Government Stipulates Types of COVID-19 Vaccines
As a follow up to our previous Newsflash on the general overview of COVID-19 vaccine procurement, this Newsflash discusses the types of vaccines for COVID-19 as stipulated under the Minister of Health (“MOH”) Decree No. HK.01.07/MENKES/9860/2020 dated December 3, 2020 on Stipulation of the Types of Vaccines for the Implementation of the Corona Virus Disease 2019 (COVID-19) Vaccination (the “MOH Decree”).
We set out below the key provisions of the MOH Decree.
- Types of Vaccines
The MOH Decree stipulates the types of COVID-19 vaccines that may be used for the implementation of vaccination in Indonesia the following vaccines produced by (i) PT Bio Farma (Persero) (as the designated state-owned enterprise to procure the COVID-19 vaccines), (ii) AstraZeneca, (iii) China National Pharmaceutical Group Corporation (Sinopharm), (iv) Moderna, (v) Pfizer Inc. and BioNTech, and (vi) Sinovac Biotech Ltd.
The above types of vaccines are either in the third-phase clinical trial or have completed the third-phase of the clinical trial.
In the future, the MOH may change the types of COVID-19 vaccines based on the Indonesian Technical Advisory Group on Immunization’s recommendation and taking into account the considerations of the Committee of the COVID-19 Handling and the National Economic Recovery.
- Use of Vaccines
In compliance with the National Agency of Drug and Food Control (Badan Pengawas Obat dan Makanan - "BPOM") Regulation No. 24 of 2017 dated November 24, 2017 on Criteria and Drug Registration Procedures as lastly amended by BPOM Regulation No. 27 of 2020 dated September 29, 2020, the use of vaccines for the implementation of the COVID-19 vaccination is only conducted after receiving the distribution license (izin edar) or emergency use authorization (persetujuan penggunaan darurat) issued by BPOM.
The MOH Decree further provides that the MOH shall conduct the vaccine procurement in accordance with the types of COVID-19 vaccines for the implementation of vaccination program by the MOH. Meanwhile, for the implementation of independent vaccination, the vaccines shall be procured by the Minister of State-Owned Enterprises.
- Price of the COVID-19 Vaccines
Pursuant to President Joko Widodo’s statement on December 16, 2020, the COVID-19 vaccines would be available free of charge or at no cost. This decision was made after considering the contributions of the public and the calculation of the state budget.
In order to dispel public doubts and to gain the community’s confidence about the safety of the COVID-19 vaccines, the President also confirmed that he would be the first person to receive the COVID-19 vaccine.
***
January 8, 2021
Copyright © 2021 AKSET. All rights reserved.
Government Stipulates Types of COVID-19 Vaccines
New Stamp Duty Law Issued
On October 26, 2020 the government enacted Law No. 10 of 2020 on Stamp Duty (the “2020 Stamp Duty Law”). The purpose of the 2020 Stamp Duty Law is, among others, to increase state revenues and provide legal certainty on stamp duty collection. Stamp duty was previously regulated under Law No. 13 of 1985 dated December 27, 1985 on Stamp Duty (the “1985 Stamp Duty Law”). The 2020 Stamp Duty Law revokes and replaces the 1985 Stamp Duty Law entirely.
The 2020 Stamp Duty Law will enter into force on January 1, 2021.
- Stamp Duty Tarriff
The 2020 Stamp Duty Law introduces a single stamp duty tariff of Rp10,000 (ten thousand Rupiah). Previously, under Government Regulation No. 24 of 2000 dated April 20, 2000 on Amendment of Stamp Duty Tariff and Amount of Nominal Price Imposition Limit Imposed by Stamp Duty, stamp duty tariff was set out at Rp3,000 (three thousand Rupiah) or Rp6,000 (six thousand Rupiah), depending on the nominal value of a document. However, the 2020 Stamp Duty Law recognizes that the stamp duty tariff may be increased or decreased in accordance with the national economy and income rates. Change of stamp duty tariff shall be set out under a Government Regulation.
- Stamp Duty Objects
Stamp duty is imposed on documents that are made that in handwriting, print, or electronic. The definition of “documents” under the 2020 Stamp Duty Law is expanded from the previous definition of documents under the 1985 Stamp Duty Law, which only include “paper documents.”
