Industry Updates

New Health Omnibus Law is Finally Around the Corner

July 2023 – On 11 July 2023, the House of Representatives (“DPR”) ratified the Draft Health Bill at its plenary meeting. There is one step left until Indonesia marks the beginning of a transformation in healthcare services with the introduction of an Omnibus Law, which will revoke 11 existing laws governing the health sector (“Health Omnibus Law”).

The Draft Health Bill has already passed the ratification process, and we still have to wait for the President to enact the bill into a law. If the President does not enact the bill within 30 days after its ratification date, the bill ratified by the DPR will automatically become a law and will technically come into effect as the new Health Omnibus Law around August 2023.

There are some notable changes and reforms in the latest draft that we have seen (i.e., 11 July 2023), such as:

a. Domestic product prioritization for medical devices and pharmaceutical preparations (including drugs, quasi drugs, health supplements, cosmetics)
b. Reform in the healthcare professionals (“HCP”) licensing regime, and easier access for foreign HCPs and diaspora HCPs to obtain practice licenses in Indonesia
c. Clear acknowledgement of telemedicine as a media to provide healthcare services to patients
d. New councils and collegiums for healthcare to be formed by the Ministry of Health (“MOH”)
e. More attention from the government on research and development, including biotechnology
f. Change of single purpose requirements for hospitals
g. New requirements for offshore data transfer between healthcare facilities
h. Centralized standard governance for pharmaceutical preparations and medical devices

More details on the importation process of ozone-depleting substances and hydrofluorocarbons

August 2024 – Issuance of Minister of Environment and Forestry Regulation No. 7 of 2024 on Procedures for the Issuance of Recommendations for Import Approval of Ozone-Depleting Substance and Hydrofluorocarbon on 16 May 2024.

By reference to the Montreal Protocol and the recent Kigali Amendment, this regulation sets out the process for importation of ozone layer-depleting substances (BPO) and hydrofluorocarbons (HFC). The objective of this regulation is to reduce global warming by controlling the use of ozone-depleting substances. The regulation provides clear rules to importers of BPOs and HFCs.

Importers may only import BPOs and HFCs once they obtain Import Approval. In order to obtain Import Approval, importers must first obtain Import Approval Recommendation. Applications must be made on the Sistem Indonesia National Window (SINSW) app. The Minister of Environment and Forestry has the authority to issue Import Approval Recommendations, as well as determine the national import allocation of BPOs and HFCs. This authority is delegated to the Director-General. To determine the National Import Allocation for BPOs and HFCs, a meeting will be conducted which will involve the Director-General, and ministries/institutions related to trade, industry, agriculture, quarantine, finance, marine affairs, fisheries and the management of KPBPB Batam.

In relation to BPOs, control of this substance is carried out through import restrictions and import bans. Pending on whether the BPO consists of methyl bromide or non-methyl bromide, a different process is relevant. For methyl bromide, this is carried out for quarantine and pre-shipment activities. For non-methyl bromide, for maintenance of refrigeration and fire extinguishing equipment. The import restriction is conducted only to fulfil domestic BPO needs. The import of BPO can only be conducted at six specified seaports, including Belawan in Medan; Tanjung Priok in Jakarta; Merak in Cilegon; Tanjung Emas in Semarang; Tanjung Perak in Surabaya; and Soekarno Hatta in Makassar.

In relation to HFCs, only import restrictions apply. Import restrictions are conducted only to fulfil domestic HFC needs, including for air condition equipment, refrigeration and foam manufacturing, aerosols, solvent/coatings, and other activities in accordance with the development of science and technology. The import of HFCs can only be conducted at seven specified seaports. These include the six stated above, as well as at Batu Ampar in Batam.

BPO and HFC importers must report:

• the realisation of imports and distributions which are realised and unrealised, if they have a Business Identification Number (NIB) which is valid as a General Importer Identification Number (API-U); and
• the realisation of imports and utilisation of BPO/HFCs which are realised and unrealised, if they have a NIB which are valid as Producer Importer Identification Number (API-P).

More details on the implementation of the management of hazardous and toxic (B3) waste and waste containing B3 substances

22 July 2024 – Issuance of Minister of Environment and Forestry Regulation No. 9 of 2024 on the Management of Waste Containing Hazardous and Toxic Substances and Hazardous and Toxic Waste ("MOEF Regulation 9/2024") on 3 July 2024

This regulation sets out a more extensive regulation on the management of hazardous and toxic (B3) waste and waste containing B3 substances. Previously, the management of B3 waste and waste containing B3 substances was regulated in Government Regulation No. 27 of 2020 on Specific Waste Management.

Every person who produces B3 waste and waste containing B3 substances must reduce and handle it. Waste handling includes sorting, collecting, transporting, processing and final processing. Waste reduction includes limiting waste generation, recycling waste and reusing waste.

a) Limiting waste generation

• Choosing goods and/or products that have labels with environmentally friendly chemical content.
• Choosing goods and/or products that have instructions on how to use, store and post-use.
• Choosing recyclable goods and/or products.

b) Waste recycling: Utilizing waste containing B3 substances and/or B3 waste into raw materials and/or useful goods after going through the processing process first.

c) Waste reutilization: Reuse all or part of the waste containing B3 substances and/or B3 waste.

In conducting waste recycling and waste reutilization, every person who produces B3 waste and waste containing B3 substances must have a business license for B3 waste utilization activities.

In the event that any person is incapable of recycling or reusing waste, the B3 waste or waste containing B3 substances is handed over to a Specific Waste Management Facility (Fasilitas Pengelolaan Sampah Spesifik or "FPSS"). FPSS is provided by the MOEF, governors and/or mayors. In providing FPSS, the MOEF, governors and regents/mayors may cooperate with business entities that have business licenses. Cooperation can be in the form of the construction of new FPSS or the use of waste collection and/or processing facilities that can serve as FPSS.

MEMR Reg 2/2023

June 2023 – Minister of Energy and Mineral Resources ("MEMR") Regulation No. 2 of 2023 on the Implementation of Carbon Capture and Storage, as well as Carbon Capture, Utilization and Storage in Upstream Oil and Gas Business Activities

The Minister of Energy and Mineral Resources regulation no. 2 of 2023 on the Implementation of Carbon Capture and Storage, as well as Carbon Capture, Utilization and Storage in Upstream Oil and Gas Business Activitites ("MEMR Reg 2/2023") introduces concepts on the implementation of (i) Carbon Capture and Storage ("CCS"); and (ii) Carbon Capture, Utilization and Storage ("CCUS")

1. What is the purpose and difference between CCS and CCUS activity?
   1. CCS is carried out with the goal of reducing greenhouse gas emissions by injecting and storing carbon emissions in Work Areas in Indonesia.
   2. CCUS is carried out with the goal of reducing greenhouse gas emissions and increasing oil and gas production by injecting, utilizing and storing carbon emissions in Work Area in Indonesia.



2. Who does the CCS/CCUS activity?

   MEMR Reg 2/2023 suggests that the Contractor under the Production Sharing Contract with the Special Working Unit for the Organization of Offshore Oil and Gas Business Activities (Satuan Kerja Khusus Pelaksana Kegiatan Usaha Hulu Minyak dan Gas Bumi – “SKK Migas”) or the Aceh Oil and Gas Agency (Badan Pengelola Migas Aceh – “BPMA”) ("Contractor") is a party carrying out CCS/CCUS activity in its Work Area.




3. Where does the captured carbon emission come from?

   The captured carbon emissions are derived from upstream oil and gas business activities. In addition, carbon emissions in the form of CO2 from the atmosphere can also be used for CCS or CCUS activity. Specifically, for CCUS activity, the carbon can also be derived from other industrial activities.

   MEMR Reg 2/2023 also allows the Contractor to inject and store carbon emissions generated by a third party in its Work Area based on a cooperation agreement; however, subject to approval from SKK Migas or BPMA. This will be further regulated by detailed working guidelines (Pedoman Tata Kerja or PTK).



4. How to implement CCS/CCUS activity?
   

   Contractor needs to first secure approvals for CCS and CCUS implementation plans by submitting their implementation plans, which must be drawn up based on the relevant research results and must include various mandatory elements, to the following parties:

   1. The MEMR through SKK Migas or BPMA, if the CCS/CCUS activity is a part of the initial field development plan; or
   2. SKK Migas or BPMA, if the CCS/CCUS activity is a part of the next field development plan.

   Once implementation plans have been approved, the Contractor can begin the implementation of the CCS and CCUS.




5. Is there any obligation that needs to be fulfilled?

   The Contractor that carried out CCS or CCUS activities must perform (i) monitoring and (ii) measurement, reporting and verification ("MRV") obligation.

