GOVERNMENT REGULATION NO. 107/2000 DATED NOVEMBER 10, 2000
CONCERNING REGIONAL LOANS
THE PRESIDENT OF THE REPUBLIC OF INDONESIA,
Considering :
That in order to implement the provisions in Article 15 of Law No. 25/1999 on the Financial Equilibrium between the Central Government and the Regional Administration, it is necessary to stipulate a Government Regulation on Regional Loans;
In view of :
1. Article 5 paragraph 2 of the 1945 Constitution as already amended by the Second Amendment to the 1945 Constitution;
2. Law No. 22/1999 on Regional Administration (Statute Book No. 60/1999, Supplement to Statute Book No. 3839);
3. Law No. 25/1999 on the Financial Equilibrium between the Central Government and the Regional Administration (Statute Book No. 72/1999, Supplement to Statute Book No. 3848);
D E C I D E S :
To Stipulate :
GOVERNMENT REGULATION ON REGIONAL LOANS
CHAPTER I
GENERAL PROVISIONS
Article 1
In this Government Regulation referred to as :
1. The Central Government shall be the apparatus of the Unitary State of the Republic of Indonesia, which comprises the President and the Ministers.
2. Autonomous Regions hereinafter referred to as Regions shall be units of society of law which have certain regional borders, and the authority to regulate and take care of the interests of the local communities in accordance with their own initiatives based on popular aspirations in the bonds of the Unitary State of the Republic of Indonesia.
3. Regional Head shall be the Governor for a Province or the Regent for a Regency or the Mayor for a City 4. Regional Legislative Assembly hereinafter abbreviated to DPRD shall be the Regional Legislative
Assembly
5. Regional budget hereinafter abbreviated to APBD shall be a Regional annual financial plan which is stipulated on the basis of the Regional Regulation on the Regional Budget.
6. Regional loans shall be all transactions which cause Regions to receive from other parties a sum of money or benefit in the value of money, so that the Regions are charged with the obligations of repayment, excluding the short term loans which are normally practiced in trade.
8. Short term loan shall be the Regional Loan with a period of one year or less than one year on the condition that the repayment of the loan shall be in the forms of the principal, interest and other costs, which shall be wholly paid in the relevant fiscal year.
CHAPTER II
SOURCE AND TYPE OF REGIONAL LOANS
Article 2
1. Regional Loans can originate from : a. Indonesia;
b. Foreign countries.
2. The Regional Loan from Indonesia as referred to in paragraph 1 letter a originate from : a. The Central Government;
b. Banking Financial Institutions; c. Non Bank Financial Institutions; d. The public;
e. Other sources.
3. The Regional Loans from foreign countries as referred to in paragraph 1 letter b can be in the form of bilateral loans or multilateral loans.
Article 3
Regional Loans consist of 2 (two) types : a. The Long Term Loan'
b. The Short Term Loan.
CHAPTER III
USE OF REGIONAL LOANS
Article 4
1. The Long Term Loan can only be used to finance construction of infrastructures which serve as the Regional assets and can produce revenues to re-finance loans as well as providing benefits for public service.
2. The Long Term Loan cannot be used to finance the expenditure of general administration as well as expenditure of operation and maintenance.
Article 5
Regions can carry out the Short Term Loan to regulate the cash flow in the framework of managing Regional Treasury.
CHAPTER IV
REQUIREMENTS FOR REGIONAL LOANS First Part
Ceiling for Regional Loan Amount
Article 6
a. The cumulative amount of the principal of the Regional Loan which shall be paid does not exceed 75% (seventy-five percent) of the total APBD General Revenue of the previous years; and
b. Based on the annual projection of Regional expenses and revenues during the period of the loan, the Debt Service Coverage Ratio (DSCR) shall be minimally 2.5 (two and half).
Article 7
1. The maximal total Short Term Loan is 1/6 (one sixth) of the total APBD expenditure of the on-going fiscal year.
2. The Short Term Loan is carried out by considering the adequacy of Regional revenue to repay the loan on time.
3. The settlement of the Short Term Loan shall be made in the on-going fiscal year.
Article 8
1. The cumulative ceiling of total loans of all Regions is adjusted to national economic policies.
2. Based on the consideration of national interests, the Minister of Finance can stipulate further control over Regional Loans.
Second Part
Maximal Time Limit of Regional Loans
Article 9
1. The maximal tune limit of the Long Term Loan is adjusted to the economic life of the assets which are financed with the loan.
2. The maximal limit of the Grace Period is adjusted to the project construction period 3. The Long Term Loan period includes the grace period
4. In the case that Regions carry out the Long Term Loan originating from Indonesia, the period of the loan and the Grace Period are stipulated by Regions with the approval of DPRD.
