THE PRESIDENT OF THE REPUBLIC OF INDONESIA REGULATION OF THE GOVERNMENT OF THE REPUBLIC OF INDONESIA

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1 REGULATION OF THE GOVERNMENT OF THE REPUBLIC OF INDONESIA NUMBER 10 OF 2011 ON PROCEDURES OF FOREIGN LOANS PROCUREMENT AND GRANTS RECEIPT BY THE GRACE OF GOD ALMIGHTY Considering : a. that in order to improve the effectiveness and efficiency of utilization of foreign loans and grants, it is necessary to replace Government Regulation No. 2 of 2006 on Procedures of Foreign Loan Procurement and / or Grant Receipt and Continuance of Foreign Loan and / or Grant; b. Based on the considerations as referred to in paragraph a and to implement the provisions of Article 38 paragraph (4) of Law No. 1 of 2004 on State Treasury, it is necessary to establish a Government Regulation on Procedures of Foreign Loan Procurement and Grant Receipt; In View of : 1. Article 5 paragraph (2) of the Constitution of the Republic of Indonesia Year 1945; 2. Law No. 1 of 2004 on State Treasury (State Gazette of the Republic of Indonesia Year 2004 Number 5, Supplement to the State Gazette of the Republic of Indonesia Number 4355); HAS DECIDED: To Stipulate : GOVERNMENT REGULATION ON PROCEDURES FOR FOREIGN LOAN PROCUREMENT AND GRANTS RECEIPT CHAPTER I GENERAL PROVISIONS Article 1

2 Referred to herein as: 1. Foreign Debt shall be any debt financing obtained through the Government of Foreign Lenders bound by an agreement in the form of loans and government securities, which must be paid back with specific requirements. 2. Government Grant, hereinafter referred to as Grant, shall be any state revenue in the form of foreign exchange, foreign exchange converted into rupiah, dollars, goods, services and / or securities acquired from the grants Lender that need not be repaid, which comes from inside or outside the country. 3. Foreign Lender shall be a creditor that lends to the government. 4. Grantor shall be a party from inside or outside the country that provides grants to the Government. 5. Foreign Loan Extension Recipients shall be Local Government and State Owned Enterprises. 6. Foreign Loan Agreement shall be a written agreement on the loan between the Government and Foreign Lender. 7. Grant Agreement shall be a written agreement between the Government and the Grantor as outlined in the grants agreement document or any other equivalent document. 8. Agreement on Loan sourced from Grant, hereinafter referred to as the Grant Loan Agreement, shall be a written agreement on the loan between the Government Grant loan recipient as outlined in the agreement document or any other equivalent document. 9. Grant Extension Agreement shall be an agreement for Grant extension or other equivalent documents between the Government and the Grant extension recipient. 10. Foreign Loan Extension Agreement shall be a written agreement between the Government and the Foreign Loan Extension Recipients for the extension of the Foreign Loan.

3 11. Grant Agreement sourced from Foreign Loan, hereinafter referred to as Foreign Loan Grant Agreement, shall be a written agreement between the Government and the Grant recipients on the Grant as outlined in an agreement document or any other equivalent document. 12. List of Medium Term Foreign Loan, hereinafter referred to as DRPLN-JM, shall be a list of planned activities financed from Foreign Loan for a medium term period. 13. List of Foreign Loan Priority Plan, hereinafter referred to as DRPPLN, shall be a list of planned activities that have had indications of funding and ready to be financed from the Foreign Loan for annual term. 14. List of Grant Activity Plan, hereinafter referred to as DRKH, shall be a list of planned activities funded by grants and has received funding indication from the Grantor. 15. State Budget, hereinafter referred to as the state budget shall be the state government annual financial plan approved by the House of Representatives. 16. Medium Term Development Plan, hereinafter referred to as RPJM, shall be the national development planning document for a period of 5 (five) years. 17. List of Activities shall be a list of planned activities that have been listed in DRPPLN and ready to be proposed to and / or negotiated with potential Foreign Lender. 18. Cash Loan shall be Foreign Loan in the form of foreign exchange and / or dollars used to finance the budget deficit and debt portfolio management. 19. Activity Loan shall be Foreign Loan used to finance specific activities. 20. Minister of Finance, hereinafter referred to as the Minister, shall be the minister who holds government affairs in the field of public finance. 21. Minister of National Development Planning / Head of National Development Planning

