In brief

Disbanding of the Offshore Loan Coordination Team (PKLN)

On 20 July, the government issued Presidential Regulation No. 82 of 2020 on the Handling Committee for Corona Virus Disease (COVID-19) and the Recovery of the National Economy ("PR 82"). Under PR 82, the government officially disbanded several government institutions, one of which is the Offshore Loan Coordination Team ("PKLN Team"). The PKLN Team was formed under Presidential Decree No. 39 of 1991 on Coordination of the Management of Offshore Loans ("PD 39").

The functions of the PKLN Team include coordinating the management of offshore loans of the government, state-owned enterprises and private companies, and determining the priority of offshore loans for development projects. In carrying out its functions, the PKLN Team (i) received periodical reports of offshore loans and (ii) provided approval to, among others, offshore loans related to government projects or provided to state-owned entities.

We understand that the functions of the government institutions that are disbanded under the regulation will be transferred to the relevant government bodies or ministries. PR 82 stipulates that the functions of the PKLN Team will be transferred to the Ministry of Finance ("MOF").

PR 82 also revokes PD 39 but it does not revoke Presidential Decree No. 59 of 1972 on Obtaining Offshore Loans (PD 59). Under PD 59 (i) offshore loans obtained by state- or regional-owned entities need prior approval from the MOF and (ii) offshore loans need to be reported periodically to the MOF.

Key takeaways

Since PD 39 has been revoked and the PKLN Team disbanded, it is possible that the MOF will enhance its role as stipulated in PD 59 to issue approvals for certain offshore loans and receive reports on offshore loans. It is unclear whether or not the MOF will conduct its functions using PD 59 (and its implementing regulations) as a guideline, or issue new implementing regulations to align the procedure in PD 59 with the current market conditions. We will provide further updates once there is an implementing regulation, socialization or further development of this regulation.

PR 82 was issued to deal with the impacts of COVID-19 in Indonesia and the recovery of the national economy by forming new task forces and committees such as (i) the Policy Committee, (ii) the COVID-19 Task Force and (iii) the Recovery and Transformation of the National Economy Task Force.

PR 82 also disbands several government institutions and revokes several regulations related to those institutions because (i) the duties and functions of those government institutions may overlap with the duties and functions of other government institutions, or (ii) because the functions of those institutions can be more efficiently performed by other government institutions. The disbanding of some government institutions and the revocation of several regulations by PR 82 would also help the government to reduce the state budget expenditure.

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Indonesia: COVID-19 - New Presidential Regulation Disbands the Offshore Loan Coordination Team (PKLN) - Lexology