Stamp duty shall be imposed 1 (one) time for each of the following documents:
- documents made for court evidence; and
- documents made for the purpose of clarifying occurrences of a civil nature, which include:
- agreements, statement letters, or other similar letters and their copies;
- notarial deed and its grosse, copies, and quotations;
- securities in any name and form;
- securities transaction documents, including futures contract transaction documents, in any name and form;
- auction documents in the form of quotation of auction minutes, copy of auction minutes, and grosse of auction minutes;
- documents with monetary value of more than Rp5,000,000 (five million Rupiah) which (i) states the receipt of money, or (ii) consists of statement that the entire or partial of payable amount has been settled or calculated; and
- other documents stipulated under Government Regulation.
Please note that unless required by laws and regulations, stamp duty does not affect the validity of a document. The stamp duty only constitutes the payment of tax over the document.
- Payment of Stamp Duty
Stamp duty shall be paid by:
- the person who receives the document if the document is made unilaterally;
- each party involved in the document if the document is made by 2 (two) or more parties;
- the party who issues the securities; or
- the party who submits the document to a court of law.
- Electronic Stamp Duty
The 2020 Stamp Duty Law acknowledges stamp duty in electronic and other forms, such as by way of digital stamp duty machine or any other technology. By including this provision, the Government clarifies that electronic documents are also subject to stamp duty. Further provisions on electronic stamp duty and stamp duty in other forms shall be regulated under the Minister of Finance’s Regulations.
***
December 23, 2020
Copyright © 2020 AKSET. All rights reserved.
New Stamp Duty Law Issued
BKPM Issued Guidelines on Tax Incentive Offline Applications
For the purpose of implementing the Minister of Finance (the “Minister”) Regulation No. 11/PMK.010/2020 dated February 11, 2020 on the Implementation of Government Regulation No. 78 of 2019 on the Income Tax Incentives for Investments in Certain Industries and/or Regions, as amended by the Minister Regulation No. 96/PMK.010/2020 dated July 27, 2020 (collectively, the “Minister Regulation”), the Capital Investment Coordinating Board (Badan Koordinasi Penanaman Modal or “BKPM”) enacted Regulation No. 5 of 2020 dated November 10, 2020 on the Guidelines of Entity Income Tax Incentive Offline Submissions for Investments in Certain Industries and/or Regions (the “BKPM Regulation”). For your reference, our Newsflash on the Minister Regulation may be accessed here.
The highlight of the Minister Regulation is the delegation of authorization from the Director General of Tax to the Chairman of BKPM on behalf of the Minister. Due to such delegation, as of August 11, 2020, the income tax incentives under the Minister Regulation (collectively, the “Tax Incentives”) shall be applied through the Online Single Submission (OSS) System and the granting process of the Tax Incentives shall be done by BKPM through the OSS System.
The BKPM Regulation provides an alternative for the Tax Incentive applications other than by way of the OSS System, in case (i) there is any issue with the OSS System and it is not accessible for 5 (five) business days, (ii) there is no internet connection available in certain regions, or (iii) of any force majeure. In such case, the Tax Incentive applications may be submitted in hard copy to the Chairman of BKPM in the form attached in the BKPM Regulation along with the following requirements:
- A copy of the applicant’s Business Identification Number (Nomor Induk Berusaha or NIB);
- A copy of the applicant’s Business License/Principle License/Expansion License;
- A copy of the applicant’s Taxpayer Registration Number (Nomor Pokok Wajib Pajak or NPWP);
- A fiscal statement letter of the shareholders stating that the relevant shareholder (i) has submitted its annual income tax returns for the past two years and its value added tax returns for the past three periods, (ii) does not have any payable tax or has payable tax but it has been granted a permit to postpone the payment of the tax or pay the tax in installment, and (iii) is not in the process of criminal proceeding for tax crime and/or tax-related money laundering;
- The details of the fixed assets of the applicant as stated in the capital investment value plan;
- A statement letter signed by the applicant indicating that the entity has not commenced commercial production;
- A statement letter signed by the applicant indicating the capability to fulfill administrative, technical, and qualitative requirements; and
- A power of attorney in case the application is not submitted by the head of company.
The Chairman of BKPM or the appointed official shall issue the Decree of the Granting of Tax Incentive within 5 (five) business days since the application is verified.
***
December 7, 2020
Copyright © 2020 AKSET. All rights reserved.
BKPM Issued Guidelines on Tax Incentive Offline Applications
Government to Grant Subsidy for Workers Affected by COVID-19
Amidst the COVID-19 pandemic, the Minister of Manpower (the “Minister”) issued the Minister Regulation No. 14 of 2020 dated August 14, 2020 on the Guidelines for the Granting of Government Support in the Form of Salary/Remuneration Subsidy for Workers/Manpower in Handling the Impact of Corona Virus Disease 2019 (COVID-19) (the “Minister Regulation”).
