PROJECT AS A BASIS FOR SUKUK ISSUANCE
As an effort to maximize the use of state property and assets as underlying assets for the issuance of Sukuk (shariah/Islamic law based bonds, or SBSN), the Minister of Finance has issued Regulation No. 129/PMK.08/2011 regarding The Use of Projects as a Basis for the Issuance of SBSN (“Regulation”). The Regulation is an implementing regulation of Article 4 of Law No. 19/2008 regarding Government Syariah-based Debt Securities (Sukuk) which stipulates that Sukuk is to be issued with the objective to finance the state revenue and expenditure budget including development projects.
The Regulation basically provides a legal basis for the issuance of Sukuk with government projects as its underlying assets, for the purpose of providing the funds for the government’s expanding budget requirements.
Under Article 2 (3) of the Regulation, projects that may be used as underlying assets for the Sukuk are development projects such as infrastructure, building, and other physical or procurement (of goods or service) projects. The projects may be ongoing projects or projects that are still being planned, as long as they have been decided under a presidential decree. Article 5 stipulates further requirements that must be fulfilled by the aforementioned projects, i.e. that the projects (i) are already registered in the List of Projects; (ii) do not violate the sharia principles, and (iii) are not currently being used as a SBSN asset.
The Regulation also provides mechanism on how projects may be considered as underlying for the issuance of the sukuk as well as management of the underlying project during the life of the sukuk. One important feature in the use of project as underlying for sukuk is that the project used for the underlying for sukuk will not cause the maximum net value of the government securities, which the parliament has approved to issue, to increase.
The Regulation has been in force since the day of its issue on 15 August 2011. (by: Hamud M. Balfas)