Monitoring obligation

1. In carrying out CCS or CCUS activities, the contractor must monitor operational safety to ensure worker safety, installation and equipment safety, environmental safety, and/or public safety.
2. The monitoring results must be reported once every six months to the Director General of Oil and Gas through SKK Migas or BPMA.

MRV obligation

1. The measurement program must be carried out at least once a year and be verified by an independent body that may be appointed by MEMR.
2. The Contractor should submit their MRV results in writing to the Minister via the Director-General by March of the year following the relevant reporting year.
3. The Contractor can also utilize the carbon economic value (or commonly known as carbon pricing) derived from CCS or CCUS activity.

Sanction

Noncompliance with the above obligations may lead to administrative sanctions in the form of written warnings and temporary suspension of CCS or CCUS activities.

HPP Law No. 7 of 2021 on the Harmonization of Tax Regulations

23 November 2021 – HPP Law introduces among others, a carbon tax in Indonesia.

The carbon tax will be imposed on individuals or entities purchasing goods that contain carbon or conducting activities that emit carbon. It will become effective on 1 April 2022. The coal-fired power plant sector will be the first sector to be charged, with a minimum tariff of IDR 30 per kilogram of carbon dioxide equivalent (CO2e).

PR 98/2021 Presidential Regulation No. 98 of 2021 on Implementation of Carbon Economic Value for Nationally Determined Contributions and Control of Greenhouse Gas Emissions in National Development

23 November 2021 –  PR 98/2021 introduces the mechanisms to implement the Carbon Economic Value.

To achieve the Nationally Determined Contribution (NDC), PR 98/2021 introduces the following mechanisms.

1. a. Carbon trading
   
   Carbon trading is carried out based on the National Registry System for Climate Change Control (Sistem Registri Nasional Pengendalian Perubahan Iklim - "SRN PPI") or based on the use of greenhouse gas Emission Reduction Certificates issued from the national emission reduction certification. The mechanisms of carbon trading may be in the form of emission trading or greenhouse gas emission offsets.
   
   
2. b. Performance-based payment
   

   Performance-based payments are made based on the results of verification of the achievement of the emission reduction results carried out by a business or activity.
   
   

3. c. Carbon levies
   
   Carbon levies may be in the form of tax, duty and custom or other levies based on the content and/or potential of the carbon emissions and/or the amount of emitted carbon and/or the performance of the Climate Change Mitigation Actions.

As the regulation was recently issued, it remains to be seen how the above mechanisms will be implemented.

Update on the regulation for infrastructure financing

September 2024 – This Presidential Regulation No. 66 of 2024 on Amendment to Presidential Regulation No. 32 of 2020 on Infrastructure Financing through Limited Management Rights ("Reg 66/2024")  – Government Eases Limited Concession Scheme.

Reg 66/2024 has made various changes to Presidential Regulation No. 30 of 2020 ("Reg 30/2020"), with the effect of the limited concession scheme ("LCS") being eased. Applying from 2 July 2024, Reg 30/2020 established numerous prerequisites related to state-owned assets, specifically addressing the limited management of state-owned assets by business entities. However, the introduction of Reg 66/2024 suggests that the previous regulation was not stimulating investment or encouraging the participation of business entities to a sufficiently desirable level.

Although the core asset management elements from Reg 30/2020 remain in Reg 66/2024, there are significant changes. Reg 66/2024 stipulates that asset owners are no longer required to have a positive cash flow for two consecutive years; the categories of infrastructure eligible under the LCS have been expanded; assets no longer must have a minimum utilization period of 10 years; and private entities can now propose asset management initiatives. For example, healthcare, tourism, government office buildings and housing now come under the scope of infrastructure subject to asset management. Additionally, business entities are also required to deposit all funds in the form of an up-front payment. Specifically, business entities have a maximum of six months after the signing of the asset management agreement to deposit all funds.

Overall, these amendments indicate the need to encourage investment, in particular, generating funds for new infrastructure without increasing debt, reducing the liabilities of state-owned enterprises, while also ensuring proceeds are paid up front. At the same time, this may pose issues in relation to the valuation of these assets, as investors are aware that the government is eager for private entities to purchase the long-term operational rights to these assets.

Recent projects with plans to implement the LCS include PT Jasa Marga Tbk, for its subsidiaries' toll road segments. In August 2024, it was announced that PT Jasa Marga Tbk hoped to complete the divestment of its 40% of shares in PT Jasamarga Jalanlayang Cikampek, forming part of its asset recycling program, with the aim of raising new funds.

Acceleration of Nusantara Capital City (Ibu Kota Nusantara or IKN) development

July 2024 – The President of the Republic Indonesia issues Presidential Regulation No. 75 of 2024 on Acceleration of the Development of the IKN ("PR 75/2024") on 11 July 2024.

PR 75/2024 aims to accelerate the development and investment in IKN. The below are five key provisions outlined in the regulation.

a) Provision of essential and social services, and commercial facilities

• The implementation of the acceleration of IKN development aims to form a livable city ecosystem, especially in the Government Center Zone (Kawasan Inti Pusat Pemerintahan or KIPP), which includes the provision and management of essential and or social services and commercial facilities.
• The IKN authority, ministries/agencies, and local governments, within their respective jurisdictions, have the ability to offer incentives to business actors engaged in advancing the provision and management of essential and/or social services, as well as commercial facilities.
• Provision and management of essential and/or social services include the provisions of the following:
  1. Shelter
  2. Health
  3. Education
  4. Social and cultural
  5. Energy and power
  6. Telecommunications and digitalization
  7. Transportation
  8. Drinking water
  9. Sanitation and waste management
  10. Emergency facilities
  11. Public cemeteries
  12. Green open space
  13. Sports facilities
  14. Religious facilities
  15. Office facilities
  16. Public peace and order
• Provisions of commercial facilities includes the provisions of the following:
  1. Hotel
  2. Shopping centers, retail and stores
  3. Restaurant
  4. Recreation and entertainment center

b) Pioneer business actors (pelaku usaha pelopor)

• PR 75/2024 stipulates that, apart from utilizing the state budget, the relevant authorities (including the head of the IKN authority and the minister/head of the institution) have the authority to accelerate the provision of essential and/or social services by sourcing from other authorized channels. This can be achieved through procurement by appointing pioneering business actors.
• Pioneer business actors are determined with the following criteria:
  1. The business actor has expressed interest and signed a letter of intent with OIKN.
  2. The business actor is willing to start the implementation of development no later than five years after the enactment of Law No. 21 of 2023 on the Amendment of Law No. 3 of 2022 on IKN (i.e., 31 October 2023).
• Please note that based on this News, the deputy head of Planning and Investment at the IKN authority said that until 12 July 2024, the IKN authority had collected 421 letters of intent from investors.
• In addition, the IKN authority may provide contributions to pioneer business actors for managing Assets in the Control of IKN (Aset Dalam Penguasaan Ibu Kota Nusantara or ADP). These contributions can take the form of either: (i) rates up to IDR 0; or (ii) payment in instalments.

c) Land value determination

• The head of the IKN authority has the authority to determine land values in the IKN region for: (i) the management of ADP; (ii) investment in IKN.
• The land value determined by the head of the IKN authority based on the land valuation zone (zona penilaian tanah) that refers to the calculation of land value by a public appraiser.
• The determined land value becomes the basis for the Ministry of Agrarian Affairs and the National Land Agency to establish land value zones (zona nilai tanah) that will be published by them for other purposes.
• The land value zones will be the basis of the determination of rural and urban land and building tax in IKN.

d) Asset Control:

• Pioneer business actors are determined with the following criteria:
  1. Possession and utilization of land originating from the physical release of forest areas is carried out for a minimum period of ten years continuously.
  2. Possession and utilization of land originating from the physical release of forest area is carried out in good faith as evidenced by the existence of historical tenure and utilization.
• As an idea of addressing ADP land possession issues within the community, the government offers compensation. This compensation can take various forms, including monetary payments, replacement land, resettlement, or other mutually agreed-upon arrangements involving parties such as business actors, the government, and relevant community members.

e) Land rights period

• This is a significant aspect made by the president where PR 75/2024 stipulates that the IKN authority provides a guarantee of certainty of the period of land rights through the first cycle and can be re-granted a second cycle to business actors that will be stipulates in the agreement. This is also aligned with the existing regulations on IKN (i.e., IKN Law and its implementing regulations). 
• PR 75/2024 outlines the land rights available to business actors in the IKN area. These rights include:
  
  1. Right to Cultivate (Hak Guna Usaha): Business actors can hold this right for a maximum period of 95 years during the first cycle. It can be re-granted for a second cycle, also with a maximum period of 95 years, based on specific criteria and evaluation stages.
  2. Right to Build (Hak Guna Bangunan): Business actors can hold this right for a maximum period of 80 years during the first cycle. It can be re-granted for a second cycle, also with a maximum period of 80 years, based on specific criteria and evaluation stages.
  3. Right to Use (Hak Pakai): The maximum period for this right is identical to that granted for the ‘Right to Build.’
• As is generally applicable, land titles are granted by the Ministry of Agrarian Affairs and the National Land Agency.
• Following the initial entitlement cycle, the IKN authority performs an evaluation five years later. During this assessment, the following aspects will be considered:
  
  1. The land continues to be cultivated and utilized appropriately, aligning with the circumstances, nature, and purpose of the granted right.
  2. The right holder still meets the qualifications for holding the right.
  3. The conditions for granting the right are still met by the right holder.
  4. Land utilization remains in accordance with the spatial plan.
  5. The land is not flagged as abandoned.

