M&E CASE STUDY FINANCIAL REFORM OF 20 PDAMs IDENTIFICATION OF CRITICAL SUCCESS FACTORS

M&E CASE STUDY FINANCIAL REFORM OF 20 PDAMs – IDENTIFICATION OF CRITICAL SUCCESS FACTORS

M&E CASE STUDY FINANCIAL REFORM OF 20 PDAMs – IDENTIFICATION OF CRITICAL SUCCESS FACTORS

INDONESIA INFRASTRUCTURE INITIATIVE June 2011

INDONESIA INFRASTRUCTURE INITIATIVE This document has been published by the Indonesia Infrastructure Initiative (IndII), an Australian Government funded project designed to promote economic growth in Indonesia by enhancing the relevance, quality and quantum of infrastructure investment. The views expressed in this report do not necessarily reflect the views of the Australia Indonesia Partnership or the Australian Government. Please direct any comments or questions to the IndII Director, tel. +62 (21) 230-6063, fax +62 (21) 3190-2994. Website: www.indii.co.id.

ACKNOWLEDGEMENTS This report has been prepared by Ty Morrissey (M&E Team), engaged under the Indonesia Infrastructure Initiative (IndII) funded by AusAID. The support provided by the Technical Director of Policy and Investment, IndII management and members of the Study Team is gratefully acknowledged. The report draws on available documents and results from key interviews. Any errors of fact or interpretation are solely those of the author. Ty Morrissey Jakarta, June 2011

© IndII 2011 All original intellectual property contained within this document is the property of the Indonesia Infrastructure Initiative (IndII). It can be used freely without attribution by consultants and IndII partners in preparing IndII documents, reports designs and plans; it can also be used freely by other agencies or organisations, provided attribution is given. Every attempt has been made to ensure that referenced documents within this publication have been correctly attributed. However, IndII would value being advised of any corrections required, or advice concerning source documents and/ or updated data.

TABLE OF CONTENTS ACRONYMS .............................................................................................................II EXECUTIVE SUMMARY ............................................................................................III CHAPTER 1: BACKGROUND AND CONTEXT................................................................ 1 CHAPTER 2: INDII INVOLVEMENT WITH PDAMS ........................................................ 2 2.1

CASE STUDY APPROACH .................................................................... 2

CHAPTER 3: ANALYSIS .............................................................................................. 4 3.1 3.2 3.3

GENERAL MANAGEMENT ................................................................... 4 PDAM SUCCESS FACTORS ................................................................. 5 FUTURE DIRECTIONS ......................................................................... 6

CHAPTER 4: KEY CONCLUSIONS ................................................................................ 7 ANNEXES

............................................................................................................. 8 ANNEXE 1: SEMI-STRUCTURED INTERVIEW QUESTIONS FOR 20 PDAMS ................ 8 ANNEXE 2: LIST OF PEOPLE CONSULTED ......................................................... 9 ANNEXE 3: INTERVIEW TRANSCRIPTS FROM STAKEHOLDERS .............................. 10 ANNEXE 4: COPY OF PERPRES NO. 29 OF 2009.............................................. 18

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ACRONYMS AusAID BPP SPAM DGCK DGHS GoI IndII LG MoF PDAM PIU PMU PPP Perpres

Australian Agency for International Development Badan Pendukung Pengembangan Sistem Penyediaan Air Minum Directorate General Cipta Karya Directorate General of Human Settlements Government of Indonesia Indonesia Infrastructure Initiative Local Government Ministry of Finance Perusahaan Daerah Air Minum Project Implementation Units Project Management Unit Public Private Partnership Presidential Regulation

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EXECUTIVE SUMMARY Financing reform of 20 PDAMs (Perusahaan Daerah Air Minum or local water utility company) has had a long history of implementation and management through the Indonesia Infrastructure Initiative (IndII). The Government of Indonesia (GoI) has contributed significant resources over the years towards making PDAMs commercially viable and sustainable. Despite the investment and support, PDAMs generally are unable to maintain existing infrastructure or raise sufficient capital to fund additional connections. The GoI has initiated Presidential Regulation (Perpres) no. 29/2009 with the intention of increasing the commercial viability of PDAMs to enable them to access subsidised loans through private sector lending institutions. The strategy is significant as there are currently 375 recognised water enterprises (including PDAMs) across Indonesia requiring various levels of technical and financial support. IndII has been involved with 20 PDAMs since 2009. The support has focused on strengthening the financial and governance structures within PDAMs to meet the requirements of Perpres no. 29/2009 to enable them to access commercial loans. The process has been time intensive and significant work has been undertaken to improve internal systems and processes, and to provide technical support around engineering and environmental designs. Three PDAMs are currently in a position to obtain loans, and a second batch of five PDAMs will follow soon. This study sought to identify common factors that have enabled and contributed towards the success of the first three PDAMs under Perpres no. 29/2009. It is important as the Activity will continue and a significant number of PDAMs have expressed interest in participating. The GoI does apply a selection criteria process to PDAMs. Historically, this process has been unclear; however the application of standardised processes enables quick assessments to be completed. The identification of success factors through this study will further strengthen the selection process. Key factors contributing to success of PDAMs reviewed in this study include: Strong buy-in and engagement with local government and Bupati (Regent) Access to reliable and clean water source(s) Adequate technical expertise and capacity – management and engineering Sound existing relations with banks and commercial lenders Supporting these success factors has been the development of standardised templates and business case models. An outsourced project management model has also been helpful; however there is scope to transition more responsibility to a government agency such as Badan Pendukung Pengembangan Sistem Penyediaan Air Minum as the programme evolves.

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The establishment of a technical working group as a GoI initiative has also been an important step forward in the selection, management and facilitation of relationships regarding PDAMs. The working group will have a pivotal role moving forward into the future. The challenges that face PDAMs are often internal, with the Ministry of Finance (MoF) not providing the necessary sign-off to enable PDAMs to commence accessing loans. This situation causes difficulty not only for PDAMs but also for the participanting banks that have approved loans. Further consultation is required from IndII senior management and the Working Group to liaise with the MoF to raise awareness of the issue and blockage. Moving forward there are opportunities for increased socialisation of bank branches towards Perpres 29 and also to include MoF and PDAMs as well in the discussions. This is a possible consideration moving forward with financial reform activities.

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CHAPTER 1: BACKGROUND AND CONTEXT

CHAPTER 1: BACKGROUND AND CONTEXT The Indonesia Infrastructure Initiative’s (IndII) Activity of Financial Reform for 20 PDAMs aims to help selected water enterprises (Perusahaan Daerah Air Minum [PDAM]) access commercial loans under the Government of Indonesia’s (GoI) Perpres no. 29/2009. The framework has been established by the Ministry of Finance (MoF) to accelerate the rate at which communities connect to piped water schemes. Current expenditure levels of PDAMs are not sufficient to properly maintain existing infrastructure let alone add additional household connections. Public funding for bulk water providers and PDAMs, which have traditionally relied on central government grants and loans with subsidised interest rates, has decreased in recent years. This has necessitated a shift towards the generation and sourcing of alternative income. Examples include loans from State-owned banks, Public Private Partnerships, and/or tariff increases and cost efficiency reforms. Despite these available options, the amounts required to invest and upgrade existing infrastructure and develop new connections are significant. The GoI through Perpres no. 29/2009 seeks to provide a formal framework through which PDAMs will be able to access subsidised or discounted loans through commercial lending institutions to accelerate provision of drinking water supply. The loans are to be backed by a 40 percent contribution from the central government, a 30 percent contribution from the local government (LG) and banks contributing the remaining 30 percent. Guarantees from the central government and LGs are used as collateral against the loan. The Activity supports the GoI’s aim to have 10 million new household connections by 2013 as a broader contribution to the MDG (Millennium Development Goals). At present there are approximately 375 water enterprises (including PDAMs) across Indonesia. The Activity has been reviewed regularly during its implementation period to assess progress towards agreed objectives as well as assessing continuing relevance and appropriateness. The purpose of this study is not to replicate these earlier studies but to draw upon them and focus on specific aspects of three PDAMs that have been able to access loans.

