This content is from: Local Insights

Indonesia: Foreign-lender selection clarified

Oene MarseilleEmir Nurmansyah
The Finance Ministry of Indonesia has issued a new regulation clarifying its internal procedures for selecting foreign lenders in government procurement areas. Under this new regulation, the directorate-general of debt management would invite certain pre-selected international lenders to submit proposals to fund government procurement plans. The directorate would choose the bidder who offered the lowest cost on comparable loan packages.

The directorate would initiate the bidding process by sending out requests for proposals to at least five qualified foreign lenders, determined to be the most suitable creditors. These prospective lenders' outstanding loans would have to fall within a permissible limit. In this regard, the government would consider the amount of outstanding loan these creditors have extended to the government's counterparty. The government would also look at the type and origin of the goods to be procured. The prospective lender closest to the goods' location would receive priority. Finally, these prospective lenders would have to have a track record of providing commercial loans to the government.

The directorate would issue a benchmark against which the proposed loan packages would be evaluated., and the winning bidder's offered interest rate and other costs would not exceed this cost benchmark. The directorate is further tasked by the new regulation to establish a method to calculate this benchmark.

Prospective lenders may offer stand-alone loans, club deals, or syndicated loans., and the successful bidder is required to submit a letter-of-commitment within seven days of notification. Failure to produce this letter or any withdrawal subsequent to this phase would result in the lender being banned from future selection processes for one year, or five selection periods.

Oene Marseille and Emir Nurmansyah

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