The Government of Indonesia has a very ambitious infrastructure target up to 2019 (http://jakartaglobe.id/archive/aceh-papua-jokowis-infrastructure-visions/). In Jakarta and its proximities region, so called, the Jabodetabek, has been ringed with several transportations projects, expedited with Presidential Regulation. We are expected to see Jakarta’s monstrous traffic will be solved by the completion of Mass Rapid Transit (MRT), Light Rail Transit (LRT) and to serve the international visitors as well as locals, the Soekarno Hatta Airport Train.
These mega project certainly incur combined complexity of financial, technical and legal aspects. Let’s take a look at the Presidential Regulation No. 99 Year 2015 in which the President instructed the construction of Jakarta LRTs, which then was implemented by Governor Basuki in his regulation (Governor Regulation Number 211 Year 2016, now has been updated with Governor Regulation Number 154 Year 2017). To ensure the Jakarta LRTs are completed, Jakpro was granted direct appointment to construct 2 LRT Lines. Currently, MAA is assisting the Railways Unit of the Jakarta Office of Transportation (Dishub) to set up further legal frameworks for the LRT implementation. This will include the financing structure of the project, the public service obligation schemes, and the concession mechanism. The structuring of these projects will need to be supported by comprehensive legal frameworks in which MAA continuously is referred to by the Government of DKI Jakarta Provincial.
Travellers can now board the Airport Train from Jakarta Central Business District from Sudirman Station to Soekarno Hatta Airport. This project went back to 2011, when under the direction of Ignatius Jonan, PT Kereta Api Indonesia (Persero) (KAI) was granted a direct appointment by virtue of Presidential Regulation Number 83 Year 2011 to execute the government obligation in public transportation for the expansion and development of a better commuter line as well as the new construction of Bandara Soekarno Hatta (Basoetta Train), running from Dukuh Atas Sudirman – Duri/Tangerang – to the Airport. Both projects were self-financed (non-state budget project) by KAI through its subsidiaries (KCJ for the commuter lines and Railink for the Basoetta Train). For the financing, KAI successfully gained the trust of the 4 primes national banks (BNI, Mandiri, BRI, and BCA) for the Basoetta Train for IDR 1,45 T loan syndication (project cost is IDR 1,7T).
MAA has assisted KAI from the initial stage of the Basoetta Train Project where KAI was mandated to produce a comprehensive study of the project including from legal perspective. Simultaneously with the loan syndication negotiation, MAA also represented KAI in the negotiation with the Ministry of Transportation for the concession contract. The concession contract was successfully signed in 2014 and marked the first regime in railways concession contract under the Railways Law of 2009.
Not only Jakarta and surroundings community will enjoy a better transportation system by means of light rail transit, MRT or Basoetta Train, the public will continue to experience a better bus transportation systems, both for Bus Rapid Transit and Non-Bus Rapid Transit, managed by Jakarta’s own company, PT. Transportasi Jakarta (Transjakarta) established in April 2014, as the wholly substitute of the previous technical unit (UP Transjakarta) under Dinas Perhubungan DKI Jakarta (Dishub/Office of Transportation). MAA has been engaged by UP Transjakarta and continued to PT Transjakarta to provide an overall legal advice especially the customized contracts for Bus Operator contracts as so funded by the state budgets. MAA has experienced that working with state owned company requires not only legal skills, but policy making process, state budget mechanism and procurement procedures. These combined knowledge and skill will ensure an integrated and comprehensive legal approach in rendering services as well as guiding the company’s good corporate governance.
The ease of doing business in Indonesia is marked, among others, by the legal certainty of the dispute resolution and its enforcement. In general, arbitration cases are resolved within 6 (six months) from the date of case registration. How about its enforcement? To date, MAA has handled numerous cases before the Indonesian Arbitration Board (BANI) with excellent enforcement rate, meaning that the enforcement of the decisions is voluntarily executed by the parties without further court process. The success of these enforcement is due to the fact that the Panel of Arbiters have decided the cases in win-win solution by ensuring that the disputes not only settled in fair and legal manner but also providing opportunity for the parties to continue with their business engagement.
How about court cases? MAA has been appointed by the Ministry of Environment to represent the ministry in several environment cases where the trial is lengthy and complicated one due to its scientific nature. In addition to environment cases, MAA has also appeared before several specific court or dispute settlement bodies, such as the Industrial Court, the Consumers Dispute Settlement Body (Badan Penyelesaian Sengketa Konsumen) and Public Information Commission. With this wide range of exposure, MAA keeps in mind in advising its client to always have a bird eye view of all possibilities in entering into a major contract so that prevention of disputes can be initiated at the earliest stage.
In the past couple of years, the Supreme Court of the Republic of Indonesia has issued important decisions on Indonesian forest fire cases, both for criminal and civil cases. The civil cases are actually the first of the cases where tort claims based on strict liability principle are applied pursuant to the Law on Environmental Protection and Preservation Number 32 year 2009 concerning Protection and Management on Environment. The case against PT. Kallista Alam, a palm oil company – brought by the Ministry of Environment was decided in 2014 where the Company is found guilty and must pay the claims comprising the environmental loss of around 114 billion rupiah to the State and environmental recovery amounting to 251 billion rupiah.