PDAMS SUCCESS FACTORS STUDY

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CHAPTER 2: INDII INVOLVEMENT WITH PDAMS IndII received a proposal from the Directorate General of Human Settlements (DGHS) initially requesting assistance for 37 PDAMs with support to be provided to assess the level of ‘health’ of each PDAM, with the intention of reducing the list to a final 20. The goal of the Activity is to improve national water supply services in urban areas to achieve GoI’s target of 10 million additional household connections by 2013, to enhance the delivery of piped water supply services to meet the basic needs of all people and support national economic growth. Key objectives include: To assist DGHS undertake a quick assessment to shortlist 20 PDAMs To develop comprehensive templates for the development of five-year business plans, annual reports and standardised financial reports to assist PDAMs implement relevant systems To develop a full-cost recovery tariff structure To develop good corporate governance regimes To assist PDAMs access new revenue streams (commercial borrowings) to accelerate infrastructure provision To develop guidance material to facilitate PDAM commercial borrowings IndII involvement has been ongoing for the past two years and involves high profile financial advisers, called Project Implementation Units, to assist in the development of tools and templates with selected PDAMs. Perpres no. 29/2009 was released in June 2009 and its implementing regulation (29/2009) was released in December 2009, which means that the approach and application employed under the Activity is relatively unique. There has been a long delay between selection of PDAMs and work to develop tools and business plans to enable loan applications to be lodged. This longer time frame has necessitated several reviews of the ‘PDAM Programme.’ However, three PDAMs are now in a position to access loans.

2.1

CASE STUDY APPROACH

This case study is slightly different from other studies in that the approach used does not align to measurement against defined aspects (i.e. capacity, partnership, and policy) nor does it seek to review and comment on specific outputs.

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CHAPTER 2: INDII INVOLVEMENT WITH PDAMS

Rather, the study seeks to identify the key success factors and enabling issues that assisted these PDAMs to be in a position to access loans through commercial lenders. The purpose is to identify key features that will assist with future PDAM selection. The case study utilised a semi-structured interview approach with key stakeholders involved with the Activity, both GoI and IndII (Annexe 1). A copy of the list of people consulted and associated transcripts are provided as Annexe 2 and 3 respectively. A copy of Perpres no. 29/2009 is also included as Annexe 4 for reference.


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CHAPTER 3: ANALYSIS The study reviewed the three PDAMs that are currently in the process of securing loans through commercial lenders. The three PDAMs are Tasikmalaya, Lombok Timur, and Kudus. Each PDAM is unique in terms of its management capacity, ability to access water sources, and linkage with communities both urban and rural. However, there are some consistent themes that emerged during the interview process that underpin the success these PDAMs have achieved in securing approval for commercial loans. It is important to mention some general management considerations from an IndII perspective that have contributed to the success of the PDAMs reviewed.

3.1

GENERAL MANAGEMENT

A shift to a new streamlined management system involving KPMG as a ‘project manager’ has reduced the burdens of administration and oversight borne by IndII. At present there is still a need to maintain a Project Management Unit (PMU) to work with contracted engineers, but moving forward there is potential for further change to further simplify structures and enhance the capacity of GoI institutions. The emergence of a Technical Working Group does provide a viable alternative. An improvement in the classification and selection system of PDAMs has been a positive step forward. Previously, PDAMs were “pushed over the line” to be in a position to access loans. This approach was not sustainable and generated failed investments and reduced partnership opportunities with banks. The application of a relatively transparent, and more importantly, consistent, selection process has meant better targeting and definition of PDAMs for partnerships. 1

This is an improvement over past systems as recognised in an earlier report in which comment was made concerning the use and selection of PDAMs using incorrect criteria. The report suggested the use of a series of rapid assessments and questions. Further interviews reveal that many PDAMs ”tend to hide information” and in the past much time was spent ”closely analysing all the data and information.” Evidence to date suggests that the recommendations for improvement have been acknowledged and steps towards an improved system are apparent. The development of business case templates has been a success as evidenced through the interviews and observation of their correct use. The three PDAMs all use the business case as a management tool and believe the tools have had a significant impact in improving operations. Questions have been raised over the use of expensive

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Andrew McLernon and Made Bawayusa. Assessment of the Umbulan Spring and Financial Reform of 20 PDAM Activities. April 2010.


CHAPTER 3: ANALYSIS

consultants2 and while this study acknowledges the positive impact these firms have had, there is scope in moving forward to rely less on these consultants and use more domestic-based individuals and firms.

3.2

PDAM SUCCESS FACTORS

Strong support and buy-in from the local government (LG) and also the Bupati (local Mayor) is essential to any successful PDAM. Interviews with all three PDAMs indicated that they would not be in their current position without this political support. There is recognition that coordination with LGs ”needs to be carefully managed,” however it was recognised by the Tasikmalaya PDAM that IndII support has enabled them “to start afresh and be open and transparent about our approach” with LGs. The main issue appears to be between governments, with the LGs expressing frustration and concern over the engagement with central bodies, namely the MoF. This is particularly pertinent as the MoF is required to sign off on (approval letter) granting the release of funding from banks under Perpres no. 29/2009. Participating banks have also shared concerns that approved loans will need to be re-negotiated in the coming month if the situation is not resolved. Suitable water source sites (e.g. springs and rivers) are another essential feature for successful PDAMs. This may appear obvious, however many PDAMs particularly in urban areas do not have access to adequately clean and reliable water sources. This inhibits their ability to implement household connections and to set higher tariff rates, and also requires significant investment in treatment facilities (thus reducing the number of connections or increasing the amount required for borrowing). All PDAMs interviewed have access to clean and reliable sources and were able to maintain costs by limiting the need for expensive infrastructure investment. The use of ‘gravity-fed’ systems was also an advantage, reducing the need for expensive pumping systems. Adequate internal technical expertise is an essential component for PDAMs. The current PDAM programme experienced difficulties with the limited capacity of engineering services to complete technical designs. This necessitated a significant input from IndII and also was a time consuming effort. Successful PDAMs tend to have ‘inhouse’ expertise that is able to meet the requirements of Perpres no. 29/2009 with the assistance of the tools and templates provided through IndII. Management tends to be fairly consistent across the PDAMs. Key to success is often having management in key positions for a long period of time to ensure consistency and to build relations. In Lombok Timur, the Bupati spoke highly of the role of the PDAM board in ‘supervising’ management factors. For the Bupati, the question is not the capacity of management but rather the slow release of funds.

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Ibid.


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Solid and long-standing partnerships with commercial banks are also an advantage. Interviews with banks involved with PDAMs indicated that those involved with the reviewed PDAMs had established relations and had conducted business with respective PDAMs in the past. Perceptions of the banks concerning Perpres no. 29/2009 were very positive in that “it has enabled us to move to more small business banking opportunities.” One advantage of involving the banks is that PDAMs will be subject to strict monitoring, both passively through the review of drawdowns and actively through the site and ‘spot checks.’ This approach is consistent with a more accountable and transparent approach to PDAMs and contributes towards conforming to the requirements of Perpres no. 29/2009.

