MEMBER NEWS | Pinsent Masons Publications: Australia-Indonesia Economic Relations

Pinsent Masons has produced two new publications featuring latest legal news and guidance on the Australia-Indonesia trade deal and Indonesia’s opening of its second round pre-qualification list for renewables projects.

1. Trade deal will allow more Australian ownership, investment in Indonesia


Indonesia and Australia have signed an economic partnership agreement that will reduce tariffs on goods moving between the countries and reduce controls on Australian investment and business ownership in Indonesia.04 Mar 2019

The Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA) relaxes foreign ownership requirements for energy and infrastructure companies, amongst others. Greater levels of Australian ownership will be permitted in contract mining services and mine site preparation services; most construction-related work; some energy activities, and in relation to some transport infrastructure.

The Indonesia-Australia Business Partnership Group (IA BPG), a body made up of Indonesian and Australian business groups to inform IA-CEPA negotiations, had called for the opening up of all classes of infrastructure to foreign investments. It also said that the Indonesian and Australian governments should create a joint public private partnerships (PPP) centre, and establish mechanisms for government-to-government agreement to aid particular infrastructure projects.

Trade and investment expert Jessica Callista of Bahar, the Indonesian partner firm of Pinsent Masons, the law firm behind, said: “Indonesia and Australia have been partners through the ASEAN Australia New Zealand Free Trade Agreement (AANZFTA), and this bilateral agreement indicates that both countries expect to create a stronger relationship. It is clearly a step forward.”

“We believe the signing of IA CEPA will spark interests and excitement from both countries, and we are looking forward to a deeper partnership on a PPP centre, which is what Indonesia needs, especially for high quality design, structuring and documentation of projects,” said Callista.

The deal has been welcomed by industry groups including the Australian Chamber of Commerce and Industry, the Australia Indonesia Business Council, and the Minerals Council of Australia.

Negotiation of the IA-CEPA concluded in August but signing was delayed due to diplomatic tensions between Australia and Indonesia over Middle East policy.

For the full article and further information click here.

2. Indonesia opens second round pre-qualification list for renewables projects


In sign of progress which has been welcomed by Indonesia’s renewable energy sector, Indonesia’s state-owned electricity company, PT PLN Persero (PLN) has opened the second round of its pre-qualification process for companies bidding for renewable energy projects. 20 Feb 2019

Companies can apply to PLN’s head office to pre-qualify as project sponsors until 15 March. Successful companies will be put on PLN’s ‘list of selected providers’ for renewable energy projects, Daftar Penyedia Terseleksi (DPT).

The process relates to projects with a capacity of over 10 megawatts (MW). Regional PLN offices will run pre-qualification processes for projects below 10MW.

Since the end of 2017 only companies listed in PLN’s DPT have been able to participate in the procurement process for renewable energy projects, according to PLN policy.

A first round pre-qualification process for DPT began in October 2017 and successful companies were told that they were on the list in November 2018, though the full list of successful applicants was not published. The DPT listing will be valid for three years.

Noverina Gurning, an energy expert at Bahar, the Indonesian partner firm of Pinsent Masons, welcomed the announcement of the first-round DPT results and the commencement of the second round DPT process, but said that issues around the implementation of the DPT process, especially on the transparency and certainty of the process, remain important considerations for interested parties.

“The DPT mechanism and procedure are not regulated by laws, but instead only by PLN internal policy, which is not shared to the public,” she said. “This creates uncertainty for the developers, as they can only rely on information provided by PLN in Q&A sessions, verbal confirmation, and emails. Further, there is also no certainty on when the results will be announced and when PLN will commence the procurement process for the next renewable energy projects.”

Despite this, Gurning said that a number of developers are pleased with the results of the first round DPT process and that she regards the second round DPT invitation as an encouraging sign of progress following a lengthy period of inactivity in 2018.

The second round DPT process relates to solar PV, hybrid energy, wind energy, biomass, biogas, biofuel, tidal wave and new energy. PLN has a separate DPT for hydro power plant projects. Applications are open to any company in Indonesia or another country which has diplomatic relations with Indonesia.

For the full article and further information click here.