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Articles contributed by Lubis Ganie Surowidjojo
Indonesia's Investment Coordination Board ("BKPM") issued Regulation No. 5 of 2013 on the Guide and Procedure of Investment Licenses and Non-Licenses ("Regulation 5/2013"). The regulation replaces its predecessor Regulation No. 12 of 2009 ("Regulation 12/2009") and serves as the principal regulation that governs the procedure on investing in Indonesia and obtaining tax and other facilities. Regulation 5/2013 comes into force 30 working days after 12 April 2013. This newsletter will highlight important changes under Regulation 5/2013.
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.
Efforts to implement REDD+ in Indonesia first began with President Susilo Bambang Yudhoyono’s speech at the G20 Leaders Summit in Pittsburgh, USA on 25 September 2009, to reduce emissions from LULUCF (Land Use, Land Use Change and Forestry) by 26% by 2020 and by 41% with international support. The President’s commitment to reduce emissions was followed by Letter of Intent between the Government of the Republic of Indonesia (“GoI”) and the Government of the Kingdom of Norway on Cooperation on Reducing Greenhouse Gas Emissions from Deforestation and Forest Degradation (“LoI”), signed on 26 May 2010. This LoI also includes partnership to implement REDD+ and financial contribution from Norway to finance the efforts of REDD+ implementation in Indonesia.
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:
The Jakarta Corruption Court, a court of first instance for corruption crimes, acquitted former Merpati Airlines Director Hotasi Nababan of corruption charges. Mr. Nababan was charged over an aircraft lease agreement that went awry. Under the agreement, Merpati leased two airplanes from a US-based corporation - the two aircraft were never delivered despite Merpati having paid the security deposit. At this time, the Attorney General’s Office (AGO) has decided to appeal the decision.
President Yudhoyono has nominated finance minister Agus Martowardojo as the next Bank Indonesia governor when the incumbent Darmin Nasution's term expires in May this year. The nomination surprised pundits and experts alike. While his tenure at Bank Mandiri saw a substantial increase in profits from 2005 to 2010, Mr. Martowardojo's experience in monetary policy has been questioned - his nomination in 2008 was rejected precisely on this ground. The nomination needs to be approved by legislators at the House of Representatives (DPR), with many seeing this as a test of the executive's relationship with the legislatives. The test may serve as a prelude to two forthcoming key legislative issues: the passing of the state budget and the enactment of the new banking and oil & gas laws.
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.
A new, 34th, North Kalimantan province, with Tanjung Selor as its capital, has been separated from East Kalimantan. Notably, the creation of new regions has previously resulted in mining disputes, such as between the state-owned Antam and the Regent of North Konawe in Sulawesi.
As 2012 draws to a close we look back on a year of steady business growth and at an unfortunate start to a period of increasingly haphazard populist legislation that can be expected to prevail until the 2014 Presidential Election (currently scheduled for 9 July 2014, following the 9 April 2014 House of Representatives election).
Transparency International released the 2012 Corruption Perceptions Index (“Index”) on 5 December 2012 ranking Indonesia 118th out of 176 countries (among the bottom third of most corrupt countries).
Bank Indonesia (BI) Regulation No. 14/17/PBI/2012 on Trusts (“Regulation”) was issued on 23 November 2012 to provides for limited trust activities, which only banks may offer and only legal entities may take advantage of.
Constitutional Court (MK) Decision No. 10/PUU-X/2012 concerning the constitutionality of a number of provisions under the Indonesian Mining Law (Law No. 4 of 2009) has been issued on 22 November 2012.
Government Regulation No. 82 of 2012 on the Electronic System and Transactions ("the Regulation") has been issued on 12 October 2012 to implement certain aspects of Law No. 11 of 2008 on Electronic Information and Transactions ("Law"). The Regulation will affect Electronic System Operators ("Operators"), which the Regulation defines as "any person, business entity, state operator or members of the public who provides, manages, and/or operates electronic system individually or collectively to the users.
On 13 November 2012 the Constitutional Court rendered its decision No. 36/PUU-X/2012 concerning the constitutionality of certain provisions under the 2001 Oil and Gas Law (Law No. 22 of 2001).
