Regulation No. 49 of 2011 on the Amendment to Government Regulation No. 1 of 2008 on Government Investment (“Regulation”) has been issued to implement Article 41 (3) of Law No. 1 of 2004 on State Treasury (“Law 1 /2004”) and to improve the provisions of Government Regulation No. 1 of 2008 on Government Investment (“Regulation 1/2008”), which addressed the same issue.
The Regulation amends two articles, Article 1 and Article 4, and adds one new article, Article 13A.
Under Article 1 (4) of the Regulation, capital participation (penyertaan modal) is defined as government investment in a company by acquiring ownership rights. Previously, under Article 1 (4) of Regulation 1/2008, capital participation was defined as government investment in a company by acquiring ownership rights, including through the establishment of a limited liability company (perseroan terbatas) or by acquisition.
This amendment of Article 1 (4) potentially broadens the means by which the government can invest in a company because it removes the limitations included in the previous regulation. Under Regulation 1/2008 the government could obtain ownership rights by means of establishing a PT, merger, acquisition, or consolidation. These methods can be found in Law No. 40 of 2007 on Limited Liability Company.
Article 4 of the Regulation states that direct investment in the form of capital participation, as referenced in Article 3 (3)(a), can be organized by means of public private partnership or non-public private partnership. Previously, Article 4 of Regulation 1/2008, as referenced in Article 3 (1)(b), stated that direct investment included capital participation and credit methods (loan).
This amendment suggests that direct investment by means of public private partnership or non-public private partnership only applies to capital participation, and does not include credit methods (loan).
Article 11 (3)(a) states that the Minister of Finance is obliged to conduct a feasibility study before recommending government investment, while Article 11 (4)(b) states that the Minister of Finance has to conduct research on investment requests from companies, public service agencies, regional governments, regional public service agencies, and foreign companies.
The Minister of Finance has the final say in whether to approve or reject a request. Article 13A of the Regulation, the new article, states that a feasibility study or a recommendation to invest is not required as stated in Article 11 (3)(a) and (4)(b) when an investment is mandated by law or is needed to rescue
the national economy or to implement an urgent government program.