Industry Updates

HPP Law 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.

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.

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

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.