On 18 October 2012 the House of Representatives passed the Bill on Food (“Bill”). The Bill intends to ensure food availability, affordability, and the ability to fulfil the demand for safe, high quality, and nutritious food on a national scale and local levels by utilizing resources, institutions, and local culture. The Bill is intended to better reflect to the external and internal development of food i.e. democratization, decentralization, globalization, law enforcement, and the actual condition of Indonesian society that is no longer can be accomodated with the predecessor regulation Law No. 7 of 1996.
On 16 October 2012 the Ministry of Energy and Mineral Resources (ESDM) issued the seventh list of mining concessions that have been certified by the ministry as clean and clear.
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.
M&A Guidelines Revision and Separation of Guidelines on the Imposition of Fines for Delays in Notifying the KPPU
Commission for the Supervision of Business Competition ("KPPU") Regulation No. 4 of 2012 on Guidelines for the Imposition of Fines for the Delay in Notifying a Merger, Consolidation or Acquisition ("Regulation") has been issued to set out the procedures and to separate this issue into a separate regulation (whereby, previously, the matter was addressed as part of Regulation No. 10 of 2011). The Regulation has been in force since 27 August 2011.
Minister of Trade Regulation No. 59/M-DAG/PER/9/2012 ("MoTR 59/2012") has been issued to amend No. 27/M-DAG/PER/5/2012 ("MoTR 27/2012") on Importer Identification Numbers. The amendment has immediate effect, as of 21 September 2012, and revises the implementation of certain aspects of General Importer Identification Number ("API-U") and Producer Importer Identification Number ("API-P"). In accordance with Articles 4(1) and 5(1) API-U is given to importers for trade purposes, whereas API-P is given to importers for production purposes.
Bank Indonesia has continued to maintain the interest rate at 5.75%, all the while the Indonesian economy has continued its strong growth. This has resulted in increased attention to Indonesia's uniquely positioned economy and substantial growth potential, one such example being the recently well-circulated McKinsey Report.
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.
Minister of Energy and Mineral Resources Regulation (MEMR) No. 22 of 2012 on the assignment to PT PLN (Persero) to purchase electricity from Geothermal Power Plants and the benchmark price of electricity purchase by PLN from Geothermal Power Plants (“Regulation”), has been issued, with immediate effect, on 23 August 2012. This Regulation revises the previous feed in tariff for geothermal power plants (MEMR Regulation No 2 of 2011, enacted on 16 February 2011) which was a flat 9.7 cents per kWh, to 10 to 17 cents per kWh based on geographical region, so as to attract more investment to the geothermal power industry in Indonesia.
Ministry of Trade Regulation No. 53/M-DAG/PER/8/2012 on Organizing Franchise Business has been issued to revoke the previous franchise regulation (Minister of Trade Regulation No. 31/M-DAG/PER/8/2008) and impose new requirements related to:
The eagerly anticipated Presidential Regulation No. 71 of 2012 on the Implementation of Land Acquisition for Public Interest Development (“Regulation”) has been issued to implement Law No. 2 of 2012 on Land Acquisition for Public Interest Development (“Law”). The Regulation repeals and replaces Presidential Regulation No. 36 of 2005, as amended by No. 65 of 2006, on the same subject matter, as well as its implementing regulations, thereby heralding an era of a completely revised legislative framework underlying land acquisition.
Indonesian development has continued apace so far this year, with Nielsen recently releasing research results that place Indonesia in the top position in its global consumer confidence survey. At the same time, however, inflation has also increased, and currently stands towards the upper end of Bank Indonesia’s target (4.56% year-on-year for July) while the Indonesian Rupiah has declined. This is likely to prevent any further reductions in the already historically low interest rate of 5.75%, and may indeed serve as a catalyst for rate increases in the medium term future.
