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In July 2012, Bank Indonesia issued Regulation No. 14/8/PBI/2012 on Shareholding in Retail Banks ("Regulation"). The Regulation caps single ownership in a retail bank for banks, non-bank entities, and individuals at 40-30-20% respectively (the so-called "40-30-20 Rule"). BI issued the Regulation as part of its policy to break up concentrated shareholding, diversify shareholders and improve bank governance.
On 11 April 2013 the Ministry of Finance issued a Business Viability Guarantee Letter (BVGL) for the Sarualla geothermal power project company pursuant to Minister of Finance Regulation No. 139/PMK.011/2011 on PLN’s Business Viability. Following the signing of the Energy Sales Contract (ESC) and Joint Operation Contract (JOC) on April 4 this allows the Sarulla project to proceed with implementation, having been initiated on 27 February 1993 but later stalled due to the 1997 financial crisis.
The DPR is currently discussing the Draft Banking Law (“Draft Law”), which will repeal the current Banking Law (Law No. 7 of 1992 as amended by Law No. 10 of 1998 “Banking Law”) upon enactment. The most important changes that the Draft Law will introduce are:
What Is FATCA?
FATCA (Foreign Account Tax Compliance Act) refers to Chapter 4 of the US Internal Revenue Code. It requires non-US Foreign Financial Institutions (FFIs) and non-US Non-Financial Foreign Entities (NFFEs) to identify and disclose their US account holders to the US Internal Revenue Service (IRS).
Bank Indonesia has issued Regulation No. 14/27/PBI/2012 (“PBI 14/2012”) on the Implementation of the Anti Money Laundering and Prevention of Terrorism Funding for Banks to replace Bank Indonesia Regulation No. 11/28/PBI/2009. PBI 14/2012 was issued on 28 December 2012, with immediate effect, and applies to commercial banks, sharia banks and branches of foreign banks.
Law No. 1 of 2013 on Microfinance Institutions (“Law”) has been issued with a view of providing legal certainty for microfinance providers (LKM). The government recognizes the sizeable gap between microfinance availability and demand, especially from the low-income segment. The Law thus aims to bridge this gap by providing a legal basis for microfinance operations as well as setting out standards that LKMs must follow.
Bappebti (Indonesia’s commodity futures trading regulator) has issued Regulation No. 99/Bappebti/PER/11/2012 (Bappebti 99/2012). The regulation allows futures traders (pialang berjangka) to sign customers up via online means, on the condition that both the traders and the customers meet a number of criteria.
Minister of Finance regulation No. 144/PMK.011/2012 on Granting Income Tax Facilities Towards Investments on Certain Industries and/or Regions ("Regulation") was issued on 3 September 2012 to implement certain provisions of Government Regulation No. 1 of 2007, as lastly amended by Government Regulation No. 52 of 2011 ("Government Regulation"). The Regulation revokes the previous Minister of Finance Regulation No. 16/PMK.03/2007 ("MoF 16/2007") on the same subject matter. The Regulation provides more comprehensive requirements and clearer and stricter rules to receive Income Tax incentives compared to MoF 16/2007.
The Indonesian Capital Market and Financial Institutions Supervisory Agency (“Bapepam-LK”) revised Rule No. X.K.6 with the issuance of Decision of the Chairman of Bapepam-LK No. Kep-431/BL/2012 on 1 August 2012, concerning Submission of Issuer or Public Company Annual Report. Revision of Rule No. X.K.6 revokes Decision of the Chairman of Bapepam No. Kep-134/BL/2006, dated 7 December 2006, and Rule No. X.K.7 as set out by Decision of the Chairman of Bapepam-LK No. Kep-40/BL/2007 dated 30 March 2007, concerning Time Frame for Submission of Periodic Financial Statement and Annual Report for Issuers and Public Companies that List Their Securities both in Indonesian Securities Exchanges and Foreign Securities Exchanges.
