Compulsory land acquisition powers available to private companies?

Finance & Projects Jakarta | Singapore Client Alert May 2015 Compulsory Land Acquisition powers available to private companies? Under the New Land Acquisition Law - which grants to the government powers to extinguish land titles after a series of steps and appeal processes have been completed - only government institutions and state/regional-owned enterprises (BUMNs/BUMDs) that receive a special assignment from the government can utilize the New Land Acquisition Law to procure land for public interest projects. The main implementing regulation of the New Land Acquisition Law - Presidential Regulation No. 71 of 2012 - was recently amended again (after two previous amendments in 2014) through Presidential Regulation No. 30 of 2015 ("PR 30/2015"). PR 30/2015 expanded the definition of "Institutions who need the land" to cover not only government institutions and BUMNs/BUMDs that receive a special assignment from the Government, but also private entities that obtain an authority/proxy based on an agreement with the relevant government institution or BUMN/BUMD. Please click here for our previous Client Alert on Presidential Regulation No. 71 of 2012. Despite legal queries which may arise on whether a presidential regulation may effectively expand a defined term under a Law, this amendment suggests that PR 30/2015 allows and facilitates direct land procurement by private entities - although when doing so, the private entities will act not on their own behalf but as "proxies" of the relevant government institution or BUMN/BUMD. There are no further details in PR 30/2015 on how this "proxy" mechanism will be implemented. But in consideration of PR 30/2015, the National Land Agency (Badan Pertanahan Nasional - BPN) has also issued a new regulation to amend its previous technical guidelines for land procurement, namely BPN Regulation No. 6 of 2015 ("BPN Reg 6/2015"). For the land title of the procured land, BPN Reg 6/2015 stipulates that when the institution that needs the land is a private entity that obtains a proxy from a government institution or BUMN/BUMD, the government institution or BUMN/BUMD can be granted a right to manage upon land (hak pengelolaan). The private entity can be granted a right to build (hak guna bangunan) or right to use over right to manage (hak pakai di atas hak pengelolaan) over the procured land. It seems that through this amendment the government expects private entities to be formally involved in the land acquisition process to expedite and assist with debottlenecking the prolonged land acquisition process, which has often been cited as one of the main obstacles to bringing infrastructure projects in Indonesia from plan to reality. But the next issue will be, whether government institutions or BUMN/BUMD will be willing to be responsible for any land acquisition delay risk when the land is procured by the developer through this "proxy" mechanism. www.bakermckenzie.com For further information please contact Luke Devine Foreign Legal Consultant +62 21 2960 8600 [email protected] Kirana D. Sastrawijaya Senior Associate +62 21 2960 8541 [email protected] Anita Karina Sungkono Associate +62 21 2960 8613 [email protected] Hadiputranto, Hadinoto & Partners* The Indonesia Stock Exchange Building, Tower II, 21st Floor Sudirman Central Business District Jl. Jendral Sudirman Kav. 52-53 Jakarta 12190 Indonesia www.hhp.co.id Milan Radman Principal +65 6434 2641 [email protected] Baker & McKenzie.Wong & Leow* 8 Marina Boulevard #05-01 Marina Bay Financial Centre Tower 1 Singapore 018981 www.bakermckenzie.com/Singapore *Hadiputranto, Hadinoto & Partners and Baker & McKenzie.Wong & Leow are member firms of Baker & McKenzie International. ©2015 Baker & McKenzie. All rights reserved. Baker & McKenzie International is a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a “partner” means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an “office” means an office of any such law firm. This may qualify as “Attorney Advertising” requiring notice in some jurisdictions. Prior results do not guarantee a similar outcome.