5. In the case that Regions carry out the Long Term Loan originating from foreign countries, the period of the loan and the Grace Period are adjusted to the requirements for the relevant loan from foreign countries.
Third Part Guarantee Ban
Article 10
1. Regions shall not carry out agreements which are guarantee in nature for the loan of other parties creating burden on Regional finance.
2. Regional assets which are used to serve the public interests cannot be used as the guarantee to obtain Regional Loans.
3. Any violation of the provisions as referred to in paragraphs 1 and 2 are subjected to sanctions in accordance with the existing regulations.
CHAPTER V
PROCEDURES FOR REGIONAL LOANS
Article 11
2. Based on the approval of DPR as referred to in paragraph 1, Regions apply for the loan to the would-be creditor
3. Any Regional Loan in contained in the loan agreement between the Region and the creditor
4. The loan agreement as referred to in paragraph 3 is signed on behalf of the Region by the Regional Head and the creditor
5. For public cognizance, any loan agreement concluded by Regions shall be announced in the Regional Gazette.
Article 12
1. To obtain a loan originating from the Central Government, Regions submit proposals to the Minister of Finance accompanied with the letter of approval of DPRD, a feasibility study and other documents needed for evaluation.
2. The agreement on the loan originating from the Central Government is signed by the Minister of Finance and the Regional Head.
Article 13
1. The Regional Loan originating from foreign countries is carried out through the Central Government
2. To obtain the Regional Loan originating from foreign countries as referred to in paragraph 1, Regions submit proposals on the loan to the Central Government accompanied with the letter of approval of DPRD, a feasibility study and other documents needed.
3. The Central Government conducts an evaluation of the proposals on the Regional loan originating from foreign countries as referred to in paragraph 2 from various aspects to determine whether the proposals are accepted or rejected.
4. If the Central Government has provided its approval as referred to in paragraph 3, the Regional Administration conducts negotiations with the would-be creditor and the outcome is reported to obtain the approval from the Central Government.
5. Regions can carry out the Regional Loan originating from foreign countries after having obtained prior approval from the Central Government
6. The agreement on the Regional Loan originating from foreign countries is signed by the Regional Head and the foreign creditor.
CHAPTER VI
REPAYMENT OF REGIONAL LOANS
Article 14
1. All payments which become the obligations of Regions and become due on Regional Loans are priorities and budgeted in APBD expenses.
2. The repayment of the Regional Loan originating from foreign countries by Regions, is made in the currency which is stipulated in the agreement on foreign loans.
3. In the case that Regions fail to pay the Regional Loan from the Central Government, the Central Government calculates the obligation with the General Allocation Funds to Regions
4. In the case that Regions fail to pay the Regional Loan originating from foreign countries, the obligation is settled in accordance with the loan agreement.
CHAPTER VII
ACCOUNTING AND REPORTING
1. All revenues and obligations in the framework of Regional Loans are mentioned in the APBD and entered in accordance with the financial accountancy standard of the Regional Administration.
2. The information on all Long Term Loans is contained in the attachment to the APBD document
3. The Regional Head reports to DPRD periodically with a copy sent to the Minister of Finance concerning the developments of total obligations of Regional Loans and the implementation in the framework of meeting the obligation of loans which have been due.
CHAPTER VIII
TRANSITIONAL PROVISION
Article 16
1. The Regional Loan Agreement which has been concluded before the enforcement of this Government Regulation can still be subject to the provisions of the former regulation until all loans have been fully paid. 2. The Regional Loan Agreement which has been concluded before the enforcement of this Government
Regulation, based on the consensus between the creditor and loan recipient, can be re-arranged on the basis of this Government Regulation.
CHAPTER IX CLOSING PROVISION
Article 17
This Government Regulation shall come into force as from January 1, 2001.
For public cognizance, this Government Regulation shall be announced by publishing it in the Statute Book of the Republic of Indonesia.
Stipulated in Jakarta on November 10, 2000
THE PRESIDENT OF THE REPUBLIC OF INDONESIA sgd.
ABDURRAHMAN WAHID
Promulgated in Jakarta on November 10, 2000
THE STATE SECRETARY, sgd.
DJOHAN EFFENDI
ELUCIDATION ON
GOVERNMENT REGULATION NUMBER 107/2000 ON REGIONAL LOANS
GENERAL
Law No. 25/1999 on the Financial Equilibrium between the Central Government and the Regional Administration stipulates that the Regional Loans are one of the Regional revenue sources in the framework of implementing Decentralization, which is recorded and managed in the Regional Budget.
