Insights

Public Private Partnership in Nusantara Capital City

By Yehezkiel Obey Yoneda / 14 June 2023

Public Private Partnership in Nusantara Capital City
Understand insights about the implementation of public private partnership for the development of the Nusantara Capital City, including regarding the stages of implementation and investment returns for business actors.

Key Points

  1. Private sector entities can participate in developing IKN through Public-Private Partnership schemes with the government, including the IKN Authority, ministries, and State Owned Companies.
  2. Investment returns to business actors include minimum coverage of capital costs, operational costs, and reasonable profits.
  3. Investment returns to business actors are carried out through various schemes, including payments by users in the form of tariffs and payment for service.

Latar Belakang

Apart from serving as Indonesia's new capital city, the Nusantara Capital City (“IKN”) development aims to become a sustainable global city and a driving force for Indonesia’s future economy. The IKN Authority will cooperate with other regions in Kalimantan island to make IKN an Indonesia-centric superhub region, funded by the state treasury and other legitimate sources, including cooperating with the private sector entities through Public-Private Partnership schemes (“PPP”).

The implementation of PPP in IKN is regulated under the Minister of National Development Planning/Head of the National Development Planning Agency Regulation No. 6 of 2022 on Procedures for Implementing Public Private Partnership in the Nusantara Capital City.

Parties Involved in the Implementation of PPP

There are several authorized parties involved in the implementation of PPP in IKN, namely:

  1. the Project Cooperation Responsibility Holder (“PCRH”), which is the Head of the IKN Authority or the Minister/Head of Institution/Director of a State-Owned Company, who is authorized to act as a provider or operator of infrastructure;
  2. the IKN PPP Committee, which is a member appointed by the PCRH who has expertise in a particular field to assist PCRH in the stages of IKN PPP;
  3. the Process Advisors, a private party selected through procurement, is authorized to provide recommendations and guidance to the PCRH regarding the suitability of the PPP project process.
  4. the Preparation Agency, which is a business entity or international institution/organization selected through selection or direct selection, that is authorized to assist in the stages of IKN PPP;
the Joint Coordination Forums, government agencies authorized to facilitate, accelerate, monitor, and evaluate the implementation of IKN PPP.


Implementation of PPP in IKN

IKN PPP is implemented through the following stages:

1. Planning stage covers:
  1. identification, which is the preparation of identification documents by the PCRH that will be used as the basis for determining the project funding scheme;
  2. determination, which is the determination of a list of proposed PPP plans by the Minister of PPN based on the proposals submitted by the PCRH. The list of proposed plans is used as a basis for consideration of providing the government’s support;
  3. budgeting, which is budget allocation by PCRH for stages of IKN PPP.

2. Preparation stage covers:

  1. preparation of pre-feasibility study documents in the form of analysis conducted by the PCRH on aspects of legal, technical, economic, and risk;
  2. implementation of several supporting activities;
  3. assessment of market interest in the form of activities carried out by the PCRH to find out inputs, responses, and interests of potential investors, banking, insurance, and other stakeholders of the IKN PPP.
3. Transaction stage covers:
  1. the procurement of implementing business entities is carried out with a one-stage tender mechanism through prequalification, merging of tender prequalifications, swiss challenge (contesting the proposal), or direct appointment. The business actors selected as the implementing entity will be followed up with the issuance of an appointment letter from the PCRH;
  2. the signing of the PPP agreement between the PCRH and the implementing business entity no later than one month after the issuance of the appointment letter from the PCRH;
  3. the fulfillment of financing for the provision of IKN infrastructure by the implementing entity (financial close) no later than 4 months after the signing of the PPP agreement, and can be submitted for a one-time extension.
4. Agreement implementation stage covers:
  1. budget allocation for the stages of cooperation agreement implementation;
  2. preparation for controlling the implementation of the PPP agreement; and
  3. controlling the implementation of the PPP agreement.

Further, the implementation of the PPP agreement is carried out through three stages:

  1. construction;
  2. service provision; and
  3. termination of the PPP agreement.


Investment Returns

PCRH is authorized to determine the form of investment returns, including a minimum coverage of capital costs, operational costs, and reasonable profits. Meanwhile, the investment returns to business actors are carried out through the following scheme:

  1. payment of users in the form of tariffs;
  2. payment of service availability (payment from PCRH to the implementing business entity for providing infrastructure service according to the IKN PPP agreement); and
  3. other forms according to the provisions of laws and regulations.

Key Contacts

Please get in touch with the designated key contacts via phone or email if you have any inquiries or would like to learn about the potential impact on your business.
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Ivor I. Pasaribu

Managing Partner
+62 21 2276 1962
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Adrian Fernando

Partner
+62 21 2276 1962

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