Based on the Minister Regulation, the Government will grant support for eligible workers, in the form of salary/remuneration subsidy (the “Social Support”), in the amount of Rp600,000 (six hundred thousand Rupiah) per month for four months. The Social Support is intended to protect, sustain, and improve workers’ economic capability during the COVID-19 pandemic.
We set out below the highlights of the Minister Regulation.
- Criteria of Eligible Workers
To be considered eligible for the Social Support, a worker must fulfill the following requirements:
- an Indonesian citizen;
- is registered as an active member of the manpower social security program of Manpower Social Security Operating Body (“BPJS Ketenagakerjaan”), evidenced with a membership card number;
- receives salary/remuneration;
- his/her BPJS Ketenagakerjaan membership is valid until June 2020;
- pays contribution based on salary/remuneration of less than Rp5,000,000 (five million Rupiah), based on the report submitted by the employer to BPJS Ketenagakerjaan; and
- owns an active bank account.
The Government will grant the Social Support based on (i) the number of eligible workers, and (ii) budget ceiling availability.
If an employer provides falsified data in relation with the workers’ salary/remuneration, such employer shall be subject to sanctions in accordance with the prevailing laws and regulations.
- Procedures for the Granting of the Social Support
The information of the Social Support recipient candidates are collected from the data of active participants of BPJS Ketenagakerjaan. Hence, workers are not required to submit any application in order to be granted the Social Support. The BPJS Ketenagakerjaan will independently conduct verification and validation of such candidates in accordance with the stipulated criteria.
Based on unofficial statement of the President Director of BPJS Ketenagakerjaan as published on the news, BPJS Ketenagakerjaan is currently validating and verifying the data of eligible workers through their bank account and BPJS Ketenagakerjaan membership.After the verification and validation is completed, BPJS Ketenagakerjaan will provide a list of recipient candidates to the Minister.
The determination of the eligible workers shall be made by the Budget User Authorizer (Kuasa Pengguna Anggaran or KPA) which refers to the official in Directorate General of Industrial Relation Development and Manpower Social Security appointed by the Minister.
The Social Support will be distributed by the State Treasury Service Office through an appointed government bank directly to the recipients’ bank account. The Social Support distribution will be carried out in phases.
If a recipient turns out to be ineligible yet already received the Social Support, then he/she must return such Social Support to the state treasury.
***
September 11, 2020
Copyright © 2020 AKSET. All rights reserved.
Government Relaxes Premia for Manpower Social Security Programs During COVID-19
As an attempt to ensure the continuity of businesses during the Covid-19 pandemic, the Government relaxes the payment of premia for the Manpower Social Security Programs with the issuance of Government Regulation No. 49 of 2020 dated August 31, 2020 on Adjustments For Premia of Manpower Social Security Programs During Non-Natural Disaster Of Corona Virus Disease 2019 (COVID-19) (“GR 49/2020”). GR 49/2020 is effective as of September 1, 2020. The salient provisions of GR 49/2020 are discussed below.
Under GR 49/2020, the relaxation is as follows:
(i) the deferment of the premium payment deadline from the 15th of a month to the 30th of the month;
(ii) 99% (ninety nine percent) deductions of the Work-Related Accident Security (Jaminan Kecelakaan Kerja — “JKK”) premium and the Death Security (Jaminan Kematian — “JKM”) premium; and
(iii) partial postponement of Pension Security (Jaminan Pensiun “JP”) premium payment.
The relaxation above is valid from August 2020 until January 2021 and is applicable for employers, non-wage recipient participants and wage recipient participants (as applicable) who have registered their Manpower Social Security programs before August 2020.
The deductions and the postponement will be granted if the JKK and JKM premia are paid until July 2020. Any person who registers after July 2020 shall pay the normal premia for the first two months and will be granted deduction on their third month premia until January 2021.
In relation to postponement of partial payment of the JP premium, 99% of the premium of an employer’s portion may be deferred to May 15, 2021. The payment of the deferred premium must be made in full by May 15, 2022. The eligibility for this postponement differs based on the size of an employer. Medium-sized and Large Enterprises (Usaha Menengah dan Besar — “UMB”) are eligible for such postponement only if their production, distribution, or main business activities are disrupted due to Covid-19 and result in a decrease in monthly sales or income turnover of more than 30% (thirty percent). The companies must have registered their employees as participants before August 2020 and the companies have made the JP premium payment until July 2020.