3.3

FUTURE DIRECTIONS

A key element moving forward is to have higher representation from IndII towards the MoF. This is critical in the coming months, as a number of PDAMs will be approaching the stage of seeking approval for loans. The hard work has been done at the operational level and further coordination is required with MoF to clearly state the importance of their approval. The PDAM Working Group (representing Directorate General of Cipta Karya, MoF, Indonesian banks and Badan Pendukung Pengembangan Sistem Penyediaan Air Minum [BPP SPAM]) is another avenue that needs to be encouraged moving forward. This group has significant potential to represent the interests of PDAMs and banks and also promote improved coordination and consultation with the MoF. Importantly, the group can also be used to ‘socialise’ to bank branches the requirements of Perpres no. 29/2009, as there appears at times to be a disconnect in understanding and application between a bank’s central branch and those in the districts and provinces. Despite the emergence of the Working Group, there is still a need to rely on existing management structures. It is recommended that IndII retain a single project manager for oversight of the completion of financial reviews and development of business cases, and also to work closely with the oversight of engineering inputs. The ideal situation would be to transfer ownership gradually to an agency such as BPP SPAM which would ultimately assume responsibility and management. This gradual approach reduces the need for a PMU in its current form and directs capacity and assistance towards an internal GoI system.

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CHAPTER 4: KEY CONCLUSIONS

CHAPTER 4: KEY CONCLUSIONS Financing Reform of 20 PDAMs has had a long history of implementation and management. There is positive progression towards the achievement of defined objectives and the Activity is starting to produce the results identified as part of the original scope. Perpres no. 29/2009 has had a significant impact on the sector and provides a framework not only for the implementation of the Activity but also for engagement and partnership arrangements between partners. Perpres no. 29/2009 has provided a solid framework through which PDAMs can obtain commercial loans and lenders can receive security and guarantees. IndII support to the Activity has been helpful in enabling PDAMs to meet minimum standards required under Perpres no. 29/2009 to access necessary loans. PDAMs that were reviewed demonstrated some consistent factors that underpinned their ability to access loans. Key success factors included: strong buy-in and engagement with LGs; access to reliable and clean water source(s); adequate technical expertise and capacity; and good relations with existing banks and commercial lenders. These four factors should ideally be considered as part of future selection processes for PDAMs. The standardisation of templates and application to emerging PDAMs remains a priority. This application should, in theory, reduce the need for expensive financial firms to implement the Activity for future PDAMs. Over time there should be a gradual phase-out of this ‘technical assistance’ as there may be less expensive options available. The current model of outsourcing management to an external provider should be retained. However, moving forward, there is scope to gradually involve an agency such as BPP SPAM to act as a direct partner and assume greater responsibility. This reduces the need to have an external PMU. Strengthening the capacity of such agencies (BPP SPAM) will remain a priority.


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ANNEXES ANNEXE 1: SEMI-STRUCTURED INTERVIEW QUESTIONS FOR 20 PDAMS

1. Background and Context Please provide us with some background to the (Activity Name) – what was the initial problem that the Activity was meant to resolve? What have been two major achievements to date for this Activity? What have been major challenges to date for this Activity? In your opinion, have the stated objectives of this Activity been met? Overall how satisfied are you with the input and support of IndII and in particular (Activity name)?

2. Key Achievements What have been the contributing factors that have led to the successful application of these PDAMs for financing? What management systems/controls are in place?

3. Partnership How has the Activity contributed to partnerships between you and PDAMs? Have there been any barriers to forming a strengthened partnership? How is the partnership to be maintained and strengthened?

4. Future Directions What are the next steps following this successful application? Is the concept sustainable?

5. Concluding Questions Based on your views, understanding and experience, could any improvements be made to the Activity? Is there anything else you would like to add to the discussions?

Thank you for your time and effort to contribute to this case study.

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ANNEXES

ANNEXE 2: LIST OF PEOPLE CONSULTED

Mr Lynton Ulrich

Technical Director, Policy and Regulatory, IndII

Ms Nuri Hayati

Programme Officer, Policy and Regulatory, IndII

Pak Ahmad Lanti

Project Manager, Project Management Unit

Ibu Elena

Water Supply Systems Engineer Specialist, Project Management Unit

Mr Sahala Situmorang

Partner, Transaction Advisory Services, Ernst and Young

Mr Andrew Winoto

Transaction Advisory Services, Ernst and Young

Pak Iswahyudi

Group Head of Credit Programme, BJB Bandung

Pak Subadri

Group Head of Small Scale Micro-Banking, BJB Bandung

Pak Sukiman

Bupati, Lombok Timur

Pak Yuniar Affandy

PDAM Director, Lombok Timur

Pak Acta Suryadinata

Relationship Manager, BNI Denpasar, Bali

Pak Made Budiana

Relationship Manager, BNI Denpasar, Bali

Ibu Warda Nadjamuddin

Pemimpin, BNI Bali

Pak Ade Bahrul

Technical Director, PDAM Tasikmalaya

Pak Atang Kardian

Vice President, PDAM Tasikmalaya

Pak Asep Rosyid

Member of Supervisory Agency of PDAM Tasikmalaya/Tasikmalaya Local Government


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ANNEXE 3: INTERVIEW TRANSCRIPTS FROM STAKEHOLDERS

Questionnaire Section

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Response Transcript

Background and Context

The 20 Perusahaan Daerah Air Minum (PDAM) programme was not subject to a thorough screening process initially. An initial 47 PDAMs applied and 18 were eventually selected. Time pressures meant that there was no real time for assessment. Capacity is a major issue in that all PDAMs have varying levels of capacity. Some PDAMs were dropped – some for political reasons and some because they were too small. “The screening system has not been robust.” The three that have been successful had good capacity and had internal engineering capacity and therefore were more advanced than other PDAMs. Management tends to be the same; the key difference is the engineering capacity and the availability of a suitable water source.

Achievements

Business case templates have been developed and are being used. They can be applied to future PDAMs.

Issues

Need to standardise the system and the templates have been positive – followed and used by JICA and USAID now.

Partnership

Partnerships are now being established with banks – need to continue working with banks as PDAMs are not commercial entities in the traditional sense and need to be applied differently. Banks have participated in awareness meetings. Limited capacity in bank branches. Need to utilise the Working Group to work with banks – get bankers working according to Perpres no. 29/2009.

Future Directions

Use the Project Management Unit to make a thorough assessment of PDAMs prior to formal selection. PDAMs do have experience to obtain loans. Strong opportunity to use this study to make presentations on why PDAMs have been successful, to present to other PDAMs. Use the experience and the lessons learned.

Conclusions

Need to have a more defined selection period and need to have better targeting. PDAMs tend to hide information, so time and effort must be devoted to closely look at all data and information. Meetings and follow-up are required – part of the “quick assessment.” Need to select the right consultant to do the work. The business case should be easier with the templates developed. Revert back to using local advisers and firms to do the financial assessments. Need to have close monitoring of the full-cost recovery tariffs. Raise the profile of the Working Group.


ANNEXES


Response Transcript


Commercial banks should not be acting as commercial entities with 20 PDAMs – either reduce the commercial loan rate or Ministry of Finance (MoF) to use subsidy. Key is to identify PDAMs early and assess them correctly. There are differing opportunities (loans, Hibah etc.) but the systems need to be developed and have a transparent classification system. Need to work closely with MoF to ensure Perpres no. 29/2009 is being followed and applied.

Achievements

Have taken a staged process – capital expenditure (CAPEX), business plan, engineering design, and environmental studies. This is a major change as it was not the case previously. The application of strict standards and improvement is a key achievement. Policy was not flexible before. In the past, PDAMs were “pushed over the line” to be able to get loans. Not a sustainable approach. Now have better selection processes and are working with “healthy” PDAMs

Issues

Additional engineering support is required. Key is to put healthy PDAMs through Perpres no. 29/2009 and unhealthy PDAMs through the Hibah scheme. Also need to apply the good governance guide.

Partnership

Good relations with the banks who are committed to the programme. Need to negotiate more with the MoF on the subsidised rate and develop the appropriate policies. There is a Memorandum of Understanding in place with the bank committing Rp 40 billion per year over five years.

