INSIGHT
Newsletter 5th Edition March 2023: Issuance of New Presidential Regulation Concerning Acceleration of Infrastructure Projects in Indonesia
Author: Privatization & Development Practice Group
To accelerate the function of the Ministry of Public Works and Public Housing (Kementrian Pekerjaan Umum dan Perumahan Rakyat – “Ministry of Public Works”) on infrastructure development, the President of the Republic of Indonesia has issued Presidential Regulation of the Republic of Indonesia Number 120 of 2022 on Special Assignments to Speed up Infrastructure Development (“PR No. 120/ 2022”). This decree is a derivative from Presidential Regulation Number 27 of 2020 on the Ministry of Public Works that assigns Ministry of Public Works to carry out other functions assigned by the President of Republic Indonesia.
PR No. 120/2022 which has been fully effective since 27 September 2022 will promote efficiency and flexibility for the Ministry of Public Works in undertaking infrastructure projects, especially in 21 activities that is mentioned in this regulation as special assignment, which includes:
- construction or rehabilitation of water resources infrastructure;
- construction or rehabilitation of groyne (structures for coastal protection);
- construction of mooring posts;
- construction or development of drainage system;
- construction of roads and bridges;
- preservation of roads and bridges;
- construction or rehabilitation of government offices;
- construction or rehabilitation of student dormitories;
- construction, rehabilitation, or renovation of basic and secondary education, and higher education facilities and infrastructure;
- construction or rehabilitation of public buildings;
- construction or rehabilitation of houses, housing facilities, and infrastructure, as well as public utilities;
- construction or rehabilitation of facilities and infrastructure, as well as public utilities;
- construction, rehabilitation, or renovation of sports facilities and infrastructure;
- construction or rehabilitation of auditorium;
- construction or rehabilitation of social and religious buildings;
- construction or rehabilitation of palaces;
- rehabilitation of cultural heritage buildings or arrangement of cultural conservation areas;
- construction, rehabilitation, or renovation of market facilities and infrastructure;
- construction or rehabilitation of hospitals;
- construction or rehabilitation of flats for area revitalization; and/or
- construction, rehabilitation, renovation of flats, or other government buildings in preparing disaster emergency hospitals and centralized isolation facilities.
In order to support the above special assignment, direct appointments can be made by the Ministry of Public Works in the process of procuring goods/services in accordance with the applicable laws and regulations. Furthermore, PR No. 120/2022 also accommodates the implementation of infrastructure development through Public Private Partnership (Kerjasama Pemerintah dan Badan Usaha – “PPP”) scheme with business entities, which implementation of such PPP shall subject to applicable regulations. The funding options can be sourced from: (i) State Budgetary; and/or (ii) other legal and non-binding sources in accordance with the applicable laws and regulations.
Meanwhile, in order to support this special assignment, recipient of the results from the construction activities must provide support, including:
- providing ready-to-build land;
- statement of willingness to receive and use assets resulting from infrastructure development;
- operating, rehabilitation, and maintenance budgets; and
- other support.
PR No. 120/2022 also regulates that requirements for ready-to-build land that can be used for this special assignment must be owned by the state, regional, or village government; or the assets of a State or Region Owned Enterprise; or the property of the community/private. The status of the land must also clear from any dispute or legal case that can be proven by a certificate and/or proof of legal entity over land. This is intended to reduce any hindrance that may hamper the implementation of the acceleration of development.
In implementing this special assignment, the Ministry of Public Works shall coordinate with the ministry/institution, provincial government, district/city government, village government, State-Owned Enterprises, Regional-Owned Enterprises, or the community. After the completion of infrastructure development, the Ministry of Public Works shall then transfer the completed project to the respective party. The handover must be carried out in accordance with the provision of the regulation.
Even though there is no new law system or any breakthrough on the procurement of goods/services in construction (since all procurement procedure shall in accordance with the current prevailing laws and regulations related to that), PR No. 120/2022 believed can cut bureaucracy procedure. Previously a policy to speed up infrastructure development assignment is issued on a special case basis, now by the issuance of PR No. 120/2022, the Ministry of Public Works have legal basis to speed up the infrastructure development without waiting for a specific policy from the President of the Republic of Indonesia. It is also expected that this measure can increase development to materialize plans as stated in the National Medium-Term Development Plan 2020-2024 (Rencana Pembangunan Jangka Menengah Nasional 2020-2024). Whereas, approximately USD 412 billion is allocated for infrastructure development works to speed up the hampered construction activities.
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