***
September 10, 2020
Copyright © 2020 AKSET. All rights reserved.
Amendment of the Income Tax Incentives Implementation for Investors in Certain Industries and/or Regions
On July 27, 2020, the Minister of Finance (the “Minister”) amended the implementing regulation of Government Regulation No. 78 of 2019 (“GR 78”), namely, the Minister Regulation No. 96/PMK.01/2020 of 2020 dated July 27, 2020 on the Amendment of the Minister Regulation No. 11/PMK.010/2020 on the Implementation of Government Regulation No. 78 of 2019 on the Income Tax Incentives for Investments in Certain Industries and/or Regions (“Minister Reg. 96”).
As a brief background, the Minister Regulation No. 11/PMK.010/2020 (“Minister Reg. 11”) as the main implementing regulation of GR 78 regulates matters related with the provisions of income tax incentives for investors in certain industries and/or regions, which includes (i) the requirements for tax incentives over tangible fixed assets, (ii) the application procedures to obtain tax incentives, and (iii) the requirements to utilize the tax incentives. Further elaboration on the income tax incentives referred to herein may be read on our Newsflash on GR 78.
In summary, Minister Reg. 96 amends the authorizations of the government officials on the procedures of the income tax incentives provisions. The differences between Minister Reg. 11 and Minister Reg. 96 will be elaborated below.
| Minister Reg. 11 | Minister Reg. 96 | Remarks |
| Amendment of Article 5 | ||
| The determination of the value of intangible fixed assets as the basis of income tax incentive calculation shall be made by the Director of General Taxation (the “Director”). | The determination shall be made by the Minister. | |
| Amendment of Article 6(6) | ||
| The OSS System will notify the Minister through the Director when the application of income tax incentive is completed. | The OSS System will notify the Minister directly when the application of income tax incentive is completed. | Article 6 stipulates provisions on the application procedures for an investor to be granted with the income tax incentive.
Based on such article, the OSS System will automatically determine whether or not an investor is eligible to be granted with the income tax incentive, based on the criteria set out under GR 78. The OSS System will then send a notification to the relevant investor if they are eligible, and such investor will be required to submit certain copies of documents through the OSS System. If the OSS System declares that the application is completed and acceptable, the OSS System will send a notification to the Minister of Finance as a suggestion of the granting of the income tax incentive. |
| Amendment of Article 7(2) | ||
| In the event the OSS System is not available, the application shall be submitted offline to the Director through the Head of the Capital Investment Coordinating Body (Badan Koordinasi Penanaman Modal or “BKPM”). | In the event the OSS System is not available, such application shall be submitted offline to the Minister through the Head of BKPM. | |
| Addition of Article 8A | ||
| The granting of the income tax incentive shall be made by the Head of BKPM, for and on behalf of the Minister.
The Head of BKPM will issue a granting decision by no later than 5 (five) days after all requirements have been met. The decision consists of information of the relevant investor, as follows: a. the name, taxation identification number, and address; b. the details of the type of income tax incentive; c. the business registration numbers, the principal license, the investment license, the capital investment registration, or the business license, and the business or project location submitted for the incentive; d. the starting period of the income tax incentive; e. obligations of the relevant taxpayer (or investor); f. prohibitions of the taxpayer; and g. the business field, the Indonesia Standard Industrial Classification (KBLI), the scope of product, and the value of the capital investment plan. The implementation of the income tax incentive granting by the Head of BKPM must be reported to the Minister quarterly. |
Based on Article 8 of Minister Reg. 11, the granting of the income tax incentive is determined by the Minister and issued by the Director instead of the Head of BKPM.
The Minister Reg. 11 also did not stipulate the information contained in the issued decision. |
|
Minister Reg. 96 is effective 15 (fifteen) days since the date of promulgation, which is as of August 11, 2020.
***
August 27, 2020
Copyright © 2020 AKSET. All rights reserved.
Income Tax Reduction for Eligible Public Companies Re-Regulated
On June 19, 2020, the Government issued Government Regulation No. 30 of 2020 dated June 19, 2020 on the Reduction of Income Tax Fee for Domestic Corporate Taxpayers in the Form of Public Companies (“GR 30/2020”). GR 30/2020 is an implementing regulation of Article 5(3) of Law No. 2 of 2020 dated May 18, 2020 on the Implementation of Government Regulation in Lieu of Law No. 1 of 2020 dated March 31, 2020 (“Perppu 1/2020”) which was enacted to improve the social, economic, and community welfare due to the Covid-19 pandemic.
