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Back to topA new Presidential Regulation assigns all functions of the PKLN Team to Indonesia’s Minister of Finance.
On 20 July 2020, Indonesian President Joko Widodo issued Presidential Regulation No. 82 of 2020 (Reg 82), which established a new special committee to manage the Covid-19 pandemic. Reg 82 also abolished several special teams and committees established by previous presidents, among them the Team for Co-ordination of the Management of Offshore Commercial Loans (PKLN Team).
The PKLN Team was established back in 1991 through Presidential Decree No. 39 (1991 Decree). It was assigned to coordinate and supervise offshore borrowings by state-owned entities and private entities through a reporting mechanism. It also had the authority to approve offshore borrowings by SOEs, and by private entities seeking funding for state projects. Reg 82 assigns all functions of the PKLN Team to the Minister of Finance (MOF).
BACKGROUND
There are two presidential decrees covering the approvals and reporting required for offshore borrowings – Presidential Decree No. 59 of 1972 (1972 Decree) and the 1991 Decree.
Under the 1972 Decree, SOEs must obtain approval from the MOF to obtain offshore borrowings. In addition, all takers of offshore loans, whether state-owned or private, must submit a report to the MOF on their offshore borrowings.
With the issuance of the 1991 Decree, these borrowers now also had to obtain approval from and submit reports to the PKLN Team. This change also expanded the approval requirements to include private entities seeking funds for state projects.
Since Reg 82 revokes the 1991 Decree, offshore loan borrowers once again only need to comply with the 1972 Decree.
POTENTIAL IMPACT
Interestingly, in revoking the 1991 Decree, Reg 82 also assigns the functions of the PKLN Team to the MOF. This raises questions as to what authority the MOF now holds in its role as the PKLN Team, in particular:
- Should borrowers also address the PKLN Team when submitting an approval request or reports to the MOF in accordance with the 1972 Decree?
- Should private entities seeking funding for state projects also obtain approval from the MOF (in its capacity as the PKLN Team)?
Our initial view on the first question is that it is recommended (but not mandatory) that borrowers address any approval request and reports under the 1972 Decree to the MOF, both in its own capacity and in its role as the PKLN Team.
The second question is not as straightforward. Without further clarity and regulations on how the MOF will perform the PKLN Team’s functions, our initial view is that private entities seeking to raise funds for state projects should be able to obtain offshore borrowings without obtaining prior approval from the MOF in its role as the PKLN Team.
CONCLUSION
With the MOF taking over the role of the PKLN Team, any SOE planning to obtain offshore loans must now obtain approval from the MOF, both (i) in its own capacity and (ii) as acting official of the PKLN Team. Meanwhile, private entities seeking offshore loans for state-related projects are no longer required to obtain approval from either the MOF or the PKLN Team.