Future Directions

Need to shift away from subsidies towards more commercial loans. Perpres no. 29/2009 – banks take control of PDAMs and monitor and assess progress. Need to expose banks more to PDAMs.

Conclusions

MoF to clear necessary blockages in one month to get the system up and running.


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Response Transcript


Leadership is required and the technical aspects follow on after that. Local government (LG) – do you really want to get the loan? “Engineering aspect not as important as having buy-in from the LG.” LGs also have the capacity to engage with the general population. PDAM need to set tariff (Lombok Timur needs to increase its tariff). Need to have further discussions and consultations.

Achievements

Key factor has been PDAM leadership – PDAM is the manager and the LG is the leader. You need LG buy-in or you do not get anything. Now have templates for five-year business plans. E&Y has better skills to assess and evaluate performance to date – the same with Cipta Kayra. A lot of people have learned improved processes – MoF and banking sector.

Issues

ADB loan to support PDAMs was not well received and IndII was perceived as being part of that to some degree. A socialisation programme is required to inform but not oblige PDAMs. Specifically need bank branch socialisation programme. Need someone at MoF to evaluate Perpres no. 29/2009. Costs have been high but results have been achieved – has been difficult to obtain momentum.

Future Directions

The future is with banks – need to be clear about the requirements of Perpres no. 29/2009 – not always sure how to work and/or treat PDAMs. Risk is actually low but say “you need us” to PDAMs. PDAMs need to approach the banks on equal footing. Need to assess the commercial mindset of PDAM management. Do they have logical sense? Not specifically finance but understand basic implications of loans. Need higherlevel engagement with MoF. PDAM is a sustainable concept but “always with room for improvement.”

Conclusions

Leadership and management are required for PDAMs. Focus of work should be at provincial and branch levels. Need broader thinking and to be innovative in the approach. Banks and MoF need to follow Perpres no. 29/2009. Government departments also do not talk to each other – not a popular concept.


ANNEXES


Response Transcript


1.5 million people live in the areas – coverage is only 4 percent but the city has a higher proportion at 28 percent. PDAM owner is the kabupaten but the main user is the city. Main source is the spring and a river. Current waiting list of 5000 to be connected to water sources. A 20-year master plan has been developed with targets in place. Aiming for 42-45 percent total coverage. Current systems are able to operate for 20-24 hours per day and aiming for 3,000-4,000 new connections each year. IndII has been very helpful – “without IndII we would not be in the position we are in now.” IndII adds value and is a partner in water supply. “Thanks for the assistance and to make the business plan.”

Achievements

“We have completed all the necessary tasks to obtain a loan.” Started the process in 2010 but have been hampered by bureaucratic delays. Assistance from IndII has been very helpful – technical support and guidance. Coordination with LG for the political aspects needs to be carefully managed. The linkages with LG are critical and we need buy-in from all aspects. ”We are able to start afresh and be open and transparent about our approach.” E&Y have provided great support to us. Independent auditor has also come and found our accounts in “good condition.” No problem in paying former loans back and we are now open and accountable. “This is the biggest loan we have taken.” We have solid relations with bank; on-call loan that is safer and more appropriate for our needs. Perpres no. 29/2009 is helpful as it helps us to be efficient with our money. Work under one management system.

Issues

Two senior directors have retired in recent months and these positions need to be filled. Need to start building relations again and this is not a good or ideal time to have to do this. May face challenges having to implement an increased tariff. Are constrained to some degree by Government of Indonesia (GoI) systems and processes – it is a long consultation process. Loan is also an issue – Rp 51 billion requested from bank – issues in being treated like a commercial entity.

Partnership

Strong partnership with BJB. Helped by the fact that the owner of PDAM is also shareholder in bank. Tariff is set at Rp 3500 per cubic metre of water. The tariff is still low when compared to other PDAMs. Looking to increase to around Rp 4400 per cubic metre. Good communications with banks and we understand the roles and responsibilities.

Future Directions

More assistance would be helpful to prepare detailed engineering plans and undertake further studies. We need a policy on Perpres no. 29/2009 and for banks to better understand their requirements and what is expected.

Conclusions

No problems with ownership – good relations with Mayor and LG. The one year delay is frustrating and waiting for agreement with MoF. Kabupaten and kota relationship also a critical issue over ownership and sharing of resources.


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Response Transcript


Have helped small to medium enterprises in the past. Perpres no. 29/2009 is a good thing and has enabled us to move to more small banking opportunities. We are able to provide credit if companies comply with Perpres no. 29/2009 – government can provide the guarantee and the subsidy. PDAMs need to follow the regulations outlined in Perpres no. 29/2009 – no problem with banks. The banks would like more guarantees with the government.

Achievements

Bank involved in contributing to broader social development – supports the MDG (Millennium Development Goals). Not purely a commercial bank – has local attachments. Happy to participate with the government. In line with our vision – develop regional and economic growth.

Issues

Main issue is the rate the central bank/government will set - we follow the reform process but need influence to set the tariff rate. No fixed agreement in place. Maximum sub rate is 5 percent but government trying to push it down to 3 percent. – government wants a lower rate but the bank is carrying all the risk. Long time to develop relationships and agreements

Partnership

Banks will assume responsibility for monitoring – passive and active – monitor account activity and also conduct site and spot checks. The banks’ systems will be applied. LG allowing banks to use PDAM assets as collateral- this is on a case-by-case basis. Banks prefer a secured loan.

Future Directions

IndII needs to consult with the MoF on the interest rate and subsidy – more influence is required. More training in finance management is required for the PDAMs and application of commercial principles. MoF still wants to negotiate subsidy rate – different banks have different capacity. Get the Working Group involved to liaise with MoF and create further dialogue. Reliance on LG approval is always hard - PDAMs do not always understand their role – different levels of control.

Conclusions

More partnership and dialogue is required with PDAMs to be aware of all the issues.


ANNEXES


Response Transcript


Roads and water are key priorities for the kabupaten and we have limited capacity in these areas. We are attempting to use a multi-agency and multi-level commitment to improve service delivery. LG commitment is high and the PDAM is very positive towards the kabupaten – “providing an essential service to the community.” Importantly they are willing to engage with the community and communicate regarding house connections.

Achievements

Has developed good governance arrangements as part of the business plan. The former director is now part of the supervisory body (board). The board plays a proactive role. The board engages well with management and is professional. We have resources and capacity, we just need funds.

Issues

Need ongoing support, as the ability of community to pay is limited. Very concerned with the bureaucracy of the GoI in stalling approvals, also why funds cannot be channelled directly to LGs.

Partnership

Very good partnership with PDAM as evidenced by the growing number of household connections. Good relation with Bank Negara Indonesia (BNI) built up over a long period.

Future Directions

Need approval and would like more connections – through PDAMs and also Hibah.

Conclusions


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Response Transcript


The water source (spring) is very good with limited need for treatment. We currently have 17,000 connections and an additional 500 Hibah connections. We are aiming for 6000 more Hibah connections and an additional 22,000 PDAM connections. Problem with Hibah is jealousy as communities are tense on water – hard to select the most needy. Need to assess equity and access. Communities are relatively poor so are very grateful for the connections received to date.

Achievements

Meeting our targets in terms of connections. We have a much better and improved corporate/business plan. “This is now our guidebook and helps run the PDAM.” Perpres no. 29/2009 has been very helpful to provide us with a framework to work and engage with banks.

Issues

Main issues are that the MoF has not provided the umbrella agreement, and lack of information. BNI is ready to proceed and is asking us to tender scope of works but we cannot proceed without MoF approval.

Partnership

Good relations with BNI. BNI initially surprised, as they were not aware of Perpres no. 29/2009. Were prepared to offer commercial loan but Perpres no. 29/2009 gives us better access. The guidelines have helped and we have a solid basis for partnership.