GR 30/2020 is meant to strengthen the capital market sector which holds an important role in the development of investment, business capitalization structure, and acceleration of national economic growth—which shall be realized through the increase of registered public companies. GR 30/2020 revokes Government Regulation No. 77 of 2013 dated November 21, 2013, as lastly amended by Government Regulation No. 56 of 2015 dated August 4, 2015 (“GR 77/2013”) which previously regulated the same matter.
Under GR 30/2020 is the deduction of Income Tax fee for corporate taxpayers and permanent establishments from 28% to (i) 22% for the Tax Years of 2020 and 2021 and (ii) 20% starting from 2022 Tax Year (before the Income Tax reduction incentive for eligible public companies). Further, under GR 30/200 an eligible public company is entitled to an additional 3% reduction of the income tax rates (the “3% Reduction”).
- Criteria of Eligible Public Companies
The criteria that must be satisfied by a public company to enjoy the 3% Reduction under GR 30/2020 are: (i) a public company, (ii) 40% of the total issued and paid-up shares must be traded on the stock exchange in Indonesia, and (iii) fulfill certain requirements, as follows:
- The shares referred to on point (ii) above must be owned by at least 300 persons;
- Each person referred to on point (a) above may only hold less than 5% of the total issued and paid-up shares; and
- The requirements referred to in points (a) and (b) above must be fulfilled for at least 183 calendar days in one tax year period.
Please note that points (a) and (b) above exclude any shares bought back by the public company and/or a related party of the public company.
- Transitional Provisions
The application for eligible public company to be granted the 3% Reduction, may be submitted to the Director General of Taxation.
***
July 10, 2020
Copyright © 2020 AKSET. All rights reserved.
Indonesian Government Introduces New and Integrated Submission Procedure for Companies’ Annual Financial Report
On March 19, 2020, the Minister of Trade (“MOT”) issued MOT Regulation No. 25 of 2020 on Annual Company Financial Reports (“MOT Reg. 25/2020”). MOT Reg. 25/2020 revokes the previous regulatory framework stipulating the annual financial report submission, i.e., Minister of Industry and Trade Decree No. 121/MPP/Kep/2/2002 dated February 25, 2002 (“Decree 121/2002”) and has entered into force on the date of its promulgation.
MOT Reg. 25/2020 sets forth a new procedure for business entities (that fulfill certain criteria to submit their annual financial reports to MOT) in submitting their annual financial reports based on the original requirement under Decree 121/2002. This new procedure is in line with the Indonesian Government’s intention to establish seamless submission of licenses and compliances process into the integrated Online Single Submission (“OSS”) system.
- SUBMISSION REQUIREMENT
MOT Reg. 25/2020 requires Companies to submit Annual Financial Report (“LKTP”) to the Ministry of Trade through the Directorate General of Domestic Trade (“Directorate General”). Companies under the MOT Reg. 25/2020 are defined as any type of business with permanent and continuous activities having the aim to obtain profit, undertaken by individuals or business entities in the form of legal or non-legal entities, as well as being established and domiciled within the territory of the Republic of Indonesia.
Based on the definition of Companies as above, MOR Reg. 25/2020 requires all Companies with the following status to submit LKTP:
- Limited Liability Companies (or PT) having fulfilled either one of these criteria:
- Being a Publicly Listed Company;
- Having a line of business in managing public funds;
- Issuing a letter of acknowledgement of indebtedness;
- Having total assets of at least Rp25,000,000,000 (twenty five billion Rupiah); or
- Being a debtor required to submit annual financial report to banks for audit purpose;
- Foreign Companies, having a domicile and running its business in the territory of the Republic of Indonesia, including their branch offices, auxiliary offices, subsidiary companies, agents, and representatives of such companies having authority to enter into agreements;
- State-Owned Companies (PERSERO), Public Service Companies (PERUM), and Region-Owned Companies (“Companies”).
Previously, Decree 121/2002 only required submission of LKTP to be conducted by head offices. MOT Reg. 25/2020 seems to broaden the definition and try to clear some uncertainty on categories of companies being required to submit LKTP.
Similar with Decree 121/2002, Companies are required to submit its LKTP after it has been audited by a public accountant and approved by the General Meeting of Shareholders or any of the authorized company organ based on laws and regulations. Submission of LKTP must be conducted at the latest six months after the financial year of a Company ends.
