News & Publications
Vol 1: Update on Offshore Loan Reporting/Approval: The Abolishment of PKLN Team
The revocation of Presidential Decree No. 39 of 1991 concerning Coordination of Management of Foreign Commercial Loans (“PD 39”), under which the PKLN Team (as defined below) was formed, can be said to be one of the long awaited simplification required from the government relating to the obtainment of offshore loan. The reporting requirement to Bank Indonesia is a lot more extensive and indeed there should not be any further reporting for lesser pieces of information to the governmental bodies, let alone a group of bodies in which Bank Indonesia is also a member of PKLN Team.
Historically, in the spirit to coordinate and supervise offshore loans extended to Indonesian parties, the Government of the Republic of Indonesia appointed the Ministry of Finance (“MOF”), Bank Indonesia and Tim Koordinasi Pengelolaan Pinjaman Luar Negeri / Offshore Loan Coordination Team (the “PKLN Team”) to carry out these tasks and functions, including (i) to accept reports of offshore loans (these were conducted by MOF, Bank Indonesia and PKLN Team) and (ii) to assess and approve the plan for certain offshore loans of certain Indonesian parties (these were conducted by MOF and PKLN Team). Noting that the PKLN team consists of several ministers and Bank Indonesia, the administrative procedure to obtain the approval of certain offshore loan could take for month(s) in practice, and of course, this was a less friendly environment for the businesses.
In July 2020, the President of the Republic of Indonesia issued the Presidential Regulation No. 82 of 2020 concerning the Handling Committee for COVID-19 and the Recovery of the National Economy ("PR 82"). One of the key provisions in the PR 82 is the abolishment of several governmental institutions, which includes the PKLN Team. The PKLN Team was abolished by the revocation of PD 39, under which the PKLN Team was formed.
Offshore Loan Compliance Requirements to the PKLN Team
PKLN Team had previously imposed certain requirements to the Indonesian entities in connection with their offshore loans, i.e.:
- to submit their offshore loan reporting to PKLN Team; and
- to obtain approval from the PKLN Team for their offshore loans, in the event that such offshore loan is to finance, for instances, a state project or state related project.
The Abolishment of PKLN Team
As mentioned above, the PR 82 has abolished the PKLN Team and revoked PD 39. However, PR 82 further regulates that the implementation of the duties and functions of the PKLN Team under the revoked PD 39 will still be carried out by the MOF.
Conclusions and Remarks
By having the provision which shifts the duties and functions of the PKLN Team to the MOF, the question arises whether Indonesian entities are still obliged to carried out the PKLN team’s compliance requirements i.e. report offshore loans or request offshore loan approval to the MOF.
The revocation of PD 39 will give the effect that all provisions therein cease to have any effect. Theoretically speaking, therefore the shift in the implementation of the PKLN Team's duties to the MOF does not necessarily mean that now the previous PKLN team’s compliance requirements must be carried out to the MOF using the guidance under PD 39. It is possible that another set of regulation to specify the requirements imposed on Indonesian parties relating to its offshore loan activities and the MOF’s power to assess and to approve or reject certain offshore loan activities by certain Indonesian parties is to be issued. However, it will not be surprising if legal practitioners and offshore banks take a more conservative interpretation, hence viewing that the provisions of PD 39 remain effective but that the power now remain only with MOF and requesting MOF clarification for this issue. On the positive side, at least, business practioner(s) can see this abolishment of PKLN Team as a good progress since an approval for certain offshore loans now should not go through a long process to the various governmetal bodies under the PKLN Team which obviously takes more time.
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