Bank Indonesia Regulation No. 14/8/PBI/2012 on Share Ownership in Banks (“Regulation”) has been issued to tighten the bank ownership rules. The aim of the Regulation is to encourage consolidation so as to strengthen Indonesia’s banking industry, reduce the dominance of single shareholders, and make Indonesian banks more competitive in anticipation of the 2020 ASEAN financial sector integration. In relation to consolidation, Darmin Nasution, the Governor of Bank Indonesia, stated that the “single presence” policy, under which shareholders can only be a controlling shareholder in one bank will be relaxed in the near future.
Indonesia is on the verge of passing a new law on banking, which will replace Law No. 7 of 1992, as amended by Law No. 10 of 1998. The driving force behind the new law is the creation of the OJK (Financial Service Authority), and the resulting allocation of regulatory and supervisory powers from the central bank (Bank Indonesia) to the OJK. The current draft of the new law (this newsletter refers to the third draft available as of 14 May 2012) provides the OJK with wide scope to regulate the banking sector, which is a departure from the earlier drafts that sought to set out more of the key provisions within the text of the law itself.
USD 800 MIO SOFT LOAN
On 13 December 2011, Badan Layanan Umum Pusat Investasi Pemerintah (BLU PIP) and the State Electricity Company (PT PLN (Persero)) signed an Investment Agreement in the Form of a Soft Loan (Perjanjian Investasi dalam bentuk Pemberian Pinjaman dengan Persyaratan Lunak), by which BLU PIP has granted PT PLN (Persero) a soft loan.
On 30 September 2011, Bank Indonesia (“BI”) issued BI Regulations concerning foreign exchange, i.e. BI Regulation No.13/20/PBI/2011 concerning Receipt of Export Proceeds in Foreign Currency and Drawdowns of Foreign Loans in Foreign Loans (“PBI 20/2011”) and BI Regulation No.13/22/PBI/2011 concerning Obligation to Report a Drawdowns of Foreign Loans in Foreign Currency (“PBI 22/2011”) both of which came into effect on 2 January 2012.
The long awaited Bill on the Financial Services Authority ("Bill") has finally been passed by House of Representatives on 27 October 2011, and will receive the number of a law upon Presidential signing, or at the latest within 30 days. The Bill is intended to serve as the legal basis for the establishment of the Financial Services Authority (Otoritas Jasa Keuangan / OJK), an independent financial institution that will alter the regulatory framework of the financial service sector in Indonesia by taking over certain functions from the Central Bank (Bank Indonesia) on 31 December 2013, and the Capital Market and Financial Institution Supervisory Body (Bapepam-LK) on 31 December 2012.
Bank Indonesia Regulation No. 13/22/PBI/2011 ("Regulation") on Mandatory Reporting of Drawdowns of Foreign Debt was issued on 30 September 2011 and will come into force on 2 January 2012, with the sanctions applying starting from July 2012. The Regulation aims to support Bank Indonesia's efforts of maintaining the stability of the Indonesian Rupiah and ensuring the availability of foreign currency in the Indonesian market by providing Bank Indonesia with the data necessary to set its monetary policies.
Presidential Regulation No. 49 of 2011 (“Regulation”) has been issued to ratify the ASEAN Comprehensive Investment Agreement (“ACIA”), which had been signed by Indonesia and other ASEAN members on 26 February 2009. The Regulation has been in force since 8 August 2011.
Capital Market and Financial Institution Supervisory Agency (Badan Pengawas Pasar Modal dan Lembaga Keuangan/ Bapepam-LK) Decree No. KEP-346/BL/2011 on the Submission of Periodic Financial Reports by Issuers and Public Companies “Decree”) has been issued as a response to changes in the Statement of Financial Accounting Standards (Pernyataan Standar Akuntansi Keuangan/ PSAK) which have occurred as a result of PSAK’s convergence with the International Financial Reporting Standards (IFRS). The Decree has been in force since 5 July 2011, and has repealed Decrees No. KEP-36/PM/2003 and No. KEP-40/BL/2007 on the same subject matter.
