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25 Jul 2013
GOVERNMENT'S FEASIBILITY SUPPORT FOR PPP INFRASTRUCTURE PROJECTS

The Minister of Finance on 21 December 2012 issued Regulation No. 223/PMK.011/2012 regarding Provision of Feasibility Support by Funding Part of the Construction Cost of Infrastructure Projects Under the Public-Private Partnership Scheme (“Regulation”). This Regulation was issued to implement the Article 17A of Presidential Regulation No. 56 of 2011 regarding Second Amendment to Presidential Regulation No. 67 of 2005 on Public-Private Partnerships in the Development of Infrastructure.

The Regulation sets forth the government’s commitment to partially fund the construction costs of Public-Private Partnership (“PPP”) infrastructure projects which meet the criteria set up in the Regulation. The feasibility support is a government fiscal policy which aims at promoting business entities and government cooperation in infrastructure projects, and providing affordable infrastructure for the public.

To be qualified to receive the feasibility support, a PPP project must fulfill the following criteria:
a. the project is economically feasible but is not yet financially feasible;
b. the project implements the “users-pay principle”;
c. the total investment cost of the project is not less than Rp.100 billion;
d. the project’s private partner is determined by the government institution which is responsible for the project (Penanggung Jawab Proyek Kerja Sama or PJPK) by way of a competitive public auction;
e. the project is executed based on a PPP contract which provides for the transfer of the assets and management of the infrastructure from the private partner to the PJPK at the end of the project; and
f. the project’s feasibility report among others: (1) states an optimal risk division between the Government/PJPK and the private partner/winner of the public auction; and (2) concludes that the project is economically feasible and qualified to receive the support.

The rules and procedures for the feasibility support as well as the implementation mechanism are regulated in great details in the Regulation’s chapters III, IV and V.

The Regulation has been in force since the day of its issue of 21 December 2012. (by: Christine Hakim).