Government Regulation No. 60 of 2012 on the amendment of No. 10 of 2010 on Procedures for Conversion of Allocation and Functions of Forest Areas (“PP 60/2012”) and Government Regulation No. 61 of 2012 on the amendment of No. 24 of 2010 on Forest Area Utilization (“PP 61/2012”) have recently been issued to address a number of outstanding issues with the regulatory framework. PP 60/2012 simplifies land replacement for permanent or limited production forests by removing the “adjacent to a forest” requirement, and PP 61/2012 is intended to provide certainty for borrow to use license holders, allow strategic industries to operate in forest areas, and reconcile conflicts with the Law No. 26 of 2007 on Spatial Planning Law.
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.
After four months of mixed signals from the government, the Ministry of Finance has issued Regulation No. 75/PMK.011/2012 on the Determination of Goods Subject to Export Duty ("Regulation"), which imposes a 20% duty on the export of any mixture of two or more raw minerals, ores or rocks if at least one constituent is listed in the Regulation.
Minister of Trade Regulation No. 29/M-DAG/PER/5/2012 on the Export of Mining Products ("MoTR No.29/2012") was issued on 7 May 2012 in relation to the government policy to control the export of raw mineral ore. Previously, under a transitional provision of Minister of Energy and Mineral Resources Regulation No. 7 of 2012 on the Increase of Mineral Added Value Through Processing and Refining ("MoEMR No.7/2012"), mining companies (holders of Production Operation Mining Permits / Izin Usaha Pertambangan Operasi Produksi / "IUP OP" and Small Scale Mining Permits / Izin Pertambangan Rakyat / "IPR") whose license were issued prior to the enactment of this regulation were prohibited from exporting raw materials or ore three months as of its 6 February 2012 enactment.
Issuance of Licensed Importer Numbers
Minister of Trade Regulation No. 39/M-DAG/PER/10/2010 on Import of Finished Goods by Manufacturers (“MoTR No. 39/2010”) has been revoked by the issuance of Minister of Trade Regulation No. 24/M-DAG/PER/4/2012 on 30 April 2012.
A Strong Start to a Year of Business Growth
A significant macroeconomic development in recent months has been that Indonesia has regained an investment grade rating, from Fitch and Moody’s, for the first time since the Asian financial crisis over a decade ago. Combined with a record low rate of 5.75% that has been set by Bank Indonesia in February this should serve to encourage further investor confidence.
Government Regulation No. 47 of 2012 on Corporate Social and Environmental Responsibility ("Regulation) has been issued on 4 April 2012 to implement Article 70 (4) of Law No. 40 of 2007 on Limited Liability Companies. This is a long-awaited piece of implementing legislation that clarifies the nature of the required corporate social responsibility (CSR) activities, which have been a vague requirement (which has survived a Constitutional Court challenge) for nearly 5 years.
Government Regulation No. 27 of 2012 on Environmental Licenses ("Regulation") was issued on 23 February 2012 to implement certain provisions of Law No. 32 of 2009 on Environmental Protection and Management ("Environmental Law"). The Regulation revokes the previous Government Regulation on AMDAL (Government Regulation on Environmental Impact Assessment - "GR 27/1999"), and institutes a procedure for obtaining an Environmental License, which is based on completing the AMDAL and UKL-UPL process and is a prerequisite for securing a Business License.
Minister of Labor and Transmigration Decree No. 40 of 2012 on Restricted Positions for Foreign Employees ("Decree") has been issued, with immediate effect, on 29 February 2012. Article 46 (1) of Law No. 13 of 2003 on Labor ("Labor Law") forbids foreign employees from holding positions of authority in a human resources capacity and certain other positions, while Article 46 (2) calls for Article 46 (1) to be further implemented by means of a ministerial decree.
Amendment of Government Regulation No. 23 of 2010 Increases the Mining Divestment Requirement to 51%
Government Regulation No. 24 of 2012 on the Amendment of Government Regulation No. 23 of 2010 on the Implementation of Mineral and Coal Mining Business Activities ("Regulation") has been issued, with immediate effect, on 21 February 2012 in order to revise the implementation of certain aspects of Law No. 4 of 2009 on Mineral and Coal Mining ("Law"). The regulation contains a number of clarifications and elaborations, as the implementation of the Law is fine-tuned, but also marks a dramatic change in the divestment requirement - calling for majority Indonesian ownership after 10 years of production.