PR 75/2024 also provides that ADP landholders are allowed to utilize excavated or filled slopes resulting from road construction, incorporating them into their land allocation.

Any legal actions taken by the IKN authority to expedite IKN development prior to the enactment of PR 75/2024 are deemed valid and unaffected.

LKPP Reg. 5/2022: National Public Procurement Agency Regulation No. 5 of 2022 on Guidelines for the Specific Provision of Infrastructure and Other Procurement of Goods/Services for the Preparation, Construction and Relocation of the State’s Capital

28 July 2022 - This regulation was issued in May this year as a follow-up to Presidential Regulation No. 62 of 2022 on Authorities of the State Capital, which, among other things, contains general provisions on the procurement of infrastructure and other goods/services relating to the preparation, construction and relocation of the capital city. Both regulations were issued as part of President Joko Widodo's decision to relocate the Indonesian capital city from DKI Jakarta to North Penajam Paser, South Kalimantan.

The National Public Procurement Agency (Lembaga Kebijakan Pengadaan Pemerintah or LKPP), a government institution tasked with carrying out the development and formulation of policies for the government’s procurement of goods/services, issued this regulation to provide more specific and technical guidelines for regulating and facilitating the procurement of goods and/or services in the capital. The regulation sets out what methods of procurement are allowed and what other requirements must be followed.

Methods of Selection under LKPP Reg. 5/2022

While this regulation does not preclude the general rules surrounding government procurement, it does provide additional methods for selecting providers of goods and/or services for the new capital city, including the following:

1. Extension of e-purchasing to consultation services
   Generally, government procurement rules only allow e-purchasing in the procurement of goods, construction work and other services. Under this regulation, e-purchasing can be used to procure consultation services for the new capital city.


2. Extension of repeat orders to the procurement of goods, construction work and other services
   Generally, government procurement rules only allow the same provider to be chosen if the procurement is a repeat order for consultation services. For the new capital city, repeat orders are now allowed for the procurement of goods, construction work and other services.


3. Panel of consultants in procurement
   The general government procurement rules allow for a procurement committee (a party assigned to perform the selection process for goods and services on behalf of the government) to be chosen from a pre-determined panel of consultants.


4. Inclusion of beauty contests
   The government may use ‘beauty contests’, which is a new method of selection. These contests may be held to obtain the best ideas, concepts or designs for any specific work. The winner of these beauty contests may be given a variety of rewards, such as the exclusive right of direct appointment for the procurement of certain services or goods.

Technical Guidelines

The attachments to the regulation also set out more detailed guidelines for various procurement processes, including for the implementation for the construction contracts procurement.

Collaboration with Small Local Businesses Requirement

The main requirement for procurement in the development of the new capital city is mandatory collaboration between parties participating in these procurement processes with "local small businesses", using local manpower and materials. The collaboration may take the form of partnerships or subcontracts, or any other form.

In order to be considered a local small business under this regulation, a business actor must meet the following requirements:

1. All or at least 50% of its shares must be owned by an individual or a community domiciled in Kalimantan.
2. Its CEO must be domiciled in Kalimantan.
3. The majority of its high-level management (if the members are an odd number) or half of its high-level management (if the members are an even number) are persons domiciled in Kalimantan.

The requirement to collaborate with a small local business may be exempted if one of the following applies:

1. There is no small local business that meets the applicable technical requirements.
2. The small local businesses are not adequate.
3. The procurement is carried out through e-purchase in the national or sectoral e-catalogue.

The requirement for the collaboration to use local manpower and materials may be exempted if one of the following applies:

1. There is no local manpower or material available in Kalimantan.
2. The local manpower or materials are inadequate or inefficient.
3. The local manpower or materials do not meet the required standards.

Additional Highlights

Other highlights include:

• The "supplied by owner" method for procurement packages, which allows a provider to supply its own materials, products and/or equipment, which may allow for cost efficiencies not otherwise available.
• The regulation also allows for performance based contracts not usually allowed under general government procurement rules, where a provider may by either rewarded or penalized based on its success or failure in achieving performance milestones.

Conclusion

All of the above signify the start of procurement of goods and/or services for the relocation and development of Indonesia's new capital city. While this should create significant opportunities, there is no precedent for some of the new methods mentioned in this update, and we expect there may be some hiccoughs and delays in implementing these processes.

MOT Reg 7/2022: Minister of Transportation Regulation No. PM 7 of 2022 on the Implementation of High Speed Train

27 May 2022 – This regulation was issued to better accommodate the operation and maintenance of high-speed trains with a more comprehensive regime. While its predecessor (Minister of Transportation Regulation No. PM 69 of 2019) only covered general provisions on the classifications of high-speed trains, general and technical requirements, and a short section on the issuance of technical approval documents by the Ministry, MOT Reg 7/2022 provides entirely new, more detailed sections.

MOT Reg 7/2022 stipulates the following:

a. Technical and feasibility requirements of high speed rail infrastructure, including routes, stations, and operational facilities, among others

b. Technical and feasibility requirements of the high speed trains themselves and their facilities, including train components, capacity and storage, among others

c. Transport and traffic management at high-speed railway stations

d. Safety standards, both general and specific

e. Human resources certification requirements for high-speed train and railway station personnel

The regulation also includes provisions on administrative sanctions, and more specific procedures, rights and obligations for each of the above sections, all of which were absent from the previous regulation.

GR 9/2022: Government Regulation No. 9 of 2022 on the Second Amendment of Government Regulation No. 51 of 2008 on Income Tax Imposed on Revenue from Construction Services Business Activity

18 March 2022 – GR 9/2022 amends the income tax percentage related to construction services, among others:

a. Reduction of taxes as follows:

1. Construction work service providers with a small qualification SBU (from 2% to 1.75%)
2. Other construction work service providers (from 3% to 2.65%) 3. Consultancy work service providers that have SBU or SKK (from 4% to 3.5%)  

b. Introduction of new taxes as follows:

1. Integrated construction work service providers that have SBU (2.65%)
2. Integrated construction work service providers that do not have SBU (4%)

Law 2/2022: Law No. 2 of 2022 on the Second Amendment of Law No. 38 of 2004 on Roads

8 February 2022 – Law 2/2022 amends several provisions of Law No. 38 of 2004 on Roads as amended by Law No. 11 of 2020 on Job Creation. The following are examples of amended provisions:

• The cost of land acquisition for unsolicited projects will be borne by the initiator.
• Evaluation and adjustment of toll road tariffs will be carried out once every two years based on the impact of inflation on the tariffs and the evaluation of the minimum service standard fulfillment.
• Evaluation and adjustment of toll road tariffs can be carried out any time in any of the following conditions:
  • There is a need to fulfill a certain traffic service in the toll road system in a certain region by considering the toll road capacity.
  • There is an additional scope that falls outside the business plan and affects the feasibility of investment.
  • There is a government policy that affects the feasibility of investment.
• Every toll operator must fulfill the minimum service standards of toll roads. Otherwise, they are subject to administrative sanctions.

MOPWH Instruction 1/2022: Minister of Public Works and Housing Instruction No. 01/IN/M/2022 on the Process of Stipulating Winners of Tenders for the Procurement of Government Goods/Services and Public-Private Partnership in the Ministry of Public Works and Housing

21 January 2022 – MOPWH Instruction 1/2022 sets out internal mechanisms for the creation of a Quality Assurance Team (Tim Penjamin Mutu) for Public-Private Partnership (Kerjasama Pemerintah dan Badan Usaha/KPBU) ("PPP") in the toll road sector, and a PPP Team for the non-toll road sector once the winner of the procurement tender is announced.