Environmental civil cases are different from the conventional civil cases, both in terms of substance law and procedural law. In addition to outstanding skill on normal civil cases, an environment lawyer must also be able to demonstrate the understanding and good analytical skills on laws as well as practical litigation formulating strategy to convince the judges despite of the minimum evidences. As for procedural, scientific evidence is of paramount factor in environmental cases.
The decision on Kallista Alam becomes monumental because this is the first time the State wins a significant victory in a tort claims against the company perpetrators in forest fire since the new law is in place. The decision has made Kallista’s case as a big push for the Government to take many following actions against other big forest fire cases. Furthermore, apparently the case has also been used as a reference for discussions in many trainings for environmental judges.
Fauzul Abrar, founding partner of MAA has been trusted by the Ministry of Environment (KLHK) to represent the above cases along with a team of lawyers from KLHK itself and the Attorney General Office. The team has successfully drafted a sound legal claim on Kallista Alam which then became the basic formulation of all civil claims on forest fire cases.
Innovation is the key ingredient to surviving in today’s business models rich with economic disruptions, though creative as they are. Services industries have expanded from its conventional style and now collaboratively work applying the blue-ocean strategy. White label services are rising providing innovative and fast-changing services to multinational companies, such as concierge services for credit card issuers so that premium clients are pampered to any demands, insurance companies cutting cost by outsourcing risk assessment for their insurance coverage and calculation or commonly known as third-party administration (TPA) services and health services support companies.
MAA have been advising Singapore-based management companies expanding their innovative business in Indonesia. Our experience shows that their service nature, though often classified as management consultancy services under the Indonesian Standard Industrial Business Classification (KBLI: Klasifikasi Baku Lapangan Usaha Indonesia), but trying to find the most correct KBLI code in compliance with BKPM (Investment Coordination Board) is still challenging. BKPM now requires interviews and consultation session with the shareholders and also the management of the potential investors to provide BKPM with their sound presentation of the business activities. The session is very crucial in that it acts as confirmation session for BKPM on which KBLI code it will grant to the new company or its business expansion. MAA is very well accustomed to such session and has assisted client to prepare their presentation well, as the session will be hosted by BKPM and its prominent advisors or resource persons in the related field.
The set up of foreign investment companies and general limited liabilities under Indonesian laws reach out as far as licensing procedures which may include permits and licenses from different ministries and local authorities. A simple common licenses that MAA assists its clients regularly are completing the corporate documentation for a company to have a bank account separately as a legal entity from its owner which (simply) consists of letter of domicile and tax payer number. If the company wishes further to be eligible to participate in government or private tenders, the company needs to have company registration, VAT registration, and general trade licensing and other licenses which may be technically required as per business sector. The process of obtaining these licenses can be tiresome both in terms of paperwork, duration and cost-wise. In this sense, MAA has acted as corporate secretary for many companies ensuring their corporate document compliance with the regulations.
Recently, the Government of Indonesia is promoting the use of One Single Submission, a platform for integrated licensing procedures from center and regional government to facilitate ease of doing business in Indonesia (https://www.oss.go.id). Though it is in early stage, but business actors, specially foreign investors and small businesses, have high hopes that this initiative will cut the red tape and thus improve business performances. MAA is communicating this OSS to its clients so that they may make most benefit out of it.
Contact us at email@example.com if you wish to consult MAA on investment process before the BKPM.
What is the indicator of a good corporate governance in a state-owned company? For one, is their compliance and commitment in their procurement procedures, especially for projects or contracts funded directly or indirectly by the Indonesian government (central/regional) budget.
State-owned companies may be subject to government procurement procedures under Presidential Regulation Number 56 Year 2018 concerning the Provisions of Government’s Goods and Services Procurement when they resource out certain goods or services which are directly paid by the government’s budget as so stated in the Annual State/Regional Budget (APBN/ABPD). This case happens when a state-owned company provides a certain public service obligation as so mandated by the government through subsidy arrangement, for example Kereta Api economic class (KAI commuter trains) by APBN via the Ministry of Transportation, Transjakarta tickets fare by APBD via the DKI Office of Transportation, Pertamina economic fuel prices by APBN via the Ministry of Energy and Natural Resources, and electricity cost by APBN via PLN (state electricity company). Any contracts related to the provisions of these services must abide with the above presidential regulation. Thus, having detailed and comprehensive knowledge and skills on how this regulation together with LKPP’s rules are essential in the drafting of the contracts.
MAA has assisted clients from the initial stage of procurement up to the contracts signing. It is crucial to have bird-eye view as well as on the ground hand-on on a government budget funded contract to ensure integrity, consistency and compliant. Not only understanding the business and legal aspects of the transaction, but the governance and due process must always be kept in mind at all times when it comes to securing state-owned company as client.