Minister of Energy and Mineral Resources Regulation No. 7 of 2012 on Increasing The Added Value of Minerals Through Processing and Refining has been passed on 6 February 2012 ("MoEMR Regulation"). The MoEMR Regulation is designed to implement the domestic mineral processing and refining requirements under Law No. 4 of 2009 on Mineral and Coal Mining ("Mining Law") as mandated by Article 96 of Government Regulation No. 23 of 2010 on Implementation of Coal and Mineral Mining Activities ("GR No. 23/2010").
Presidential Decree No. 3 of 2012 on the Contract of Work and Coal Contract of Work Adjustment Evaluation Team ("Decree") has been issued on 10 January 2012 in order to establish a team that will evaluate the adjustment of Contracts of Work (CoW / Kontrak Karya) and Coal Contacts of Work (CCoW / Perjanjian Karya Pengusahaan Pertambangan Batubara) as required by Article 169(b) of Law No. 4 of 2009 on Mineral and Coal Mining ("Law"). The Evaluation Team will operate from 10 January 2012 until December 2013 (Part 7).
The Bill on Land Acquisition for Public Interest Development ("Bill") has finally been passed by House of Representatives (DPR) on 16 December 2011, and will receive the number of a law upon Presidential signing, or at the latest within 30 days. The Bill is intended to assure that land can be acquired for the development of public interest projects while prioritizing fair, democratic and humane principles and improving on the previous regulations on land acquisition, which are widely seen as being insufficient. The Bill is a significant revision of the prior regime under Presidential Regulation No. 65 of 2006 on the Amendment of Presidential Regulation No. 35 of 2005 on Land Acquisition for Public Interest ("PR 65/2006").
6 months after the issuance of Ministry of Forestry Decree No. 323/Menhut-II/2011 on the Determination of Indicative Maps Concerning the Suspension of New Permits for Utilization of Forests, Use of Forest Areas and Change of Forest Area Usage and Other Usage Areas ("Decree"), Ministry of Forestry Decree No. SK.7416/Menhut-VII/IPSDH/2011 on the Determination of Indicative Maps Concerning the Suspension of New Permits for Utilization of Forests, Use of Forest Areas and Change of Forest Area Usage and Other Usage Areas (Revision I) was issued on 22 November 2011 ("Revised Decree"). The issuance of Revised Decree is mandated by Presidential Instruction No. 10 of 2011, which obliged the Minister of Forestry ("Minister") to revise the maps covering the entire territory of Indonesia setting out areas of suspension of new permit issuance ("Indicative Maps") in every 6 months.
Law No. 20 of 2011 on Apartments was issued on 10 November 2011 ("Law 20/2011") and revoked the previous law on the same subject matter ("Law 16/1985"), which was considered to no longer be in line with the current conditions.
Capital Market and Financial Institutions Supervisory Agency (Bapepam-LK) Rule IX.E.2 on Material Transactions and Changes in Core Business has been amended by the Chairman of Bapepam-LK Decree No. KEP-614/BL/2011 ("Decree"). The amendment has been in force since 28 November 2011, and has repealed Chairman of Bapepam-LK Decree No. KEP-413/BL/2009 on the same subject matter. The amendment adds exemptions to the disclosure rules for debt, creates a disclosure obligation for changes in the business of certain subsidiaries, and sets a deadline for reporting the completion of the transaction.
On 11 November 2011 Indonesia notified its prior ratification, by means of Presidential Regulation No. 26 of 2011 ("Regulation"), of the ASEAN - Australia - New Zealand Free Trade Agreement ("AANZFTA" / "Agreement"). This means that the Agreement will enter into force for Indonesia on 10 January 2012. The original English version of the Agreement is included as part of the Regulation's appendix along with an Indonesian translation, whereby the original English language version of the Agreement will prevail should there be a difference in interpretation.