The loans complement the existing Regional revenue sources and are aimed at financing the procurement of Regional infrastructures and other fixed assets relating to the activities to increase revenues which can be used to pay the loans and can provide benefits for public service. In addition, Regions can carry out loans for another purpose, such as overcoming short term problems which are related to the Regional cash flow.
Regional Loans need to be adjusted to the Regional capacity, because it can create big enough burden on the Regional Budget for the subsequent years, so that they need to be supported by the skill of the Regional apparatus in managing Regional Loans.
To improve the objective capacity and discipline of the Regional Administration in repaying loans, it is necessary to have carefulness and accuracy in the management of Regional Loans. This Government Regulation intends to further stipulate matters relating to Regional Loans by anticipating future needs and considering the importance of maintaining the conditions of health and sustainability of the national economy.
ARTICLE BY ARTICLE
Article 1
Sufficiently clear
Article 2
Paragraph 1
Sufficiently clear Paragraph 2
Letter a
The provisions on the loan which originates from the Central Government, such as the type, period of the loan, grace period, interest rate, method of calculation and method of paying interest, administrative matters and distribution of the loan, are stipulated by the Minister of Finance
Letter b
The implementation of the Regional Loan originating from Banking Financial Institutions follows the provisions of the existing regulations.
Letter c
The implementation of the Regional Loan originating from Non Bank Financial Institutions follows the provisions of the existing regulations.
Letter d
The Regional Loan originating from the public among others through the issue of Regional Bonds
Letter e
"Other sources" are Regional Loans derived from other than the above sources, such as the Regional Loan from another Regional Administration.
Paragraph 3
Sufficiently clear
Article 3
Sufficiently clear
Article 4
Paragraph 1
"Producing revenues" means the production of revenue which is related to the construction of infrastructures is financed by the long term loan, both directly and or indirectly.
Paragraph 2
Sufficiently clear
Article 5
The Short Term Loan can be used :
a. To assist in the smoothening of cash flow for short term needs;
b. For the initial stage payment funds of an investment which will be financed by the Long Term Loan, after there is already the certainty about the availability of the relevant Long Term Loan.
Article 6
This provision is intended to provide Regions with guidelines in order that Regions should take into account the Regional capacity in determining the total Long Term Loan so as to meet all Regional obligations of the Regional Loan.
Letter a
This provision is the ceiling of the total Regional Loan which is considered appropriate to become burden of APBD
"The cumulative total of the principal of the Regional Loan which shall be paid" is the principal of the former loan which has not yet been paid (including the accumulation of capitalized interest), plus the principal of the loan which will be received in that year.
"The APBD General Revenue" means all APBD revenues which exclude the Special Allocation Funds, Emergency Funds, former loan funds and other revenues, the use of which is limited to finance certain expenses, or :
PU = PD - (DAK + DD + DP + PL) PU = APBD General Revenue PD = Total Regional Revenue DAK = Special Allocation Funds DD = Emergency Funds
DP = Loan Funds
PL = Other revenues, the use of which is limited to finance certain expenses; Letter b
The Debt Service Coverage Ratio (DSCR) is the ratio between the addition of Regional Original Income, Regional Share from Land and Building Tax, Land and Building Title Acquisition Fees, natural resources revenue and other Regional shares, such as individual Income Tax and General Allocation Funds after being reduced Compulsory Expenditure, and the addition of installments of principal, interest and other loan costs which are due.
The Debt Service Coverage Ratio (DSCR) can be written with the following formula : (PAD + BD + DAU) - BW
DSCR = Debt Service Coverage Ratio; PAD = Regional Original Income;
BD = Regional shares from Land and Building Tax, Land and Building Title Acquisition Fees and natural resources revenue and other Regional shares, such as from individual Income Tax; DAU = General Allocation Funds;
BW = Compulsory Expenditure, namely the expenditure which shall be met/cannot be avoided in the relevant fiscal year by the Regional Administration, such as expenditure for employees; P = installment of the principal loan, which is due in the relevant fiscal year;
B = the interest of the loan which is due in the relevant fiscal year
BL = other costs (the cost of commitment, the cost of bank, etc) which are due.
To obtain the Long Term Loan, both requirements as referred to in letters a and b shall be met by Regions.
Article 7
Paragraphs 1 and 2 Sufficiently clear Paragraph 3
"The on-going fiscal year" means the fiscal year in which Regions carry out the Short Term Loan This provision also means that the Short Term Loan shall not be used to finance the cash deficit at the end of the fiscal year.
Article 8
Paragraph 1
This provisions is intended to prevent the cumulative total loans of all Regions from exceeding the ceiling considered safe for the national economy. The ceiling is stipulated by the Minister of Finance
Paragraph 2
The consideration for the national interests, among others, arises if the national monetary condition shows the importance of exercising stricter control on the total Regional Loans.
