This content is from: Local Insights

Indonesia: Land procurement regulation

Oene MarseilleEmir Nurmansyah

In December 2016, the Indonesian president issued a new regulation paving the way for Indonesia's ministry of finance to provide land procurement funding to projects with national strategic value, but with insufficient funding to complete the necessary land acquisition.

The new regulation is designed to provide a solution for important projects that have faced difficulties in proceeding due to insufficient budget allocated for the necessary land procurement.

Under the new regulation, the relevant government entities (including other ministries or government-owned entities (BUMNs)) contemplating land acquisition in the context of these strategic projects may work with the ministry of finance to secure additional funding to procure the necessary land.

Assuming that the necessary documentation has been provided, the ministry of finance will initiate a review and if approved, will disburse the relevant funds.

The regulation provides two ways for the disbursement to take place. One method is called 'indemnification' – or a direct fund disbursement to the relevant land owners. The second method would involve reimbursing the relevant funds to government entities that had already used their own funds to pay for the land acquisition (in other words, the payment had not been provided for in the budget reserved for the land acquisition in question).

After the land acquisition is completed, it is required that the ministry of finance obtains the relevant title certificate on the land under the name of the government of the Republic of Indonesia, specifically the ministry of finance.

There is also reference in the regulation to the effect that the government may provide a guarantee against risks that may be incurred due to delays in land procurement budgeting. The implementation of this form of guarantee is to be regulated further.

The regulation was effective as of December 6 2016.

Oene Marseille and Emir Nurmansyah

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