Amendment of KPPU Guidelines on Notification of Mergers, Consolidations and Acquisitions (Article 29
Commission for the Supervision of Business Competition ("KPPU") Regulation No. 10 of 2011 on Guidelines for Completing Mergers, Consolidations or Acquisitions that Might Result in Monopolistic Practices and Unfair Competition ("Regulation") has been issued as an implementation of Article 29 (1) of Law No. 5 of 1999 on the Prohibition on Monopolistic Practices and Unfair Business Competition. The Regulation effectively replaces Regulation No. 13 of 2010 with the intention of improving the efficiency of corporate restructuring notification procedures. The Regulation has been in force since 21 September 2011.
Commission for the Supervision of Business Competition ("KPPU") Regulation No. 11 of 2011 ("Regulation") has been issued to provide guidelines for the implementation of Article 17 (Monopolistic Practices) of Law No. 5 of 1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition. The Regulation has been in force since 28 September 2011.
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. 56 of 2011 as the Second Amendment of the Regulation on Public-Private Partnerships (PPP)
Commission for the Supervision of Business Competition (“KPPU”) Regulation No. 6 of 2011 (“Regulation”) has been issued to provide guidelines for the implementation of Article 20 of Law No. 5 of 1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition (“Law”).
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.
Minister of Finance Regulation No. 130/PMK.011/2011 on Provision of Tax Holiday or Reduction Facility (“MoF Regulation”) has been issued to implement Articles 29 and 30 of Government Regulation No. 94 of 2010 on Calculation of Non Taxable Income and Payment of Income Tax in the Current Year (“Government Regulation”) and Article 18 (5) in conjunction with Article 18 (7) of Law No. 25 of 2007 on Investment (“Investment Law”).
A month after the issuance of Presidential Instruction No. 10 of 2011 on the Suspension of New Concession Permits and the Improvement of Governance for Primary Natural Forests and Peatlands (“Presidential Instruction”), Ministry of Forestry Decree No. 323/Menhut-II/2011 on the Determination of Indicative Maps Concerning the Suspension of New Permits for Utilization of Forest, Use of Forest Area and Change of Forest Area Usage and Other Usage Areas (“Decree”) has been issued.
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.
Government Regulation No. 31 of 2011 on the Repeal of Government Regulation No. 17 of 2009 on the Income Tax on Transactions in Exchange-Traded Derivatives (“Regulation”) has been issued to repeal the earlier imposed 2.5% income tax that applied to the initial margin of exchange-traded derivatives (such as futures contracts).
June 2011 A busy time for business, a few notable corruption developments, and some long anticipated environmental progress
February 2011 A new year of challenges and opportunities
As we enter 2011 it is necessary to take a moment to note a number of significant developments that have recently taken place in Indonesia.
Suspension of New Concession Permits and Improvement of Governance for Primary Natural Forests and Peatlands
Head of Capital Investment Coordinating Board (BKPM) Circular Letter No. 2 of 2011 on the Regional Implementation of Investment Services (“Circular Letter”) has been issued to decentralize the authority over investment by shifting it from the central government to the regional governments. The Circular Letter was issued on 7 March 2011.
Government Regulation No. 22 of 2011 ("Regulation") has been issued to amend Government Regulation No. 20 of 2010 on Water Transport so as to exempt upstream oil and gas vessels from the cabotage rule of Law No. 17 of 2008 on Shipping ("Shipping Law") that requires all vessels operating between domestic ports to be Indonesian-flagged.
Bank Indonesia Tightens the Fit and Proper Test for Commercial Bank Officials and Controlling Shareholderes
Bank Indonesia Circular Letter No. 13/8/DPNP, dated 28 March 2011, on Fit and Proper Tests (“Circular Letter”) has been issued to implement Bank Indonesia Regulation No. 12/23/PBI/2010 on Fit and Proper Tests (“Regulation”). The Circular Letter has been in force since 28 March 2011 and repeals and replaces Bank Indonesia Circular Letter No. No.6/15/DPNP, dated 31 March 2004; and the Regulation, since 29 December 2010, repeals and replaces Bank Indonesia Regulation No. 5/25/PBI/2003, on the same subject matter, so as to improve good governance in the banking industry.
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.