Future Directions

More assistance required to strengthen management capacity in finance and management.

Conclusions

We need the MoF to provide the umbrella agreement.


ANNEXES


Response Transcript


Released the loan agreement in November 2010. Waiting for letters of guarantee as well as the umbrella agreement from MoF, which is critical. BNI has no problems with working with PDAMs as we have national coverage and a good understanding of the market and strong support from the central branch. However Lombok Timur PDAM is the first public enterprise that we have supported – a pilot case for us.

Achievements

Have negotiated the agreement and expectations and we have Perpres no. 29/2009 to support our engagement. We have had a verification team check the agreement and ensure it is aligned to PDAM business plan.

Issues

MoF is the issue – need to push this and get the umbrella agreement

Partnership Future Directions

PWC had indicated in business case that first tranche to be implemented before June 2011. If not done then the business case and projections need to be revisited.

Conclusions

The umbrella agreement is the collateral we need. Normally loan agreements only last one month, so if we do not have approval soon we will need to renegotiate the deal as our auditors will not approve an open letter. By end of June, may have to renegotiate the loan.


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ANNEXE 4: COPY OF PERPRES NO. 29 OF 2009

PERATURAN PRESIDEN REPUBLIK INDONESIA

PRESIDENTIAL REGULATION OF THE REPUBLIC OF INDONESIA

NOMOR 29 TAHUN 2009

NUMBER 29 YEAR 2009

TENTANG

CONCERNING

PEMBERIAN JAMINAN DAN SUBSIDI BUNGA OLEH PEMERINTAH PUSAT DALAM RANGKA PERCEPATAN PENYEDIAAN AIR MINUM

PROVISION OF GUARANTEES AND INTEREST SUBSIDY BY THE CENTRAL GOVERNMENT IN ACCELERATING TO SUPPLY DRINKING WATER WITH THE BLESSINGS OF THE ONE ALMIGHTY GOD

DENGAN RAHMAT TUHAN YANG MAHA ESA PRESIDEN REPUBLIK INDONESIA,

Menimbang :

Considering:

a.

bahwa air minum merupakan salah satu kebutuhan dasar penduduk yang perlu diupayakan agar senantiasa tersedia dalam jumlah yang cukup merata dan mutu yang baik;

a. that drinking water is one of the basic needs of the population that requires to be aligned continually available in sufficient quantities, equitably and of good quality;

b.

bahwa dalam rangka percepatan penyediaan air minum bagi penduduk dan untuk mencapai millennium development goals perlu diberikan akses pembiayaan bagi Perusahaan Daerah Air Minum (PDAM) untuk memperoleh kredit investasi dari perbankan nasional;

b. that in order to accelerate the provision of drinking water for residents and to achieve the MDG (Millennium Development Goals), it is necessary to provide access to new revenue streams for the Local Government-owned Water Companies (PDAMs) to obtain investment loans from national banks;

c.

bahwa untuk mendorong perbankan nasional memberikan kredit investasi kepada PDAM, dipandang perlu memberikan jaminan dan subsidi bunga oleh Pemerintah Pusat atas kewajiban pembayaran kredit investasi PDAM kepada bank;

c. that in order to encourage national banks to facilitate investment loans to the PDAM, it is deemed necessary that the Central Government provides guarantees and interest subsidies on payment obligations of PDAM’s investment loans to the bank;

d.

bahwa berdasarkan pertimbangan sebagaimana dimaksud dalam huruf a, huruf b, dan huruf c, serta dalam rangka memberikan kepastian hukum, dipandang perlu menetapkan Peraturan Presiden tentang Pemberian Jaminan Dan Subsidi Bunga Oleh Pemerintah Pusat Dalam Rangka Percepatan Penyediaan Air Minum;

d. that based on considerations as referred to in provisions of letters a, b, and c, and in order to provide legal certainty, it is deemed necessary to enact a Presidential Regulation concerning Provision of Guarantees and Interest Subsidies by the Central Government in Accelerating to Supply Drinking Water;

Mengingat 1.

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THE PRESIDENT OF THE REPUBLIC OF INDONESIA,

:

Pasal 4 ayat (1) Undang-Undang Dasar Negara Republik Indonesia Tahun 1945;

In view of: 1.

Article 4 paragraph (1) of the 1945 Constitution of the Republic of Indonesia;


ANNEXES

2.

Undang-Undang Nomor 5 Tahun 1962 tentang Perusahaan Daerah (Lembaran Negara Republik Indonesia Tahun 1962 Nomor 10, Tambahan Lembaran Negara Republik Indonesia Nomor 2387);

2.

Law Number 5 Year 1962 concerning Local Government-owned Companies (State Gazette of the Republic of Indonesia Year 1962 Number 10, Supplement State Gazette of the Republic of Indonesia Number 2387);

3.

Undang-Undang Nomor 17 Tahun 2003 tentang Keuangan Negara (Lembaran Negara Republik Indonesia Tahun 2003 Nomor 47, Tambahan Lembaran Negara Republik Indonesia Nomor 4286);

3.

Law Number 11 Year 2003 concerning State Finance (State Gazette of the Republic of Indonesia Year 2003 Number 47, Supplement State Gazette of the Republic of Indonesia Number 4286);

4.

Undang-Undang Nomor 1 Tahun 2004 tentang Perbendaharaan Negara (Lembaran Negara Republik Indonesia Nomor 5 Tambahan Lembaran Negara Republik Indonesia Nomor 4355);

4.

Law Number 1 Year 2004 concerning State Treasury (State Gazette of the Republic of Indonesia Year 2004 Number 5, Supplement State Gazette of the Republic of Indonesia Number 4355);

5.

Undang-Undang Nomor 7 Tahun 2004 tentang Sumber Daya Air (Lembaran Negara Republik Indonesia Tahun 2004 Nomor 32, Tambahan Lembaran Negara Republik Indonesia Nomor 4377);

5.

Law Number 7 Year 2004 concerning Water Resources (State Gazette of the Republic of Indonesia Year 2004 Number 32, Supplement State Gazette of the Republic of Indonesia Number 4377);

6.

Undang-Undang Nomor 32 Tahun 2004 tentang Pemerintah Daerah (Lembaran Negara Republik Indonesia Tahun 2004 Nomor 125, Tambahan Lembaran Negara Republik Indonesia Nomor 4437) sebagaimana telah beberapa kali diubah, terakhir dengan Undang-Undang Nomor 12 Tahun 2008 (Lembaran Negara Republik Indonesia Tahun 2008 Nomor 59, Tambahan Lembaran Negara Republik Indonesia Nomor 4844);

6.

Law Number 32 Year 2004 concerning Local Government (State Gazette of the Republic of Indonesia Year 2004 Number 125, Supplement State Gazette of the Republic of Indonesia Number 4437) as has been amended several times, most recently with Law Number 12 Year 2008 (State Gazette of the Republic of Indonesia Year 2008 Number 59, Supplement State Gazette of the Republic of Indonesia Number 4844);

7.

7.

Undang-Undang Nomor 33 Tahun 2004 tentang Perimbangan Keuangan Antara Pemerintah Pusat dan Pemerintahan Daerah (Lembaran Negara Republik Indonesia Tahun 2004 Nomor 126, Tambahan Lembaran Negara Republik Indonesia Nomor 4438);

Law Number 33 Year 2004 concerning Financial Balance between Central Government and Regional Government (State Gazette of the Republic of Indonesia Year 2004 Number 126, Supplement State Gazette of the Republic of Indonesia Number 4438);

8.

Peraturan Pemerintah Nomor 16 Tahun 2005 tentang Pengembangan Sistem Penyediaan Air Minum (Lembaran Negara Republik Indonesia Tahun 2005 Nomor 33, Tambahan Lembaran Negara Republik Indonesia Nomor 4490);

8.

