period by the same business entity; or
- re-beauty contest failed.
Additionally, PR 66/2024 adds new provisions whereby the Assets Management Business Entity shall have deposited all the fund (in the form of an upfront payment) resulting from BMN assets management into the account of Asset Management Public Service Agency (“BLU”), within 6 (six) months at the latest after the Assets Management Business Entity signs the assets management agreement. Other than that, the Asset Management Business Entity may be subject to the obligation to pay the distribution of excess profits (claw-back) as regulated in the asset management agreement and in accordance with the provisions of laws and regulations.
♦ BUMN Assets Management Transactions
Similar with the BMN asset management transactions, the BUMN assets management transactions shall also include preparation and execution of the transactions.
PR 66/2024 also amends the minimum requirements of the asset management agreement of BUMN into as follows:
- Basis of agreement;
- identity of the parties involved in the agreement;
- Asset management object;
- Asset management result;
- Asset management period;
- disbursement of performance guarantees;
- the purpose of asset utilization and prohibitions on the utilization of assets for purposes other than those that have been agreed upon;
- operational and maintenance responsibilities, including the payment of tax and other obligations arising from the utilization of assets;
- the rights and obligations of the party in possession of the asset to supervise and maintain the performance of asset during its use;
- prohibition for Asset Management Business Entities from pledging BUMN’s assets as collateral to third parties;
- procedures for the transfer and/or return of assets; and
- other matters in accordance with the provisions of laws and regulations.
PR 66/2024 further stipulates that the Asset Management Business Entity must have deposited all the funds in the form of upfront payment resulting from the asset management of BUMN into the PJPK account, within a maximum period of 6 (six) months after the Asset Management Business Entity signs the asset management agreement. The asset management of BUMN is also subject to the obligation to pay claw back.
AKSET
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