Government procurement policy, as previously defined by Presidential Decree No. 80 of 2003 has been revised under Presidential Regulation No. 54 of 2010 (‘Regulation').
Government Regulation No. 55 of 2010 on the Guidance and Supervision of the Management of Mineral and Coal Mining Operations (‘Regulation') was issued on 5 July 2010. The purpose of the Regulation is to govern the supervision of the extractive industries, by implementing Article 144 of Law No. 4 of 2009 on Mineral and Coal Mining ("Mining Law").
Capital Market and Financial Institutions Supervisory Agency (Bapepam-LK) Regulation No. VI.C.4 (KEP-412/BL/2010) (‘Regulation') will come into force on 5 November 2010. The purpose of the Regulation is to implement Article 52 of Law No. 8 of 1995 on Capital Markets by regulating the relationship between the Issuer of debt securities (bonds) and the Trustee.
On 1 February 2010, Government Regulation No. 23 of 2010 on the Implementation of Mineral and Coal Mining Business Activities (“PP 23/2010”) was enacted.
Indonesia Issued a New Rule on Mandatory Indonesian Language Labeling to Enhance Consumer Protection
Indonesian Government through the Minister of Trade Regulation No. 22/M-DAG/PER/5/2010 dated May 21, 2010 (“Permendag 22/2010”), accelerates the implementation of mandatory Indonesian language labeling for goods circulated in Indonesia as a step to increase consumer protection. The mandatory labeling is also in accordance with the Consumer Protection Law No. 8 of 1999. This regulation serves as an improvement over the previous Permendag No. 62/M-DAG/PER/12/2009 dated December 21, 2009 (“Permendag No. 62/2009”).
The Government of Indonesia has announced that it will place a two-year moratorium on the conversion of natural forests and peat lands. The moratorium is planned to be implemented in the beginning of 2011. As a result, no new conversion permits will be issued, while permits issued before 2011 will not be affected.
The President of the Republic of Indonesia on 6 August 2010 issued Presidential Regulation Number 54 Year 2010 ("PR No. 54/2010") which amends the previous regulation on Government’s Goods and Services Procurement. The new regulation would serve as a reference for drafting of bill on public procurement on goods and services for both central government and regional government, which is expected to be submitted before the House of Representatives by December 2010.
Upstream oil and gas regulator BPMigas has rejected a plan of development (POD) for a liquefied natural gas (LNG) project proposed by Energy Equity Epic Sengkang, a subsidiary of Australia-based Energy World Corporation (EWC), on the grounds that the proposal is incomplete.
Jakarta (ANTARA News) - West Java province is planning to build its own international seaport in Muara Gembong, Bekasi district, a provincial businessman said.
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."
The State Minister of National Development Planning / Head of the National Development Planning Board has released a Guidelines for Compiling Departmental and Institutional Strategic Plans through Minister Regulation No. 5 of 2009. The Guideline covers the scope and procedure of Government Ministry/Institution Strategic Plan for the period of 2010-2014. All of the initial strategic plans are to be submitted by 15 October 2009.
In order to enhance protections for insurance customers, Minister of Finance will soon replace Ministerial Decisions on Investigations of Insurance Companies No. 423/KMK.06/2003 with a new Regulation. The draft regulation will provide additional definitions for loss insurance, life insurance, and insurance brokers. Direct investigations of an insurance company under this Draft should be done with a prior notification to the Insurance Company and Capital Market and Financial Institutions Supervisory Agency. An indirect investigation is to be carried out by the insurance bureau. In addition, both direct and indirect investigation should be conducted periodically.
The Minister of Environment has issued Regulation No. 27 Year 2009 concerning Guidelines of Implementation of Strategic Environment which was effective since 3 July 2009. The regulation intends to maintain and conserve the strategic environment through integration of 3 main principles policy, planning and developing.
The Minister of Labor and Transmigration has issued the Regulation of Minister of Labor and Transmigration No. Per.17/MEN/VIII/2009 concerning the Enactment of Pre-departed Briefing of Indonesian Migrant Worker Overseas.It shall be effective as of 6 August 2009.