Government Regulation Number 16 Year 2005 concerning the Development of Water Supply System (State Gazette of the Republic of Indonesia Year 2005 Number 33, Supplement State Gazette of the Republic of Indonesia Number 4490);

9.

Peraturan Pemerintah Nomor 54 Tahun 2005 tentang Pinjaman Daerah (Lembaran Negara Republik Indonesia Tahun 2005 Nomor 136, Tambahan Lembaran Negara Republik Indonesia Nomor 4574);

9.

Government Regulation Number 54 Year 2005 concerning Regional Loans (State Gazette of the Republic of Indonesia Year 2005 Number 136, Supplement State Gazette of the Republic of Indonesia Number 4574);


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10. Peraturan Pemerintah Nomor 42 Tahun 2008 tentang Pengelolaan Sumber Daya Air (Lembaran Negara Republik Indonesia Tahun 2008 Nomor 82, Tambahan Lembaran Negara Republik Indonesia Nomor 4858);

10. Government Regulation Number 42 Year 2008 concerning Water Resources Management (State Gazette of the Republic of Indonesia Year 2008 Number 82, Supplement State Gazette of the Republic of Indonesia Number 4858);

MEMUTUSKAN:

HAS RESOLVED

Menetapkan: PERATURAN PRESIDEN TENTANG PEMBERIAN JAMINAN DAN SUBSIDI BUNGA OLEH PEMERINTAH PUSAT DALAM RANGKA PERCEPATAN PENYEDIAAN AIR MINUM.

To enact: PROVISION OF GUARANTEES AND INTEREST SUBSIDY BY THE CENTRAL GOVERNMENT IN ACCELERATING TO SUPPLY DRINKING WATER

BAB I UMUM

CHAPTER I GENERAL Article 1

Pasal 1 (1) Dalam rangka percepatan penyediaan air minum, Pemerintah Pusat dengan memperhatikan kemampuan keuangan negara dapat memberikan: a.

jaminan atas pembayaran kembali kredit PDAM kepada bank dan

a. guarantee on settlements of PDAMs’ loans to banks; and

b.

subsidi atas bunga yang dikenakan oleh bank.

b. subsidy on interest charged by banks.

(2) Kredit yang dapat disalurkan kepada PDAM dalam rangka pemberian jaminan dan subsidi sebagaimana dimaksud pada ayat (1) hanya untuk kredit investasi. (3) Jaminan dan subsidi bunga sebagaimana dimaksud pada ayat (1) diberikan berdasarkan perjanjian kredit investasi antara PDAM dan bank. BAB II JAMINAN PEMERINTAH PUSAT Bagian Kesatu Ketentuan dan Besaran Penjaminan Pasal 2 Jaminan Pemerintah Pusat sebagaimana dimaksud dalam Pasal 1 huruf a adalah sebesar 70% (tujuh puluh persen) dari jumlah kewajiban pembayaran kembali kredit investasi PDAM yang telah jatuh tempo, sedangkan sisanya sebesar 30% (tiga puluh persen) menjadi resiko bank yang memberikan kredit investasi.

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(1) In order to accelerate provision of drinking water supply, in consideration of the State’s financial capability, the Central Government shall provide:

(2) Loans that can be provided to PDAMs subject to guarantees and subsidies as referred to in paragraph (1) shall only be investment loans. (3) Guarantees and interest subsidies as referred to in paragraph (1) shall be granted under an investment loan agreement between PDAM and the bank. CHAPTER II CENTRAL GOVERNMENT’S GUARANTEES Part One Term and Quantity of Guarantees Article 2 Central Government guarantee as referred to in Article 1 letter a shall be 70% (seventy percent) of total investment loan settlements of PDAM that have been due, while remaining settlements of 30% (thirty percent) shall be a risk taken by the bank that facilitates an investment loan.


ANNEXES

Pasal 3 (1) Dalam hal PDAM gagal membayar atas sebagian atau seluruh kewajiban yang telah jatuh tempo sesuai dengan perjanjian pinjaman, Pemerintah Pusat menanggung sebesar 70% (tujuh puluh persen) dan bank menanggung 30% (tiga puluh persen) dari jumlah gagal bayar. (2) Berdasarkan realisasi pembayaran jaminan Pemerintah Pusat sebagaimana dimaksud pada ayat (1), selanjutnya dilakukan pembagian pembebanan masing-masing Pemerintah Pusat menanggung sebesar 40% (empat puluh persen), dan Pemerintah Daerah menanggung sebesar 30% (tiga puluh persen) dihitung dari seluruh kewajiban PDAM yang gagal bayar. (3) Pelaksanaan pembayaran jaminan Pemerintah Pusat sebesar 40% (empat puluh persen) sebagaimana yang dimaksud pada ayat (2) selanjutnya diperhitungkan sebagai pinjaman dari Pemerintah Pusat kepada PDAM dengan persyaratan pinjaman yang diatur dalam perjanjian pinjaman antara Pemerintah Pusat dan PDAM (4) Pemerintah Daerah menetapkan status dana yang dibayarkan sebesar 30% (tiga puluh persen) sebagaimana dimaksud pada ayat (2) sebagai penyertaan modal Pemerintah Daerah, pinjaman Pemerintah Daerah, dan/atau hibah Pemerintah Daerah kepada PDAM.

Article 3 (1) In the event that PDAM defaults on partial or entire liabilities that are due based on a loan agreement, the Central Government shall bear 70% (seventy percent) and the bank shall bear 30% (thirty percent) of the defaulted amount. (2) As from a realisation for reimbursing Central Government guarantees as referred to in paragraph (1), a payment sharing shall further be conducted that the Central Government shall bear 40% (forty percent) and Local Government shall bear 30% (thirty percent) respectively calculated from total liabilities that are unperformed. (3) Implementation for reimbursing the Central Government guarantees of 40% (forty percent) as referred to in paragraph (2) shall further be treated as a loan from the central government to PDAM in complying with a loan agreement between the Central Government and the PDAM concerned. (4) Local Government shall determine status of funds paid for 30% (thirty percent) as referred to in paragraph (2) as Local Government capital participation, Local Government loan, and/or Local Government grant provided to PDAM.

Pasal 4

Article 4

Pemberian jaminan Pemerintah Pusat dilakukan oleh Menteri Keuangan dengan menerbitkan Surat Jaminan Pemerintah Pusat.

The provision of Central Government guarantees shall be made by the Minister of Finance through an issuance of the Central Government Guarantee Letter.

Bagian Kedua

Part Two

Persyaratan Pemberian Jaminan Pemerintah Pusat

Terms of the Central Government Guarantee

Pasal 5 (1) Setiap pemberian jaminan Pemerintah Pusat didahului dengan perjanjian induk (umbrella agreement) antara Pemerintah Pusat c.q Menteri Keuangan, Pemerintah Daerah, dan PDAM, yang paling kurang memuat ketentuanketentuan sebagai berikut:


Article 5 (1) Each provision of Central Government guarantees shall be initiated with a principal agreement (umbrella agreement) between the Central Government through the Minister of Finance, Local Government and PDAM, with the following minimum provisions:

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a.

b.

c.

d.