The PPP Team will assist the management of PPP from the preparation and transaction stage until the fulfillment of financing.

MOPWH Circular Letter 21/2021: Minister of Public Works and Housing Circular Letter No. 21/SE/M/2021 on Procedures for Fulfilling Business Licensing Requirements, Construction Work Competency Certification Implementation, and Business Entity Certificates Applications as well as Construction Work Competency Certificates

21 December 2021 – MOPWH Circular Letter 21/2021 revokes MOPWH Circular Letter No. 10/SE/M/2021 on Procedures to Apply for LSBU, SKK and SBU. The following is the scope of MOPWH Circular Letter 21/2021:

a. Fulfilment of Business Entity Certification Agency (Lembaga Sertifikasi Badan Usaha/LSBU) business license requirements

b. Fulfilment of Professional Certification Institution (Lembaga Sertifikasi Profesi/LSP) business license requirements

c. Fulfilment of business license requirements for construction service business entities

d. Implementation of construction work competency certification

e. Provisions related to applications for Business Entity Certificates (Sertifikat Badan Usaha/SBU) and Work Competency Standards (Standar Kompetensi Kerja/SKK) Construction

In addition, the Construction Services Development Agency (Lembaga Pengembangan Jasa Konstruksi/LPJK) will stop the services for SBU and SKK applications once LSBU and LSP are operating.

MOPWH Reg 28/2021: Minister of Public Work and Housing Regulation No. 28 of 2021 on Rest and Services Areas on Toll Roads

3 November 2021 – MOPWH Reg 28/2021 revokes MOPWH Regulation No. 10/PRT/M/2018 on Rest and Services Areas on Toll Roads.

In general, MOPWH Reg 28/2021 adds a new layer of classification to the types of rest area. The previous regulation only recognized Type A, Type B and Type C Rest and Services Areas (Tempat Istirahat dan Pelayan/"TIP"). The new regulation differentiates between City and Inter-city TIP, and the classification becomes City TIP, Intercity TIP Type A, Intercity TIP Type B, and Intercity TIP Type C (the differences are in required size and facilities).

There are also some changes in requirements to obtain a business permit for development and change of TIP. Now, toll road operators must also provide an analysis of traffic, technical analysis and user needs analysis as well as company profile of the applicant. Also, where TIP Type C (the smallest type of TIP, which is temporary) previously did not require permits, the new regulation obliges parties to obtain a permit albeit with lower standards and requirements.

MOT Reg 81/2021: Minister of Transportation Regulation No. 81 of 2021 on Airport Business Activities

3 November 2021 – MOT Reg 81/2021 revokes MOT Reg 33/2021 on Airport Business Activities.

In general, MOT Reg 81/2021 sets out further provisions on the implementation of airport affairs services and airport-related affairs services in Indonesia, including their cooperation and licensing schemes. For example, MOT Reg 81/2021 clarifies that state-owned enterprises/regional-owned enterprises can cooperate with business entities in operating airport through a joint venture (i.e., by establishing subsidiaries).

MOPWH Reg 23/2021: Minister of Public Works and Housing No. 23 of 2021 on Procedures for Determining Toll Road Development Initiated by Business Entities

1 October 2021 – This regulation provides thorough guidelines on the procedure for determining a toll road unsolicited project, including for the relevant land procurement process. An unsolicited project (proyek prakarsa) is a toll road operation prepared and proposed by a business entity to the MOPWH.

An unsolicited project that has obtained the approval of feasibility pre-study document based on Minister of National Construction Planning Regulation No. 4 of 2015 on Procedures for the Implementation of Cooperation Between Government and Business Entities in the Provision of Infrastructure (as amended) must continue the process of determining the toll road operation initiated by the business entity based on MOPWH Reg 23/2021.

Update on the regulation for gross split production sharing contract

September 2024 – Issuance of Minister of Energy and Mineral Resources ("MEMR") Regulation Number 13 of 2024 on Gross Split Production Sharing Contract ("New Regulation") on 12 August 2024.

The New Regulation provides general provisions on gross split production sharing contracts. This regulation revokes MEMR Regulation Number 8 of 2017 on Gross Split Production Sharing Contract (as amended) ("Old Regulation") and amends MEMR Regulation Number 23 of 2021 on Management of Oil and Gas Working Areas for Expiring Cooperation Contracts ("MEMR Reg 23/2021").

A. Highlights of the New Regulation

We divide this part into three sections: (i) base split calculation; (ii) change of PSC contract scheme; and (iii) other key highlights.

Base split calculation

The Old Regulation mandated a fixed percentage of initial base split between the contractor and the state. The New Regulation offers more flexibility for contractors by eliminating the fixed initial base split and amending various components under the base split calculation. The MEMR will regulate the base split calculation further through a ministerial decree.

Previously, it was only regulated that the base split (for both conventional and unconventional oil and gas) was determined based on variable and progressive components. Under the New Regulation, the base split for unconventional oil and gas is only determined based on a fixed variable component. Additionally, variable and progressive components are also simplified. See the comparison in the table below.

Variable and progressive components

The New Regulation also sets out the mechanism to change a PSC contract scheme. Under the New Regulation, contractors may apply to change the scheme and terms of their PSC from gross split to cost recovery. Contractors with a cost recovery PSC can also apply for a change to a gross split PSC if their PSC was signed before the enactment of the New Regulation (i.e., 12 August 2024). The New Regulation provides no further clarity on whether the change of PSC contract scheme and terms of the PSC can be done more than once or not.

Contractors eligible to change the scheme and terms of their PSC to a new gross split PSC are as follows:

1. Contractors of unconventional oil and gas working areas
2. Contractors of conventional oil and gas working areas that have not received approval of the first Plan of Development ("POD")
3. Contractors of gross split PSC for conventional oil and gas working areas in the exploitation stage that will cultivate the potential of unconventional oil and gas resources in one PSC, with changes only to the main provisions of the exploitation of unconventional oil and gas

Requirements to change the contract scheme and terms of the PSC

For working areas in the exploration stage, the contractor must have done one of the following:

• Obtained a letter of acknowledgment or determination from SKK Migas confirming the discovery of conventional or unconventional oil and gas and the application for change is submitted together with the application for approval of the POD
• Conducted a study of the potential for unconventional oil and gas in a conventional oil and gas working area, the results of which have been evaluated by the acceleration team for conventional oil and gas exploitation.

For working areas in the exploitation stage, the contractor must have done all of the following:

• Proposed additional commitment for exploration and/or exploitation activities
• Obtained an acknowledgment letter or stipulation from SKK Migas confirming the discovery of unconventional oil and/or gas
• Conducted a study on the potential of unconventional oil and gas in a conventional oil and gas working area, the results of which have been evaluated by the acceleration team for the exploitation of unconventional oil and gas

Mechanism

Contractors submit an application for changes in the form and terms of the PSC to the MEMR through SKK Migas. The required supporting data includes a reasoning of the application and a comparison of the economic calculation of the working area before and after the change. The comparison must include the following three aspects: (i) increased exploration or exploitation activities; (ii) potential increase in oil and gas production; or (iii) potential increase in state revenue.

SKK Migas evaluates the application proposed by a contractor. The contractor's application and recommendations from SKK Migas are submitted to the MEMR, with copies to the DGOG. The DGOG conducts an assessment and submits the assessment results to the MEMR as the MEMR's consideration in approving or rejecting the application.

The MEMR has the authority to approve or reject the contractor's application. If the MEMR approves the contractor's application, it will determine the new form and terms of the PSC.

Other key highlights

B. Reactions from the industry

The New Regulation has sparked both excitement and scepticism. On one hand, the New Regulation provides more flexibility on the base split calculation and change of PSC contract schemes. The MEMR is of the view that under the previous regulation, gross split PSCs were not appealing to investors. This is because contractors under gross split PSC are burdened with too mush risk. The MEMR hopes that the New Regulation will serve as a legal basis to increase contractors' take in oil and gas projects and will consequently improve the Indonesian oil and gas investment climate.

On the other hand, there is growing scepticism that the New Regulation may not be enough to significantly improve the Indonesian oil and gas investment climate. For example, some people are questioning the MEMR's decision to regulate the base split calculation through a ministerial regulation because ministerial-level regulations are considered to be less stable and inconsistent. Additionally, the cabinet is often reshuffled.

However, despite the mixed reaction to the New Regulation, the MEMR is hinting that more implementing regulations of the New Regulation will be issued.

