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Indonesia: Rules Eased on Who Can Buy Land for Infrastructure Projects

(Jan. 6, 2017) On December 2, 2016, Indonesia’s President Joko Widodo signed a presidential regulation that eases existing rules on the acquisition of land for infrastructure projects.  In the past, only the central and regional governments could acquire land for the projects, but budget limitations often delayed infrastructure development.  (Govt Now Allows SOEs, Private Sectors to Finance Land Acquisitions, JAKARTA GLOBE (Dec. 28, 2016).)  Under the new, 27-article regulation, state-owned enterprises (SOEs) and private companies may finance the acquisition of land for these projects.  (Id.; Presidential Regulation of the Republic of Indonesia No. 102, 2016, Concerning Land Acquisition Financing for Public Interest Development to Implement National Strategic Projects (signed Dec. 2, 2016, promulgated Dec. 6, 2016), Secretariat of the Ministry of State website (in Indonesian) (click on Document link to open text).)

The new regulation provides for SOEs and private organizations to pay for land designated for a government infrastructure project initially, with the government eventually repaying them for their outlays.  According to Bastari Panji Indra, the Deputy Assistant for Housing, Land, and Infrastructure Financing of the Coordinating Ministry for Economic Affairs, “[t]he government will give a guarantee against risk that may arise from the delayed budgeting process.”  (Govt Now Allows SOEs, Private Sectors to Finance Land Acquisitions, supra.)

One example of the problem this new regulation is designed to address is the budget for land purchases for toll road projects.  While the budgeted amount for the projects was only Rp2.8 trillion (about US$207.7 million), the actual amount required was Rp17 trillion.  (Id.)

Only 225 specific projects considered to be strategic, in addition to all power plant construction efforts, are eligible for the new sources of funding.  These projects include construction of a high speed train between the cities of Jakarta and Bandung, development of part of the trans-Java toll highway, expansion of the airport in East Nusa Tenggara Province, installation of a new sewage system for Jakarta, and development of a refinery run jointly by the state-owned company Pertamina and Iran.  (Id.)