INDONESIA Law and Practice Contributed by: Maria Sagrado, Frederick Simanjuntak and Stephanie Kandou, Makarim & Taira S.
Hak Pengelolaan (“Right to Manage”) This right is not provided in Indonesia’s 1960 Agrarian Law, but under GR 18/2021, a Right to Manage may be granted for State Land ( Tanah Negara ) or Custom- ary Land ( Tanah Ulayat ). A Right to Manage granted over State Land can be conferred to state-owned or region-owned companies, central or regional govern- ments, and legal entities appointed by the central government through a decree from the Minister of Agrarian Affairs. The holder of a Right to Manage has the authority to grant a Right to Build and a Right to Use over the land subject to Right to Manage to another party, through a land utilisation agreement. The term of this right is usually tied to the period for which the holder intends to use the land for its designated purpose. Due to its specific conditions, a Right to Manage cannot be transferred to another party. However, the Right to Build or Right to Use over the Right to Manage can be transferred to another party with prior approval from Government Regulation No 18 of 2021 (“GR 18/21”), issued on 2 February 2021, allows certain foreigners to hold a Right to Use title over state-owned land, land under a Right of Ownership, and land under Right of Management. The Right to Use includes a specific right to the underlying land. Under GR 18/21, certain foreigners may also hold a Right to Use over apart- ments. However, according to GR 18/21, the foreigner’s pres- ence must be “of benefit” because, meaning they must be conducting business, working, or investing in Indonesia. To qualify for land ownership rights over apartments, foreigners must possess the necessary the holder of the Right to Manage. Land Ownership by Foreigners
Note that each land certificate can only correspond to one of the aforementioned rights. For example, a Right to Build certificate only grants the right to build on the land. Non-certificated land, which may include customary land or state-owned land, has not yet been registered with the relevant Land Office and cannot be owned by a company until it is certificated. For state-owned land, a company must apply for and obtain a Right to Build before it can use the land. 8.5 Structuring Deals The following are the main issues to consider when structuring a project finance deal in Indonesia. The Type of Security to Be Provided Under Indonesian Law Indonesian law recognises various types of security, depending on the nature of the assets. However, cer- tain assets, such as government-owned assets, can- not be used as security. In project finance transac- tions, especially those involving the government, such as the public–private partnerships, some assets will remain under government ownership. In such cases, these assets cannot be included in the security pack- age for financing, and lenders will need to explore alternative forms of security. Refer to 5. Guarantees and Security for the types of security interest available under Indonesian law. Requirements for Offshore Loans Disbursement procedure Bank Indonesia, the central bank, requires that any foreign currency offshore loan received by Indonesian parties, including loans from (i) non-revolving loan agreements and (ii) debt securities (such as bonds, medium-term notes, floating rate notes, etc), must be disbursed through banks in Indonesia (including foreign bank branch offices) that are licensed to con- duct foreign currency banking activities (“FX Banks”). Therefore, offshore lenders should be aware that the loan cannot be disbursed through an offshore account. The borrower will need to open a bank account with an FX Bank to receive the proceeds of the offshore loan.
permits (work permit, stay permit, etc). Land Ownership by Foreign Investment Companies
A foreign capital investment (PMA) company may hold a Right to Build, Right to Use, or a Right to Cultivate, depending on its business activities. The most com- mon right held by a PMA company is the Right to Build.
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