- THE NEW AND INTEGRATED SUBMISSION SYSTEM
Under MOT Reg. 25/2020, Companies having obtained their Business Identification Number (“NIB”) are required to submit their LKTP online through the Licensing Information System (“SIPT”) which has been integrated to the OSS system. In turn, the Directorate General will issue an LKTP Submission Receipt (“LKTP Receipt”) within 5 (five) days of the LKPT being duly submitted. In the previous regime, the Companies had to perform submission of their LKTP physically to the Directorate of Business Development and Company Registration at the MOT.
Furthermore, MOT Reg. 25/2020 also acknowledges LKTP submission required by other institutions. Therefore, if a Company has submitted its LKTP to: (i) regulators, (ii) authorities regulating submission of financial reports, (iii) Minister of State-Owned Enterprises, and/or (iv) Minister of Finance, the Company will be deemed to have submitted its LKTP. Companies will be required to submit the submission receipt through SIPT in order to obtain the LKTP Receipt.
- THE OPENNESS AND TRANSPARENCY OF COMPANIES’ FINANCIAL INFORMATION
The LKTP data submitted by the Companies constitutes open information and accessible to the public by submission of written request and payment of certain fees pursuant to regulations. The foregoing is also applicable to any ministerial body and/or state institution without the requirement to pay any fees.
- ADMINISTRATIVE SANCTIONS
Any incompliance with respect to the obligation to submit LKTP will be subject to administrative sanction of 3 (three) written warnings, each given with a period of 14 (fourteen) days in between each warning. Failure to comply with such warnings will result in revocation of business license for the Companies operating in trade sector, or recommendation of revocation of business license for the Companies with non-trade sector businesses.
Furthermore, if the Companies fail to submit LKTP in a complete and valid manner, the Companies will also be subject to administrative sanction of 3 (three) written warnings, each given with a period of 14 (fourteen) days in between each warning and followed by the revocation of the LKTP Receipt. Should the Companies fail to correct the submission within 14 (fourteen) days after the LKTP Receipt revocation, the Director General will impose an administrative sanction of license revocation or recommendation of license revocation, as relevant.F
April 27, 2020
Copyright © 2020 AKSET. All rights reserved.
Precautionary Steps Taken to Maintain the Stability of Indonesian Financial Systems During COVID-19
The Novel Coronavirus Disease (“COVID-19”) pandemic has caused the country’s economic growth to slow down and the financial system to worsen. As an effort to maintain stability of the financial system and the national economy, the Government of Indonesia issued the Government Regulation in lieu of Law No. 1 of 2020 dated March 31, 2020 on the State Financial and the Financial System Stability Policies in Relation to the Handling of the Coronavirus Disease 2019 (COVID-19) Pandemic and/or to Overcome Threats that are Potentially Harmful to the National Economy and/or the Financial System Stability (“Perppu 1/2020”)
Perppu 1/2020 sets out policies which, among others, expand the authority of the relevant authorities in Indonesia that supervise and make policies to create the safety net for the financial and monetary conditions of the country, including, KSSK, BI, OJK, and LPS (all terms as defined below).
In this Newsflash, we focus on the financial system stability policy set out under Perppu 1/2020. Please visit our website for our Newsflash with regard to the tax policy set out under Perppu 1/2020 that we have discussed separately.
- FINANCIAL SYSTEM STABILITY COMMITTEE’S LEGAL IMMUNITY
Initially, the Financial System Stability Committee (Komite Stabilitas Sistem Keuangan — “KSSK”) was formed under Law 9/2016 (defined below). KSSK consists of the Minister of Finance, the Governor of Bank Indonesia (“BI”), the Chairman of the Board of Commissioners of the Financial Services Authority (Otoritas Jasa Keuangan — “OJK”) and the Chairman of the Board of Commissioners of Indonesian Deposit Insurance Corporation (Lembaga Penjamin Simpanan — “LPS”), each of them represents their respective institutions to supervise, control and handle any Systemic Bank issues during both normal or financial crisis situations.
Under Perppu 1/2020, KSSK’s authority under Law No. 9 of 2016 on Prevention and Control of Financial System Crisis effective on April 15, 2016 (“Law 9/2016”) is expanded. Under Perppu 1/2020, KSSK is now authorized to determine any scheme for incentives from the Government to tackle issues in financial institutions and issues with regard to the stability of the financial systems that threaten the national economy.