Pemerintah Pusat melaksanakan pembayaran sebesar 70% (tujuh puluh persen) dari seluruh kewajiban pembayaran kembali kredit investasi PDAM yang gagal bayar sebagaimana dimaksud dalam Pasal 3 ayat (1); Setiap pelaksanaan pembayaran jaminan Pemerintah Pusat sebesar 40% (empat puluh persen) sebagaimana dimaksud dalam Pasal 3 ayat (2) menjadi pinjaman PDAM kepada Pemerintah Pusat; Pernyataan Gubernur/Walikota/Bupati mengenai kesediaan untuk menanggung beban sebesar 30% (tiga puluh persen) dari APBD, dan/atau mengkonversi beban sebesar 30% (tiga puluh persen) sebagaimana dimaksud dalam Pasal 3 ayat (2) menjadi utang Pemerintah Daerah kepada Pemerintah Pusat; dan Pernyataan Gubernur/Walikota/Bupati mengenai kesediaan dilakukan pemotongan Dana Alokasi Umum dan/atau Dana Bagi Hasil apabila Pemerintah Daerah tidak melakukan pembayaran pinjaman sebagai konversi dari pembagian pembebanan sebagaimana dimaksud dalam Pasal 3 ayat (2)

(2) Pernyataan kesediaan Gubernur/Walikota/Bupati sebagaimana dimaksud pada ayat (1) huruf c dan huruf d, wajib mendapat persetujuan dari Dewan Perwakilan Rakyat Daerah, dan dilakukan sebelum penandatanganan perjanjian induk (umbrella agreement). Pasal 6

The Central Government shall pay 70% (seventy percent) of all liability of PDAM’s investment loan that is unperformed as referred to in Article 3 paragraph (1);

b.

The Central Government shall pay 70% (seventy percent) of all liability of PDAM’s investment loan that is unperformed as referred to in Article 3 paragraph (1);

c.

A Statement of the Governor/Mayor/Regent concerning the willingness to bear a burden of 30% (thirty percent) from Local Government Budget and/or convert a burden of 30% (thirty percent) as referred to in Article 3 paragraph (2) as the Local Government debt to the Central Government; and

d.

A Statement of the Governor/Mayor/Regent concerning the willingness for deducting the General Allocation Fund (DAU) and/or Profit Sharing Fund if the Local Government fails to pay the loan as a conversion of payment sharing as referred to in Article 3 paragraph (2).

(2) A Statement concerning the willingness of Governor/Mayor/Regent as referred to in paragraph (1) letters c and d shall be required to have approval from Regional Legislatures, and such approval shall be obtained prior to signing a principal agreement (umbrella agreement).

Article 6

Jaminan Pemerintah Pusat sebagaimana dimaksud dalam Pasal 1 huruf a diberikan kepada PDAM yang telah memenuhi ketentuan ketentuan sebagai berikut:

Central Government guarantee as referred to in Article 1 letter a shall be provided to PDAMs that have complied with the following provisions:

a.

a. For PDAMs which have no outstanding liability to the Central Government, they shall meet the following requirements:

Untuk PDAM yang tidak mempunyai tunggakan kepada Pemerintah Pusat, wajib memenuhi persyaratan sebagai berikut: 1)

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a.

Hasil audit kinerja oleh Badan Pengawasan Keuangan dan Pembangunan yang menunjukkan kinerja “sehat”; dan

1) A performance auditing issued by the Financial Supervisory and Development Agency (BPKP) has established that performance of PDAM is "healthy"; and


ANNEXES

2)

b.

PDAM telah melakukan penetapan tarif rata-rata yang lebih besar dari seluruh biaya rata-rata per unit (full cost recovery selama masa penjaminan.

2) PDAM has determined an average tariff that is higher than the average cost per unit (full cost recovery) during the guarantee timeframe.

Untuk PDAM yang mempunyai tunggakan kepada Pemerintah Pusat, diwajibkan telah memenuhi persyaratan program restrukturisasi dan mendapat persetujuan Menteri Keuangan

b. For PDAMs that have an outstanding liability to the Central Government, they shall be obliged to meet the restructuring programme requirements and shall obtain an approval from the Minister of Finance.

Pasal 7

Article 7

Guna memperoleh jaminan Pemerintah Pusat sebagaimana dimaksud dalam Pasal 1 huruf a, dalam perjanjian kredit investasi antara bank dengan PDAM paling kurang memuat ketentuan sebagai berikut:

In obtaining Central Government guarantees as referred to in Article 1 letter a, an investment loan agreement between the bank and PDAM shall contain the following minimum provisions:

a.

kewajiban PDAM untuk membuka rekening pada bank pemberi kredit investasi, atau bank yang ditunjuk oleh bank pemberi kredit investasi untuk keperluan transaksi penerimaan dan pengeluaran PDAM; dan

b.

hak bank pemberi kredit investasi, atau bank yang ditunjuk oleh bank pemberi kredit investasi untuk memblokir dana sebesar kewajiban yang akan jatuh tempo, dan selanjutnya mendebet langsung dana yang diblokir tersebut.

a.

an obligation of PDAM to open an account at the bank that lends an investment loan, or the bank designated by the lending bank for the purpose of PDAM’s revenue and expenditure transactions; and

b.

the right of the bank that lends an investment loan, or the bank designated by the lending bank, to freeze funds equivalent to total liability that is due, and then directly shall debit such funds being frozen.

Bagian Ketiga

Part Three

Ketentuan Kredit Investasi dan Pedoman Teknis

Investment Loan Conditions and Technical Guidelines

Pasal 8

Article 8

(1) Dalam rangka pemberian kredit investasi kepada PDAM, bank menetapkan kriteria penilaian sesuai ketentuan perbankan. (2) Menteri Pekerjaan Umum menetapkan pedoman teknis kelayakan proyek investasi yang diajukan oleh PDAM.


(1) In the context of investment lending to PDAM, the bank shall set assessment criteria in accordance with banking regulations. (2) The Minister of Public Works shall provide guidelines regarding technical feasibility of investment projects proposed by PDAM.

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Bagian Keempat

Part Four

Pembayaran Jaminan Pemerintah Pusat

Reimbursement of Central Government Guarantees

Pasal 9 (1) Pemerintah Pusat menyediakan anggaran jaminan Pemerintah Pusat melalui mekanisme Anggaran Pendapatan dan Belanja Negara berdasarkan estimasi kebutuhan pelaksanaan jaminan sebagai pembayaran atas kewajiban kontinjensi PDAM. (2) Menteri Keuangan melakukan perhitungan kewajiban kontinjensi jaminan Pemerintah Pusat kepada PDAM. (3) Penyediaan anggaran jaminan Pemerintah Pusat sebagaimana dimaksud pada ayat (1) dituangkan dalam Daftar Isian Pelaksanaan Anggaran selama periode penjaminan.

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Article 9 (1) The Central Government shall provide budgets in facilitating Central Government guarantees through the State Budget mechanism based on the estimated requirement of guarantees allocation as reimbursement for contingent liabilities of PDAM. (2) The Minister of Finance shall calculate contingent liabilities of Central Government guarantees to PDAM. (3) Provision of budget for Central Government guarantees as referred to in paragraph (1) shall be set forth in the Budget Allocation List (DIPA) during the guarantee timeframe.

Pasal 10

Article 10

Setiap pembayaran jaminan Pemerintah Pusat kepada bank harus didahului dan didasarkan pada perjanjian pinjaman antara PDAM dan Pemerintah Pusat sebesar jumlah yang akan dibayarkan kepada bank sebagai pelaksanaan kewajiban yang tidak dapat dipenuhi PDAM.

Any reimbursement of Central Government guarantees to the bank must be preceded and based on a loan agreement between PDAM and the Central Government for the amount to be paid to the bank as liabilities payment that cannot be met by PDAM.

Pasal 11

Article 11

(1) Pemerintah Pusat melakukan pembayaran jaminan Pemerintah Pusat terhadap kewajiban kredit investasi PDAM yang gagal bayar setelah bank menyampaikan tagihan dan pemberitahuan secara tertulis kepada Menteri Keuangan yang menyatakan bahwa PDAM tidak mampu memenuhi kewajibannya sesuai perjanjian pinjaman.

(1) The Central Government shall perform payments in respect with Central Government guarantees against PDAM’s investment liabilities that are unperformed after the bank submits claims and a written notice to the Minister of Finance informing that the PDAM is not able to fulfil its obligation under the loan agreement.