Update on the procedures for the business licensing for the utilization of water resources

29 July 2024 – Issuance of Minister of Public Works and Public Housing Regulation No. 2 of 2024 on Procedures for Licensing Businesses for the Use of Water Resources and Approval for the Use of Water Resources ("MOPW Regulation 2/2024") on 7 February 2024.

This regulation is an update of the procedures for licensing the business use of water resources and approval of the use of water resources. Previously, water resources business licensing was regulated by MOPW Regulation No. 01/PRT/M/2016 on Procedures for Licensing the Exploitation of Water Resources and Use of Water Resources ("Old Regulation"), which was later revoked by MOPW Regulation 2/2024.

The following are the important and significant provisions amended from the Old Regulation.

a) Scope of water resources management

Previously, the Old Regulation only divided licensing into two: Water Resources Concession Permits (Izin Pengusahaan Sumber Daya Air) for commercial activities and Water Resources Use Permits (Izin Penggunaan Sumber Daya Air) for non-commercial activities.

MOPW Regulation 2/2024 also divides licensing into two but changes the terminology used, namely: Water Resources Concession Permit (Izin Pengusahaan Sumber Daya Air) and Water Resources Use Approval (Persetujuan Penggunaan Sumber Daya Air). Furthermore, there is an additional scope in obtaining a permit/approval for the use of water resources, namely irrigation use activities (previously only non-commercial activities).

The division between non-commercial activities and irrigation use based on MOPW Regulation 2/2024 is as follows:

b) Types of water resources exploitation activities within the scope of commercial activities

Previously, business activities were divided based on the form of use (i.e., as a medium, as a material in the form of both water products and non-water products, and as a medium and material). However, MOPW Regulation 2/2024 eliminates this division and directly details 14 commercial activities as follows:

• Power plant
• Space utilization in water sources for construction activities
• Transportation
• Sports
• Tourism
• Fisheries
• Industry
• Food and beverages
• Hospitality
• Plantation
• Drinking water
• Bottled water
• Mining
• Other business activities

c) Mechanism for submitting applications and issuing business licenses

The Old Regulation stipulated that applications to obtain a Water Resources Concession Permit and/or a Water Resources Use Permit must be submitted to the Director General of Water Resources of the MOPW. However, MOPW Regulation 2/2024 stipulates that applications to obtain a Water Resources Concession Permit and Water Resources Use Approval are made through the system established by the government, that is, the OSS system for Water Resources Concession Permit, and MOPW's Water Resources Information System for Water Resources Use Approval.

d) Validity period of Water Resources Concession Permit and Water Resources Use Approval

The Old Regulation stipulated that business licenses (both water resources exploitation licenses and water resources use licenses) were granted for a period of 10 years.

However, MOPW Regulation 2/2024 regulates in more detail the validity period of Water Resources Concession Permits and Water Resources Use Approvals (e.g., for Water Resources Use Approvals, for instance, are now held valid for as long as necessary for smallholder agriculture activities.

e) Technical recommendations

Previously, the Old Regulation did not limit which activities require technical recommendations from the Balai Besar Wilayah Sungai/Balai Wilayah Sungai. However, MOPW Regulation 2/2024 stipulates that such technical recommendations are only required specifically for activities that meet the following criteria:

• Significant utilization or withdrawal of water discharge
• Water collection from springs
• Construction of water resources infrastructure, including weirs, dams and reservoirs
• Construction in the form of a stretch of buildings across the water source
• Complex use of water resources or irrigation

In relation to the enactment of MOPW Regulation 2/2024, water resources use permits that have been issued previously and are still valid are declared valid until the validity period expires.

Updated applicable export duty rates for processed metal mineral products

June 2024 – Issuance of Minister of Finance Regulation No. 38 of 2024 on the Determination of Export Goods Subject to Export Duty and Export Duty Rates ("MOF Reg 38/2024") on 3 June 2024.

This regulation amends the Minister of Finance Regulation No. 39/PMK.010/2022 on the Determination of Export Goods Subject to Export Duty and Export Duty Rates ("MOF Reg 39/2022"). The MOF Reg 38/2024 sets out the new export duty rates for processed metal mineral products.

Previously, the export duty rates for processed metal mineral products were determined based on the progress (set in percentage) of the development stages in the construction of the relevant refining facilities.

Under MOF Reg 38/2024, there is only one export duty rate that will apply to businesses whose refining facilities have reached the commissioning stage.

The below table set out the applicable export duty rates.

Notes:

a) Stage I: The level of physical development progress is ≥ 50% (more than or equal to fifty percent) up to < 70% (less than seventy percent) of the total development
b) Stage II: The level of physical development progress is ≥ 70% (more than or equal to seventy percent) up to < 90% (less than ninety percent) of the total development
c) Stage III: The level of physical development progress is ≥ 90% (more than or equal to ninety percent) up to 100% (one hundred percent) of the total development

GR 15/2022: Government Regulation No. 15 of 2022 on Implementation of Tax and/or Non-Tax State Revenue in Coal Mining

27 April 2022 – GR15/2022 was issued to increase clarity of tax and non-tax state revenue (Pendapatan Negara Bukan Pajak or "PNBP") regulations for the holders of Mining Business Licenses (Izin Usaha Pertambangan or "IUP"), Special Mining Business Licenses (Izin Usaha Pertambangan Khusus or "IUPK"), IUPK as continuation of Coal Contracts of Work ("CCOW"), and CCOW.

The regulation stipulates the following:

• IUP and IUPK holders are subject to tax and PNBP as set out in the relevant regulation.
• CCOW holders are subject to tax and PNBP as set out in the CCOW until the CCOW expires.
• Holders of IUPK as continuation of CCOW must pay the following Coal Production PNBP according to the classifications in the following table:

The above is applied retroactively from January 2022 except licenses issued in or after 2022, for which the above will apply from January 2023.

PR 55/2022: Presidential Regulation No. 55 of 2022 on the Delegation of Authority in Mineral and Coal Mining

27 April 2022 – PR 55/2022 stipulates that the Minister of Energy and Mineral Resources ("MEMR") may now delegate to provincial governments their authority to issue standard certificates and licensing, as well as provide guidance on and supervise the delegated license issuance authority. This authority includes the issuance of any of the following licenses:

• IUP for Domestic Investment Companies and mining commodities of non-metallic minerals, certain non-metallic minerals and/or rocks (batuan), which are either within a single provincial area or are within an ocean area up to 12 NM (nautical miles)
• Rocks Mining License (Surat Izin Penambangan Batuan)
• Public Mining License (Izin Pertambangan Rakyat)
• Transportation and Sales License for commodity of non-metallic minerals, certain non-metallic minerals and/or rocks (batuan)
• Mining Service Business License (Izin Usaha Jasa Pertambangan) within a single province
• IUP for selling commodities of non-metallic minerals, certain non-metallic minerals and/or rocks (batuan)

The government may also delegate certain actions to support the main delegated activities, such as granting and determining Business Areas in a single province or within 12 nautical miles, determining bench-price for the aforementioned commodities of non-metallic minerals and certain non-metallic minerals and/or rocks (batuan) as well as granting recommendations and approvals.

Any authority delegated to provincial governments under this regulation cannot be re-delegated to city or regency governments.

MOT Reg 9/2022: Minister of Trade Regulation No. 9 of 2022 on the Determination of Export Benchmark Prices for Mining Products Subject to Export Duty

18 March 2022 –MOT Reg 9/2022 provides the export benchmark prices (harga patokan ekspor/"HPE") for mining products for March 2022. The HPE is determined by referring to the highest average price of: (i) international exchanges, (ii) Free on Board (FOB), (iii) domestic market and (iv) the importing country.

The HPE for March 2022 is set out under the attachment of MOT Reg 9/2022.

MOT Reg 17/2022: Minister of Finance Regulation No. 17/PMK.02/2022 on Types and Rates of Type of Non Tax State Revenue on Urgent Need in the Form of Fines and Compensation Fund for Domestic Coal Needs Fulfillment in the Minister of Energy and Mineral Resources

18 March 2022 –MOF Reg 17/2022 provides the method of calculating fines and compensation fund for Mining Business Entities that have not fulfilled the domestic need of coal. The fines and compensation are calculated as follows:

a. Calculation of fines: the difference between average sale price of export benchmark price and the price of providing coal, multiplied by the volume of coal supply deficit in tonnes

b. Calculation of compensation: based on the compensation tariff multiplied by the difference between obligation and realization of the fulfilment of domestic need of coal per year in tonnes

The fines and compensation will be regarded as non-tax state revenue and will be deposited to the State Treasury.