Article 27 of Perppu 1/2020 provides one interesting point. This provision grants legal immunity to KSSK’s members and its member institutions in performing the tasks prescribed in Perppu 1/2020 in good faith regardless of the amount of expenditure spent for the actions stipulated under Perppu 1/2020. In fact, under Perppu 1/2020 such expenditure will not be considered state’s loss. Therefore, no civil or criminal legal action may be conducted against KSSK’s decision. Any decision or action by KSSK will neither be considered an administrative court object of assessment. We note that this provision is being challenged at the Constitutional Court.
Perppu 1/2020 further grants each of KSSK’s member institutions various forms of authority intended to help maintain the stability of Indonesia’s financial system.
- BI REGAINS SOME CRUCIAL AUTHORITIES
Perppu 1/2020 now grants BI several authorities that were previously revoked by Law 9/2016, as follows:
- to provide a short term loan or funding to banks based on the sharia principles, both to Systemic or non-Systemic Banks based on BI and OJK’s assessment of banks’ soundness level and solvability — assessed by OJK, as well as banks’ collateral sufficiency and repayment ability — assessed by BI and OJK;
- to provide a special emergency liquidity loan (pinjaman likuiditas khusus) to a Systemic Bank that does not meet the requirement for the foregoing short term loan and or funding with the approval from KSSK; and
- to buy Government Bonds (Surat Utang Negara — “SUN”) and/or Government Sharia Bonds (Surat Berharga Syariah Negara “SBSN”) from the primary market issued for particular purpose, specifically in relation to COVID-19 pandemic.
In addition to the foregoing, Perppu 1/2020 allows BI to do the following actions:
- to purchase or repurchase (repo) of government securities owned by LPS to fund the cost of handling solvability issues for Systemic or non-Systemic Banks;
- to regulate the obligation to receive and use foreign exchange for residents including provisions regarding the foreign exchange’s delivery, repatriation, and conversion in order to maintain macroeconomic and financial system stability; and
- to provide funding to corporate or private sectors by repurchasing (repo) SUN or SBSN owned by corporate or private sector via banks.
Previously during the economic crisis in 2008, Bank Century’s bailout by BI cost the Government trillions of Rupiah. Learning from this, the Government had limited BI’s authority in giving incentives for banks. BI was only allowed to provide short term loans and or funding for Systemic Banks with a very high threshold. In addition to receiving such funding from BI, Systemic Banks must also provide high-quality collateral in the form of high-rating securities that are liquid or loan assets rated as Current. Further, BI used to only be allowed to purchase or conduct repo transactions of Bovernment bonds owned by LPS. Also, buying SUNs and SBSNs from the primary market was prohibited.
- MORE POWER GRANTED TO OJK
Perppu 1/2020 provides a more significant role to OJK. On top of holding the crucial role in deciding to provide short term loans or funding for banks, OJK is allowed to give written orders to financial institutions to perform mergers, consolidations, acquisitions, integrations, and/or conversions.
In respect of the capital markets, OJK is authorized to determine exemptions for certain parties from performing the disclosure obligation as a part of the effort in preventing and handling the financial crisis. Further, OJK may enact regulations concerning the use of information technology for holding General Meetings of Shareholders or other meetings that are mandatory for financial service business actors. This policy is also in line with policies issued by OJK on similar issues under OJK Circular Letter No. S-92/D.04/2020 dated March 18, 2020 on the Relaxation on the Reporting Obligations and the Implementation of General Meetings of Shareholders.
- LPS’ EXTENSION OF AUTHORITY
Perppu 1/2020 also expands LPS’ authority during the COVID-19 pandemic by allowing LPS to:
- undertake joint preparation by conducting exchange information and/or conduct joint inspection with OJK against banks that are suspected to have solvability issues;
- take the following actions:
- perform sell or conduct repo of Government bonds to BI,
- issue bonds,
- receive loans from another party, and/or
- receive loans from the Government,
in case LPS is considered to have liquidity issues in handling failing banks;
- decide to save or not to save failing banks that are non-Systemic by considering, among others, the economic condition, availability or appetite of investors, banks’ complexity of issues and the efficacy in handling those issues, including but not limited to the consideration on the least cost test; and
- regulate and implement deposit insurance policies for a group of customers based on the source of fund and/or implement such policy with regard to a particular savings portfolio with a predetermined insured amount, that will be regulated in a Government Regulation.