(2) Tata cara penyampaian tagihan dan pemberitahuan sebagaimana dimaksud pada ayat (1) diatur dalam Peraturan Menteri Keuangan.

(2) Procedure for submitting claims and notification as referred to in paragraph (1) shall be regulated through a Regulation of the Minister of Finance.

BAB III

CHAPTER III

SUBSIDI BUNGA

INTEREST SUBSIDY

Pasal 12

Article 12

Tingkat bunga kredit investasi yang disalurkan bank kepada PDAM ditetapkan sebesar BI rate ditambah paling tinggi 5% (lima persen) dengan ketentuan:

The interest rate of the investment loan facilitated by the bank to the PDAM shall be determined based on the central bank’s rate plus 5% (five percent) with the following provisions:


ANNEXES

a.

tingkat bunga sebesar BI rate ditanggung PDAM; dan

a.

an interest rate suitable with the central bank’s rate shall be borne by PDAM; and

b.

selisih bunga di atas BI rate paling tinggi sebesar 5% (lima persen) menjadi subsidi yang ditanggung Pemerintah Pusat.

b.

the difference of interest rate above the central bank’s rate within no higher than 5% (five percent) shall be a subsidy borne by the Central Government.

Pasal 13

Article 13

(1) Pemerintah Pusat menyediakan anggaran subsidi bunga dalam Anggaran Pendapatan dan Belanja Negara

(1) The Central Government shall provide budgets in the State Budget for interest subsidies.

(2) Pemerintah Pusat memberikan subsidi bunga selama jangka waktu kredit investasi.

(2) The Central Government shall provide interest subsidies during the term of the investment loan.

Pasal 14

Article 14

Pemberian subsidi bunga Pemerintah Pusat atas kredit investasi yang digunakan oleh PDAM dilaksanakan oleh Menteri Keuangan.

Central Government interest subsidies on investment loans used by the PDAM shall be performed by the Minister of Finance.

Pasal 15

Article 15

(1) Subsidi bunga kepada bank dibayarkan setiap 6 (enam) bulan sekali masing-masing pada tanggal 1 April dan 1 Oktober.

(1) Interest subsidies to the bank shall be paid every 6 (six) months, dated on April 1 and October 1.

(2) Ketentuan lebih lanjut mengenai mekanisme pembayaran subsidi bunga diatur dengan Peraturan Menteri Keuangan.

(2) Further provisions regarding payment of the interest subsidy mechanism shall be regulated by Regulation of the Minister of Finance.

BAB IV

CHAPTER IV

PEMANTAUAN, EVALUASI DAN PENGAWASAN

MONITORING, EVALUATION AND SUPERVISION

Pasal 16 (1) Pemantauan, evaluasi dan pengawasan atas pemberian jaminan dan subsidi bunga kepada PDAM dalam rangka percepatan penyediaan air minum dilakukan oleh Tim Koordinasi yang dibentuk oleh Menteri Koordinator Bidang Perekonomian. (2) Tim Koordinasi sebagaimana dimaksud pada ayat (1) terdiri dari Menteri Koordinator Bidang Perekonomian, Menteri Keuangan, Menteri Pekerjaan Umum, Menteri Dalam Negeri, Menteri Negara Perencanaan Pembangunan Nasional/Kepala Badan Perencanaan Pembangunan Nasional, dan Kepala Badan Pengawasan Keuangan dan Pembangunan.


Article 16 (1) Monitoring, evaluation and supervision of the provision of guarantees and interest subsidies to the PDAM in order to accelerate the provision of drinking water supply shall be conducted by the Coordination Team established by the Coordinating Minister for Economic Affairs. (2) The Coordination Team as referred to in paragraph (1) shall consist of the Coordinating Minister for Economic Affairs, Minister of Finance, Minister of Public Works, Minister of Home Affairs, Minister of State for National Development Planning/Head of National Development Planning Agency, and the Head of Financial Supervision and Development Agency (BPKP).

25

(3) Tim Koordinasi sebagaimana dimaksud pada ayat (1) mempunyai tugas sebagai berikut: a.

melaksanakan sosialisasi pelaksanaan penjaminan dan subsidi bunga dalam rangka percepatan penyediaan air minum;

b.

melaksanakan koordinasi dengan instansi terkait dalam rangka pemantauan, evaluasi dan pengawasan atas pelaksanaan penjaminan dan subsidi bunga dalam rangka percepatan penyediaan air minum; dan

c.

melaksanakan pemantauan, evaluasi dan pengawasan atas pelaksanaan penjaminan dan subsidi bunga dalam rangka percepatan penyediaan air minum.

(4) Dalam melaksanakan tugasnya, Tim Koordinasi dapat meminta bantuan Kantor Akuntan Publik, atau Badan Pengawasan Keuangan dan Pembangunan untuk melakukan audit keuangan atas pekerjaan yang dibiayai dengan kredit investasi. (5) Ketentuan lebih lanjut mengenai susunan organisasi, dan tata kerja Tim Koordinasi ditetapkan dengan Peraturan Menteri Koordinator Bidang Perekonomian.

26

(3) The Coordination Team as referred to in paragraph (1) shall have the following tasks: a.

to perform socialisation on the implementation of guarantee and interest subsidy provisions in order to accelerate the provision of drinking water.

b.

to perform coordination with relevant agencies in the context of monitoring, evaluation and supervision of the implementation of guarantees and interest subsidies in order to accelerate the provision of drinking water; and

c.

to implement monitoring, evaluation and supervision of the implementation of guarantees and interest subsidies in order to accelerate the provision of drinking water.

(4) In performing its duties, the Coordination Team may request assistance from Public Accountant Office, or Financial Supervision and Development Agency to conduct financial audits of the works being financed by investment loans. (5) Further provisions on the organisational structure and working procedures of the Coordination Team shall be governed under a Regulation of the Coordinating Minister for Economic Affairs.

BAB V

CHAPTER V

KETENTUAN LAIN-LAIN

OTHER PROVISIONS

Pasal 17

Article 17

(1) Menteri Keuangan menetapkan bank yang dapat memberikan kredit investasi kepada PDAM berdasarkan permohonan bank yang bersangkutan.

(1) The Minister of Finance shall inform the bank that may facilitate investment loans to PDAMs upon a request from the bank concerned.

(2) Jaminan dan subsidi bunga Pemerintah Pusat hanya diberikan kepada bank yang melakukan penandatanganan perjanjian kredit investasi dengan PDAM dan diberikan sejak berlakunya Peraturan Presiden ini sampai dengan tanggal 31 Desember 2014.

(2) Central Government guarantees and interest subsidies shall only be provided to the bank that has signed an investment agreement with PDAM and shall be granted as from the enactment of this Presidential Regulation until December 31, 2014.

(3) Jangka waktu pemberian jaminan dan subsidi bunga oleh Pemerintah Pusat sebagaimana dimaksud pada ayat (1) diberikan paling lama 20 (dua puluh) tahun.

(3) Timeframe of Central Government guarantees and interest subsidies as referred to in paragraph (1) shall be given with no longer than 20 (twenty) years.


ANNEXES

BAB VI

CHAPTER VI

KETENTUAN PENUTUP

CLOSING PROVISION

Pasal 18

Article 18

Peraturan Presiden ini mulai berlaku pada tanggal ditetapkan.

This Presidential Regulation shall come into force on the date of its enactment.

Ditetapkan di Jakarta

Enacted in Jakarta

pada tanggal 23 Juni 2009

On June 23, 2009

PRESIDEN REPUBLIK INDONESIA,

THE PRESIDENT INDONESIA,

ttd DR. H. SUSILO BAMBANG YUDHOYONO


OF

REPUBLIC

OF

DR. H. SUSILO BAMBANG YUDHOYONO

27

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