MEMR Decree 13/2022: Minister of Energy and Mineral Resources Decree No. 13.K/HK.021/MEM.B/2022 on Guidelines on the Imposition of Administrative Sanctions, the Prohibition of Coal Export and the Imposition of Financial Penalties as well as Requirement to Pay Compensation for the Fulfillment of Domestic Market Obligations

8 February 2022 –MEMR Decree 13/2022 provides that any mining company that fails to fulfill its DMO or the provisions under its coal sales agreement is subject to the following administrative sanctions:

• Temporary cessation of the whole production operation activity or a statement of negligence
• Revocation of Mining Business License (Izin Usaha Pertambangan - "IUP"), Special Mining Business License (Izin Usaha Pertambangan Khusus - "IUPK"), IUPK as a Continuation of Contract/Agreement or termination of Coal Contract of Work ("CCOW")
• Coal export restriction
• Financial penalty and compensation

The prohibition to export coal for a mining company will be determined by the Director General of Mineral and Coal. This restriction can be lifted once the mining company clarifies its fulfillment of DMO and provides proof of payment of the financial penalty and compensation.

MEMR Decree 15/2022: Minister of Energy and Mineral Resources Decree No. 15.K/HK.02/MEM.B/2022 on the Procedure to Process the Issuance of and Applications for Mining Business Licenses

8 February 2022 –MEMR Decree 15/2022 stipulates the authority of the Director General of Mineral and Coal in relation to the issuance of IUP and reduction of mining area if there is a binding State Administrative Decision.

If, due to a binding State Administrative Decision, the business entity's IUP is revoked, its upgrade application is rejected or its extension application is rejected, the business entity may request the MEMR through the Director General of Mineral and Coal to process the issuance of IUP after fulfilling the administrative, areal, technical, environmental and financial requirements.

If there are two binding State Administrative Decisions, the Director General of Mineral and Coal, on behalf of the MEMR, is entitled to (i) rearrange the WIUP by reducing the size of the overlapping WIUP (or WIUPK) or by applying the first come first served requirement or (ii) other methods of resolution.

MEMR Letter 1605/2021: Director-General of Mineral and Coal of MEMR Letter No. B-1605/MB.05/DJB.B/2021 on the Fulfillment of Coal Requirements for General Electrical Power

21 January 2022 – The coal supply for PLN Group's Steam Power Plants (Pembangkit Listrik Tenaga Uap - "PLTU") and Independent Power Producers ("IPP") is critically low and could affect the national electrical system.

Every holder of a Coal Contract of Work (Perjanjian Karya Pengusahaan Pertambangan Batubara – “CCOW”), Mining Business License (Izin Usaha Pertambangan – “IUP”), Operation Production Special Mining Business License (Izin Usaha Pertambangan Khusus – “IUPK”) as Continuation of Contract/Agreement Operations, and Coal Transportation and Sales License must:

a. Stop the overseas sale of coal from 1 January 2022 to 31 January 2022

b. Supply its entire coal production to fulfill electric needs for public interests in accordance with the obligation to fulfill domestic needs and/or the assignment from the Government to a company and/or contract with PT PLN (Persero) and IPP

c. If the coal is already at a harbor and/or has been loaded onto a ship, immediately deliver that coal to PLN Group's PLTU and IPP, and such implementation must be completed as soon as possible by coordinating with PT PLN (Persero)

The prohibition of overseas sales of coal will be evaluated and reviewed on the basis of coal supply realization for PLN Group's PLTU and IPP.

MOEF Reg 23/2021: Minister of Environment and Forestry Regulation No. 23 of 2021 on the Implementation of Forest and Land Rehabilitation

21 December 2021 – MOEF Reg 23/2021 revokes MOEF Regulation No. P.105/MENLHK/SETJEN/KUM.1/12/2018 on the Implementation, Supporting Activities, Incentives, Guidance and Control of Forest and Land Rehabilitation Activities, as amended by P.2/MENLHK/SETJEN/KUM.1/1/2020. There is a significant change on incentives under the new regulation, which no longer provides incentives in the form of ease of service and/or awards.

MOEF Reg 23/2021 sets out a new provision on 10-year indicative plans for Forest and Land Rehabilitation (Rehabilitasi Hutan dan Lahan/"RHL"), i.e., the Forest and River Area Rehabilitation Plan (Rencana Umum Rehabilitasi Hutan dan Lahan Daerah Aliran Sungai/"RURHL-DAS"). Also, an annual rehabilitation plan for forest or land must be made in accordance with the RURHL-DAS.

Specific regulations on the funds for forest and land rehabilitation activities are set out in MOEF Reg 23/2021. The funds can be provided from the state revenue and expenditure budget, regional revenue and expenditure budget and/or other sources of funds in accordance with the laws and regulations.

Constitutional Court Decision on Law 3/2020 Amendment to Law No. 4 of 2009 on Mineral and Coal Mining

23 November 2021 –On 27 October 2021, Constitutional Court Decision No. 64/PUU-XVIII/2020 amended Law 3/2020 regarding the extension guarantees for Contracts of Work (Kontrak Karya - "COW") and Coal Contracts of Work (Perjanjian Karya Pengusahaan Pertambangan Batubara - "CCOW").

Due to this amendment, holders of COW and CCOW are no longer guaranteed to obtain IUPK as a continuation of operation of contracts/agreements. In addition, the state is expected to start enforcing the scale of priority as well. State Owned Enterprises (SOEs) and Regional Owned Enterprises (ROEs) are prioritized for obtaining Special Mining Business License Areas (Wilayah Izin Usaha Pertambangan Khusus - WIUPK).

MEMR Decree 169/2021: Minister of Energy and Mineral Resources Decree No. 169.K/HK.02/MEM.M/2021 on Cost of Generation (BPP) of PT PLN (Persero) Year 2020

3 November 2021 - MEMR Decree 169/2021 is applicable to determine the amount of BPP from 8 September 2021 until 31 March 2022 (by which time a new set of annual BPP numbers for the 2021 calendar year will be published).

The average national BPP is decreased to USD 7.05 cent/kWh or IDR 1,027.70/kWh (a 10.3% decrease from the USD 7.86 cent/kWh specified in the previous 2018 BPP Decree).

GR 96/2021: Government Regulation No. 96 of 2021 on Implementation of Mining of Minerals and Coal Business Activities

3 November 2021 – GR 96/2021 revokes the long-standing Government Regulation No. 23 of 2010 as lastly amended by Government Regulation No. 8 of 2018. The following are some of the significant changes:

1. Greater detail in preparation and determination of National Mineral and Coal Management Plan
2. Several changes in various licensing (including changes to IUP, IPK, IUPK, IUJP and addition of IUPK continuation, Authorization Letter for Rock Mining, Transport and Sale Licenses)
3. Procedural and authority changes in amending Business Area Size
4. Relaxation of Divestment Requirements
5. Procedural Changes in Suspension of Licenses.
6. More specific obligations in prioritizing national interest
7. More specific authority in State production and sale control
8. New principles and standards in processing and smelting coal/minerals
9. New regulations in utilizing mining roads
10. More specific regulations on land utilization and sale of mineral/coal in specific circumstances

MEMR Decree 139/2021: Minister of Energy and Mineral Resources Decree No. 139.K/HK.02/MEM.B/2021 on Fulfillment of Domestic Coal Needs

4 October 2021 - This decree revokes MEMR Decree No.255.K/30/MEM/2020 of 2020 (as amended by MEMR Decree No.66.K/HK.02/MEM.B/2021 of 2021 on Fulfillment of Domestic Coal Needs for 2021). Domestic market obligations, coal production amount and coal price for supply of electricity for public interest remain the same as before, respectively, 25%, 650 million tons, and USD 70 per ton at standard specifications.