***
Perppu 1/2020 is valid as of March 31, 2020. However, in accordance with the Constitution and applicable laws, the House of Representatives (Dewan Perwakilan Rakyat or “DPR”) will decide on its next hearing whether to approve Perppu 1/2020 into a law. If the DPR decides to cancel Perppu 1/2020, then Perppu 1/2020 will immediately be cancelled.
April 24, 2020
Copyright © 2020 AKSET. All rights reserved.
Supervisory Board of KPK – Implementing Regulations
Last year, the Parliament and the Government amended Law No. 30 of 2002 dated December 27, 2002 on Corruption Eradication Commission (“KPK”) with Law No. 19 of 2019 dated October 17, 2019 (collectively, the “KPK Law”). Such amendment to the KPK Law created public backlash due to the fear of attempts to weaken KPK. One of the provisions is the establishment of a Supervisory Board of KPK. As regulated in the KPK Law, the Supervisory Board serves as a body to oversee the work of KPK. The Board members will be appointed by the President of Indonesia.
Following the establishment of the Supervisory Board of KPK, the President of Indonesia issued Presidential Regulation No. 91 of 2019 dated December 31, 2019 on the Implementing Body of the Supervisory Board of KPK (“PR 91/2019”). The summary of key stipulations in PR 91/2019 is as follows:
| Issue | PR 91/2019 |
| Duties and responsibilities
|
In carrying out its duties, the Supervisory Board creates an implementing body called the Secretariat of the Supervisory Board. The Secretariat would be led by the Head of the Secretariat and the body will be directly under the responsibility of the Head of the Supervisory Board.
The Secretariat caries out the function of, among others: a. receiving and administering any permission to wiretap, search, and/or confiscate; b. facilitating the preparation of drafting the code of ethics for KPK chairman and employees; c. facilitating any public report on a alleged code of ethics violation by KPK chairman and employees; d. facilitating the enactment of the Supervisory Board’s hearing; and e. facilitating the work evaluation for KPK chairman and employees. |
| Appointment | The Head of Secretariat shall be appointed by the Secretary General of KPK based on a recommendation from the Supervisory Board. |
In addition to PR 91/2019, the Government issued Government Regulation No. 4 of 2020 dated January 16, 2020 on the Procedures to Appoint the Head and Members of the Supervisory Board of KPK (“GR 4/2020”). The summary of key stipulations in GR 4/2020 is as follows:
| Issue | GR 4/2020 |
| Membership | The Supervisory Board consists of five members, one of which is assigned as the Head of Supervisory Board. The term of office of the members is four years and may be extended for another period of four years. |
| Appointment and termination of appointment | The Head and the members of the Supervisory Board are appointed by the President. In appointing the Head and members of the Supervisory Board, the President is assisted by a Selection Panel.
The Selection Panel consists of nine members, five of whom are from the Central Government and the remaining four are from the public. One member from the Central Government acts as the head of the Selection Panel and another member serves as the deputy. Members of the Selection Panel are determined based on a Presidential Decree. The Selection Panel will conduct a series of tests to the candidate members of the Supervisory Board, which candidacy will be open for the public. When the panel selection determines the selected candidates, the Selection Panel will deliver these names to the President. The President will further deliver these names to the House of Representatives for consultation. Upon consultation, the President would have fourteen working days to determine the Head and members of the Supervisory Board. The Head and members of the Supervisory Board can resign or be terminated if: a. they pass away; b. the period of office has ended; c. they committed inappropriate conduct; d. they are sentenced to imprisonment because of a criminal act based on a court decision that is final and binding; e. they resign voluntarily in writing; and/or f. they are unable to carry out the work for three consecutive months. Termination of the appointment of the Head and members of the Supervisory Board will be based on a Presidential Decree. |
- Recent Development: Issuance of other Presidential Regulations
Other than PR 91/2019 and GR 4/2020, the President and the Government plan to issue certain regulations relating to the new provisions in the KPK Law. The new regulations include:
- Government Regulations on:
- Results of Search and Confiscation in respect of Corruption; and
- Transfer of KPK Employees as State Civil Apparatus.
- Presidential Regulations on:
- Supervision on the Eradication of Corruption;
- Salaries and Allowances for KPK Employees;
- Financial and Facility Rights for the Supervisory Board of KPK; and
- Organization and Work Procedures for the Chairman and Implementing Body of KPK.
To date, these regulations have not been issued by the President or the Government.
February 11, 2020
Copyright © 2020 AKSET. All rights reserved.