Law No. 7 of 2011 on Currency (“Law”) has been issued to further implement Article 23B of the 1945 Constitution, which is also implemented by Law No. 23 of 1999 on Bank Indonesia (“Bank Indonesia Law”) and Law No. 17 of 2003 on State Finance. It repeals and replaces Articles 2, 19, 20, 21, 22, and 23 of the Bank Indonesia Law. The Law came into force on 28 June 2011, and calls for the necessary implementing regulations to be issued within a period of one year.
The Indonesian and Singaporean governments cooperate in the development of Batam, Bintan and Karimun into an industrial zone competitive against other such projects in Asia and the Pacific.
The government assures banks that they are allowed to exchange recapitalized bonds with shares in non-bank financial institutions. However, banks are prohibited to use non-tradable recapitalized bonds for the acquisition. Banks must hold the recapitalized bonds until their maturity (hold to maturity).
Capital Market and Financial Institutions Supervisory Agency (Bapepam-LK) Rule IX.A.15 (Decree No. KEP-555/BL/2010) on Continuing Public Offerings (‘Rule’) has come into force on 30 December 2010. The Rule has been introduced to enable companies with good financial performance to conduct debt securities and/or sukuk (Islamic bond) public offerings gradually, through a single effective Registration Statement.
A technologist and author, Bruce Schneier, once said, “The mantra of any good security is: ‘Security is not a product, but a process.’” This quote may be true, and this is what the government of Republic of Indonesia is currently working on.
Indonesia continues to attract favorable global investor interest in all sectors beyond the traditional sectors of oil and gas, mining and other natural resources.
The Indonesian Capital Market experienced an all time high at the end of 2009, resulting in many implications for 2010. The growing power of Indonesian Investors and the middle class, married with the increased potential for public offerings on the stock exchange should lead to more activity on the stock market and a subsequent growth in the economy. The Government of Indonesia has its eye set on achieving economic growth of 6 to 7 percent in the next few years, with the hope of enabling them to reduce poverty and unemployment significantly. They see increasing investment as a way of securing this economic growth. In order to build confidence in investors, thus encouraging investments, and to match regulations with current practice the Government is continuing to develop its investment and capital market.
In spite of the global crisis, Indonesia is still full of potential for foreign investors. The country seems to have been largely buffered from many of the worst impacts occurring in other economies. This is perhaps because, after the collapse of the banking system during the Asian crisis in the wake of 1997, the Indonesian financial sector was forced clean up its act, developing stronger fiscal resilience in the process. Banks were recapitalised and restructured by the Government and once the financial soundness of the banks was stabilised, many were sold to foreign institutions. The financial sector is now relatively healthy and provides a stable foundation for the Indonesian economy. There remains an attractive market for the acquisition of banks, insurance companies and securities companies.
Surabaya, E Java (ANTARA News) - The National Investment Coordinating Board (BKPM) has been trying to minimize the complexity in obtaining an investment license under the one-stop service program, a spokesman said.
State power firm PT PLN and Malaysia's utility company Tenaga Nasional Berhad (TNB) have signed an agreement on the construction of a US$400 million power grid connecting the two countries.
A planned initial public offering (IPO) by PT Krakatau Steel, the nation's largest steel producer, will most likely be carried out in the second half of next year - about six months later than planned. "Krakatau's IPO will be in the second semester of 2010," president director Fazwar Bujang told reporters at the office of the State Ministry for State Enterprises on Tuesday.
JAKARTA, Oct 29 - Indonesia is looking at lifting restrictions on share issues, the head of the stock exchange said on Thursday, a move which could increase fund-raising for companies, improve liquidity, and attract more investors.
The global financial firm UBS has upgraded its growth forecasts of Philippines, Indonesia and Thailand for 2010 due to "pent-up demand, the inventory cycle, fiscal and monetary policy."