Non-compliance with domestic market obligations will result in:

a. an export ban until domestic market obligations are met

b. a fine of the difference in the selling price abroad minus the coal benchmark price for the supply of electricity for the public interest (domestic market obligation) multiplied by the volume of sales abroad in the amount of the obligation to fulfill domestic coal needs that are not fulfilled for the license and permit holder

c. compensation fund in the amount of sales shortfall in accordance with the percentage of sales for license/permit holders without sale contracts with domestic coal users or whose coal does not have a market in Indonesia

MOEF Reg 7/2021: Minister of Environment and Forestry of the Republic of Indonesia No. 7 of 2021 on Forestry Planning, Changes to the Designations and Functions of Forest Areas, and Uses of Forest Areas

1 October 2021 – This MOEF Reg 7/2021 revokes a number of MOEF regulations, among others:

• MOEF Regulation No. P.67/MENHUT-II/2006 on Forest Inventory Criteria and Standards
• MOEF Regulation No. P.6/MENHUT-II/2009 on the Formation of Forest Management Unit Areas
• MOEF Regulation No. P.34/MENHUT-II/2010 on Procedures for Changes to the Function of Forest Areas, which has been amended several times, most recently through the issuance of MOEF Regulation No. P.16/MENHUT-II/2015 ("MOEF Reg 34/2021")
• MOEF Regulation No. P.36/MENHUT-II/2010 on the Integrated Team for Research into Changes to the Use and Functions of Forest Areas

In general, MOEF Reg 7/2021 addresses the following three main areas:

• Forestry planning
• Changes to the designations of forest area (change from forest to non-forest area)
• Changes to the functions of forest areas (change of function of part or all of the forest area within one or several groups of forest to other function of forest area)
• Uses of forest areas (for development purposes other than forestry activities can only be implemented for activities that have critical strategic objectives)

Use of Forest Areas

The use of forest areas for development purposes other than forestry activities can only be implemented for activities that have critical strategic objectives. Under MOEF Reg. 7/2021, said use of forest areas can be implemented through the following mechanisms:

1. Approval for the use of a forest area through a Minister Decree, which is delegated to the relevant governor in relation to any of the following activities:
   • Development of non-commercial public facilities (up to a maximum area of 5 Ha)
   • Community mining
2. Cooperation agreement through a Letter of Director-General of Forestry Planning and Environmental Management on behalf of the Minister, which can be issued for the development of certain activities outside forest areas (di luar kegiatan kehutanan tertentu) that may support direct/non-direct forest management (e.g. cultural tourism, post-mining activities, telecommunications towers)

Approvals for the implementation of survey activities through a Letter of the Director-General on behalf of the Minister, which can be issued for developments that lie outside the scope of forestry activities (specifically survey-related activities

MOEF Reg 7/2021: Minister of Environment and Forestry of the Republic of Indonesia Regulation No. 7 of 2021 on Forestry Planning, Changes to the Designations and Functions of Forest Areas, and Uses of Forest Areas

1 October 2021 - MOEF Reg 7/2021 revokes a number of MOEF regulations, including:

• MOEF Regulation No. P.34/MENHUT-II/2010 on Procedures for Changes to the Function of Forest Areas, (as lastly amended by MOEF Regulation No. P.16/MENLHK-II/2015)
• MOEF Regulation No. P.44/MENHUT-II/2012 on Forest Area Affirmation (as lastly amended by MOEF Regulation No. P.62/MENHUT-II/2013
• MOEF Regulation No. P.27/MENLHK/SETJEN/KUM.1/7/2018 on Guideline of Borrow Use of Forest Area (as lastly amended by MOEF Regulation No. P.7/MENLHK/SETJEN/KUM.1/2/2019
• MOEF Regulation No. P.97/MENLHK/SETJEN/KUM.1/11/2018 on Exchange of Forest Area

In general, MOEF Reg 7/2021 addresses the following main areas:

• Forestry planning
• Changes to the designations of forest areas (change from forest to non-forest areas)
• Changes to the functions of forest areas (change of function of part or all of a forest area within one or several groups of forest area to other functions of forest areas)
• Uses of forest areas (for development purposes other than forestry activities without changing the forest designation or function)

Use of Forest Areas

The use of forest areas for development purposes other than forestry activities can only be implemented for activities that have critical strategic objectives. Under MOEF Reg 7/2021, that use of forest areas can be implemented through the following mechanisms:

1. Approval for the use of a forest area through a Ministerial Decree, which is delegated to the relevant governor, in relation to any of the following activities:
   • Development of non-commercial public facilities (up to a maximum area of 5 Ha)
   • Community mining
2. Cooperation agreement through a Letter of Director General of Forestry Planning and Environmental Management (Director General) on behalf of the MOEF, which can be issued for developments that lie outside the scope of forestry activities that may support direct/non-direct forest management (e.g., cultural tourism, post-mining activities, telecommunications towers)
3. Approvals for the implementation of survey activities through a Letter of the Director General on behalf of the MOEF, which can be issued for developments that lie outside the scope of forestry activities (specifically survey-related activities).

In addition, MOEF Reg 7/2021 covers transitional provisions from the previous regime of borrow-to-use forestry permits (Izin Pinjam Pakai Kawasan Hutan/IPPKH) to the forest area utilization approvals (Persetujuan Penggunaan Kawasan Hutan/PPKH) regime.

Government Tightening Its Grip on Water Resources

October 2019 - Four years after the 2004 Water Resources Law was annulled by the Constitutional Court, the new water law was finally issued on 16 October, i.e., Law No. 17 of 2019 on Water Resources (New Water Law). There is only one type of license under the New Water Law, i.e., Water Resources Use License (Izin Penggunaan Sumber Daya Air). This license can be granted for use of water resources:

(i) for business purposes, for the use of water, water resources and/or water power (daya air) as a medium and/or material (i.e., Water Use Business License), and

(ii) for non-business purposes, such as for daily use, people's farming, and other non-business activities (i.e., Water Use Non-business License).

The Water Use Business License is prioritized for state/region/village-owned entities (S/R/V-OEs). It can be granted to a private business entity if, among other things, it has been first offered to S/R/V-OEs. However, particularly for businesses producing drinking water for the public, the license is granted to S/R/V-OEs. There is no exception to this provision. Further provisions regarding Water Resources Use Licenses will be regulated in a government regulation.

PR 117/2021: Presidential Regulation No. 117 of 2021 on the Third Amendment of Presidential Regulation No. 191 of 2014 on the Provision, Distribution and Retail Sales Price of Fuel

21 January 2022 – PR 117/2021 expands the assignment area (wilayah penugasan) for the distribution of Research Octane Number (RON) 88 Fuel. Previously, the Provinces of DKI Jakarta, Banten, West Java, Central Java, East Java, DIY Yogyakarta and Bali were excluded from the assignment area. Now, there is no more exemption and all of the provinces in Indonesia are included.

To support the development of clean and eco-friendly energy, the 88 RON Fuel, which is provided and distributed by a business entity receiving the assignment, is classified as a Specific Fuel Type for Assignment since 1 June 2021.

MEMR Reg 23/2021: Minister of Energy and Mineral Resources Regulation No. 23 of 2021 on the Management of Oil and Gas Working Area for Cooperation Contract that Will Expire

4 October 2021 – MEMR Reg 23/2021 revokes MEMR Reg No. 23 of 2018 on the Management of Oil and Gas Working Areas whose Cooperation Contract will Expire.

Management of working areas for cooperation contracts that will expire may be conducted by way of:

a. extending the cooperation contract

b. management by PT Pertamina (Persero)

c. joint management between the Contractor and PT Pertamina (Persero)

d. determining working area bidding

This regulation provides that PT Pertamina (Persero) may apply for the MEMR's approval to manage the working area and PT Pertamina (Persero) must, among other things, attach the proposal of the signing bonus amount to the proposal. MEMR Reg 23/2021 states that the formula for the bonus amount for the signing of the cooperation contract will be determined by the MEMR, and that the signing bonus must be no less than USD 1,000,000. There is no maximum signing bonus as previously stated in MEMR Reg 23/2018 with a maximum limit of USD 250,000,000. The winner of working area bidding must provide a performance bond with a value of 10% of the amount of the fixed work commitment budget for the first five years. If 10% of that amount is less than USD1,500,000, the contractor must provide a performance bond with a minimum of USD 1,500,000.

Comparison between MEMR Regulation No. 27/2006 and MEMR Regulation No. 7/2019

23 September 2019 – In a bid to encourage a greater amount of oil and gas exploration and exploitation activity, the Minister of Energy and Mineral Resources (MEMR) recently issued MEMR Regulation No. 7 of 2019 on the Management and Utilization of Oil and Gas Data (MEMR Regulation 7/2019). MEMR Regulation 7/2019 updates procedures relating to the management and utilization of various facts, information, hints and indications, which are generated through activities such as general surveys, as well as the exploration and exploitation of oil and gas resources (Data).

Previously, those procedures were addressed under the now obsolete MEMR Regulation No. 27 of 2006 on the Management and Utilization of Data Secured through General Surveys and the Exploration and Exploitation of Oil and Gas (Previous Regulation). In general, MEMR Regulation 7/2019 addresses the following specific matters:

1. data classification, acquisition and confidentiality
2. data transfers
3. data management
4. data utilization and membership
5. transfers of media and deletions of data

MEMR Regulation 7/2019 has been in force since 2 August 2019 and simultaneously repeals and replaces the Previous Regulation. To see a high-level comparison table between the two regulations, please click here.