Article 9
Paragraph 1
The tie limit of loans is adjusted to the economic life of the relevant assets, with the maximal period of 30 (thirty) years.
Paragraph 2
The grace period is a period in the initial loan period, which can be stipulated in the loan agreement, so that in that period the borrower does not pay the installment of the loan principal. The Grace Period is only stipulated if it is really needed and the period does not exceed the period for procurement of assets or the construction period of the relevant project, maximally 5 (five) years.
This is intended, among others, to avoid bigger loan cost burden. Paragraphs 3 and 4
Sufficiently clear Paragraph 5
Sufficiently clear
Article 10
Paragraph 1
"Guarantee for the loans of other parties" means the Regional guarantees for, among others, the loans of Regional Corporations and or loans of the private sector in the framework of implementing Regional projects.
Assets owned by Regions used to serve public interests include hospitals, schools and markets. Paragraph 3
Sufficiently clear
Article 11
Paragraph 1
The Short Term Loan is intended to assist in the smooth flow of cash excepted from the provision in this paragraph.
The approval of DPRD for the proposal of the Regional Administration to obtain loans is carefully conducted by taking into account, among other, the Regional capacity to pay, ceiling of loan, utilization of loans funds, installment of principal, period of loans, grace period of payment of principal and interest rate.
Paragraph 2
In the case of a loan originating from foreign countries, the "creditor" is that stipulated in accordance with the existing laws.
Paragraphs 3 and 4 Sufficiently clear Paragraph 5
This provision is intended to create transparency and clear accountability to the public concerning obligations of the loans.
Article 12
Paragraph 1
"Other documents" include the documents which mention the calculation on Regional capacity to pay off the loan.
Paragraph 2
Sufficiently clear
Article 13
Paragraph 1
"Carried out through the Central Government" means the Minister of Finance provides approval for the source, utilization, the total fund and requirements for each Regional loan originating from foreign countries concerned as well as stipulating the procedures for the supply, distribution and repayment of the loans.
Paragraph 2
"Other documents" include the documents which mention the calculation on Regional capacity to pay off the loans.
Paragraph 3
The Central Government, in this case the Minister of Finance, after having conducted consultations with the Minister of Home Affairs and Regional Autonomy and related agencies conducts an evaluation of each loan proposal submitted by Regions.
The evaluation covers, among others, the conformity of the type of projects which will be financed by utilizing the loan funds and the Regional financial capacity in receiving loans as well as the Regional financial capacity to pay off the loans.
Subsequently, the Minister of Finance conveys the outcome of the evaluation of the proposal of each foreign loan to the relevant Region.
The conveyance of the outcome of the evaluation can mean approving or rejecting the loan proposal.
Paragraph 4
By this provision, Regions cannot carry out Regional Loans originating from foreign countries, if the relevant Regions do not obtain the approval from the Central Government.
Paragraph 6
Sufficiently clear
Article 14
Paragraph 1
The obligations on the loans which are due cover all installments of the loan principal plus loan costs, such as interest of loans, bank costs and commitment fees.
By placing the obligations of Regions on Regional Loans as one of the priorities and budgeting them in the APBD expenses, the fulfillment of the said obligations has a position which is the same as that of other expense which shall be prioritized by Regions, for instance, the expense which if not made can create social vulnerability.
Thus, the fulfillment of obligations on Regional Loans cannot be left aside, if the target of APBD revenue is not reached.
Paragraph 2
Further provisions on the distribution and repayment of Regional Loans originating from foreign countries are stipulated by the Minister of Finance in accordance with the existing laws.
Paragraph 3
"Failing pay the Regional Loan" means failing to meet the obligation to pay the installments of the loan principal and loan costs, such as loan interest, bank cost and commitment fees in accordance with the schedule and total which have been stipulated in the loan agreement.
In line with the provision in paragraph 1, all obligations to pay off Regional Loans become the responsibility of Regions. The Central Government does not bear the repayment which becomes the obligation and responsibility of Regions.
Paragraph 4
Sufficiently clear
Article 15
Paragraph 1
In the case that the financial accountancy standard of the Regional Administration does not exist, the Regional Administration carries out the accounting in the framework of Regional Loans in accordance with the existing laws.
Paragraph 2
The attachment forms a part of the APBD document, so that it becomes a document which can be obtained by the public.
Paragraph 3
In this paragraph the Report of the Regional Head to the DPRD is prepared in the framework of the Report on Regional financial accountability in accordance with the existing laws.
Article 16
Paragraph 1
Sufficiently clear Paragraph 2
In this paragraph the said consensus is made on the basis of the approval of DPRD.
Article 17
Sufficiently clear