MEMR Reg 10/2022: Minister of Energy and Mineral Resources Regulation No. 10 of 2022 on the Procedure for Application of Electricity Sale Price and Electricity Grid Lease and Procedure for Application of Electricity Tariff Implementation

27 May 2022 – This regulation was issued to both provide clarity on as well as simplify the process of obtaining tariff approvals in relation to Electricity Sales and Electricity Grid Leasing. This regulation also simplifies the procedure for obtaining Electricity Sales and Electricity Grid Leasing.

This regulation and its predecessors obliged holders of Electricity Supply Business Licenses for Public Interest (Izin Usaha Penyediaan Tenaga Listrik Untuk Kepentingan Umum) that have business areas to satisfy all electricity demands in their designated business area. In order to perform these obligations, these license holders may enter into agreements to buy electricity from other parties to cover their generation deficits, as well as rent electricity grids where they do not own them. The following are the changes to the provisions of these agreements:

a. The removal of the Tender Requirement in Relation to Electricity Sales and Electricity Grid Leasing
Previously, the procurement of electricity sales and/or electricity grid lease agreements had to be done through public tenders. Under this new regulation, parties may directly enter into electricity sales and electricity grid lease agreements without a tender.

b. Process of Obtaining Tariff Approvals in Relation to Electricity Sales and Electricity Grid Leasing
In relation to electricity sales and/or electricity grid leasing transactions, a license holder must first obtain approval of the sale or lease tariff. The license holder must submit an application for tariff approval to either the MEMR or a Governor, depending on the scale of the business area, with all the administrative and technical requirements. An approval or rejection will be issued within 14 days. If the tariff is approved, the license holder must enter into an electricity sales-purchase agreement or electricity grid lease agreement within 30 days, and then report their purchase and/or lease plan within five days of signing the agreement.

c. Addition of Other Costs for Electricity Grid Lease
The new regulation allows parties of an electricity grid lease agreement to determine "other costs" besides the tariff. These other costs include deposits, late fees, etc. The addition of these costs must be approved and determined by the MEMR.

MEMR Reg 12/2021: Minister of Energy and Mineral Resources Regulation No. 12 of 2021 on Classification, Qualification, Accreditation, and Certification of Electricity Support Service Business

4 October 2021 – MEMR Reg 12/2021 revokes MEMR Reg No. 38 of 2018 on Guidelines of Accreditation and Certification of Electricity. 

In general, MEMR 12/2021 addresses new classification of electricity support business, i.e., other electricity support service business directly related to the electricity supply, minimum in the form of:

a. inspection and assessment of the level of domestic components in the electricity sector

b. inspection and assessment of the implementation of the electricity safety management system

c. electricity environmental management

d. control of electricity greenhouse gas emissions

e. inspection and assessment of compensation for land, buildings, and/or plants located under the free space of the electric power transmission network

MEMR Reg 11/2021: Minister of Energy and Mineral Resources Regulation No. 11 of 2021 on Implementation of Electricity Business

1 October 2021 –MEMR Reg 11/2021 revokes a number of MEMR regulations, including:

• MEMR Regulation No. 28 of 2012 on Procedures for Applying for Electricity Supply Business Area for Public Interest
• MEMR Regulation No. 35 of 2013 on Procedures for Electricity Business Licensing
• MEMR Regulation No. 36 of 2013 on Procedures for Applying for Electric Power Grid Utilization Permit for the Purposes of Telecommunication, Multimedia, and Informatics
• MEMR Regulation No. 10 of 2019 on Procedures for the Preparation of an Electricity Supply Business Plan

In general, MEMR Reg 11/2021 addresses the following main areas:

• newest classification and licensing obligations for electricity business
• implementation of electricity businesses
• utilization of electricity grids for telecommunications, multimedia and/or information needs

Solar Rooftop Quota 2024–2028 is out!

June 2024 – Following the issuance of Minister of Energy and Mineral Resources Regulation on Rooftop Solar That Is Connected to the Grid of a Holder of a Business License for Electricity Provision for Public Use on 29 January 2024, the Directorate General of Electricity ("DGE") issued Decree No. 279.K/TL.03/DJL.2/2024 on Quota for Development of Rooftop Solar Power Plant System of PLN for 2024 to 2028 on 27 May 2024 (“Decree”).

The Decree sets out the quota for different regions, and it requires PLN to issue a quota based on clustering. PLN has 10 business days from the issuance of the decree to publish the determination. We are therefore looking at 11 June (or earlier) for PLN to publish its cluster-based quota.

The Decree also allows the DGE to instruct PLN to change the quota, and PLN is obliged to comply and submit the amendment to the DGE.

We set out below the quotas set out by the DGE.

The good news is that the quotas increase each year. Given the trend shown in the Decree, we cannot help but be hopeful that in the future the quotas will continue to get higher and higher along with more industry growth.

In addition, the quota matrix above shows that industry dense areas such as Java, Madura and Bali have the highest amount of quotas, at around 85% to 91.56% of the entire yearly quota. This is in contrast with North Sulawesi and Gorontalo areas, which have the smallest quotas, representing only around 0.02% to 0.07% of the entire yearly quota. We see this as a positive approach by the government towards prioritizing the quota for industry dense areas and understanding the ever growing needs of existing industries (particularly those located in industry dense areas) to transition to green and affordable energy.

Those interested in installing rooftop solar should get ready for the race. As we discussed in this client alert, the Director of EBTKE has mentioned that applications should be processed on a first-in, first-served basis. Solar customers (who are also PLN customers) should by now (if not already) get their ducks in line to submit their applications to install rooftop solar as soon as PLN publishes its cluster-based quota.

MEMR Releases New Regulations on Captive Power Plants and Use of Roof Solar Power Plants

1 October 2021 - Reg 12 revokes MEMR Regulation No. 29 of 2012 on the Capacity of Power Plants for Private Purposes Based on Operational License (Reg 29).

Under Reg 29, owners of a captive power plant with a capacity of more than 200 kVA were required to obtain an Operational License issued by the Director General of Electricity (DGE) on behalf of the MEMR, relevant Governor or Regent (as applicable), and a Registered Certificate (Surat Keterangan Terdaftar or SKT) was required for a capacity of 25 kVA up to 200 kVA.

Reg 12 now provides the following:

1. Captive power plants with a total capacity of >500 kVA. The owner of this type of power plant must obtain both an Operational License and an Operational Worthiness Certificate (Sertifikat Laik Operasi or SLO).
2. Captive power plants with a total capacity of ≤500 kVA. The owner of this type of power plant does not have to obtain an Operational License or an SLO. However, the owner must submit a one-time report prior to the commencement of the electricity supply to the MEMR through the DGE or the relevant Governor in accordance with their authority. Further, the owner must ensure that the power plant has a manufacturer test result (hasil uji pabrikan), product certificates (sertifikat produk) or a product safety standard document (dokumen standar keselamatan) equivalent to SLO.
3. SKT is no longer required. Operational Licenses and SKTs issued before Reg 12 came into effect remain valid until they expire as long as the designation and the capacity of the power plant do not change.

MEMR Regulation No. 13 of 2019 (Reg 13) on Amendment to MEMR Regulation No. 49 of 2018 (Reg 49) on the Use of Rooftop Solar Power Plants by Customers of PLN

4 November 2019 - The amendments contemplated by Reg 13 were intended to bring the requirements to obtain an Operational License and an SLO for rooftop solar power plants in line with Reg 12.

Previously, under Reg 49, owners of rooftop solar power plants with a capacity greater than 200 kVA were required to obtain both an Operational License and an SLO.

Reg 13 now amends and relaxes certain provisions under Reg 49 regarding requirements to obtain an Operational License and an SLO, to comply with Reg 12, which is the current prevailing law. As a result, only rooftop power plants with a capacity greater than 500 kVA require both an Operational License and an SLO.

PLN customers that are in the process of applying for an Operational License and an SLO for rooftop solar power plants with a capacity ≤ 500 kVA will be affected by this relaxation.

MEMR Regulation No. 16 of 2019 (Reg 16) on the Second Amendment of Regulation No. 49 of 2018 (Reg 49) on the Use of Rooftop Solar Power Plants by Customers of PLN

4 November 2019 - Reg 16 also relaxes the requirements under Reg 49. Through this amendment, the MEMR has decided to facilitate industrial customers who want to have their own rooftop solar projects to supplement their electricity supply.

Reg 16 lowered the monthly capacity charge amount to only five hours, or one-eighth of the amount under the previous regulation. The amendment also eliminates the mandatory emergency energy charge.

Before today, PLN industrial customers who had rooftop solar projects were subject to a monthly 40 hours' capacity charge, which is the same as the amount payable by PLN customers that have load based captive power plants.