4 Agency, hereinafter referred to as the Minister for Planning, shall be a minister who holds government affairs in the field of national development planning. 22. Ministers / Heads of Institutions shall be the officials responsible for the financial management of Ministry / Agency concerned. 23. Ministry / Agency shall be state ministries / non-ministerial state government agencies / state agencies. 24. Multilateral Creditors shall be international financial institutions consisting of several countries, which provide loans to the Government. 25. Bilateral creditors shall be foreign governments or agencies appointed by the government of a foreign country or government agency acting for a foreign country that provides loans to the Government. 26. Foreign Private Creditors shall be foreign financial institutions, national financial institutions, national and foreign nonfinancial institutions domiciled and conducting business outside the territory of the Republic of Indonesia, which provide loans to the Government under an agreement on unsecured loan from the Export Credit Agency. 27. Export Credit Agency shall be an agency designated by a foreign country to provide guarantee, insurance, direct loans, interest subsidies, and financial assistance to increase exports of the country concerned or the largest portion of the funds used to purchase goods / services from the countries concerned domiciled and conducting business outside the territory of the Republic of Indonesia. 28. Central Government, hereinafter referred to as the Government, shall be the President of the Republic of Indonesia who holds the administrative power of the Republic of Indonesia as defined in the Constitution of

5 the Republic of Indonesia Year Local Government shall be the governor, regent, or mayor, and the region as the elements of regional administration. 30. State-Owned Enterprises, hereinafter referred to as SOE, shall be a business entity that shall be wholly or largely owned by the state capital through direct investments from allocated state assets. Article 2 Foreign loans and grants receipts must meet the principles of: a. transparency; b. accountability; c. efficiency and effectiveness; d. prudence; e. not accompanied by political ties; and f. does not have motive that can interfere with the stability of the country's security. Article 3 (1) The Minister shall be authorized to conduct Foreign Loan and / or receive grants from foreign and domestic parties. (2) The Foreign Loan as referred to in paragraph (1) can be lent and / or granted. (3) The grants as referred to in paragraph (1) may be granted and / or loaned to local governments and SOEs. Article 4 Ministry / Agency, Local Government and SOEs shall be prohibited from entering into engagement in any form that can result in liability for the conduct of Foreign Loan. CHAPTER II FOREIGN LOANS Part One Types and Sources of Foreign Loan Article 5 Foreign loans by type shall consists of:

6 a. Cash Loan; and b. Activity Loan. Article 6 The Foreign loans as referred to in Article 5 shall be sourced from: a. Multilateral creditors; b. Bilateral creditors; c. Foreign Private creditors; and d. Export Credit Agency. Part Two Use of Foreign Loan Article 7 (1) Foreign loans shall be used for: a. financing the budget deficit; b. financing priority activities of Ministry / Agency; c. managing debt portfolio; d. for loan to the Local Government; e. for loan to SOEs; and / or f. for grant to local government. (2) The Local Government may lend and / or grant the Foreign Loan as referred to in paragraph (1) letter d and f to Regional-Owned Enterprises in accordance with the provisions of legislations. Part Three Foreign Loan Planning Paragraph 1 Financing Planning Article 8 (1) Foreign Loan shall be a part of the Loan Net Value approved by the House of Representatives. (2) Changes in the loans that do not add to the excess of the value of the Loan Net Value do not require the approval of the House of Representatives. (3) The approval of the Board of Representatives as referred to in paragraph (1) shall be part of the approval of the State Budget.

7 Article 9 (1) The Minister shall plan the limit on Foreign Loan to be reviewed annually. (2) The planned maximum limit of the Foreign Loan as referred to in paragraph (1) shall be prepared by taking into account the: a. real needs of financing; b. ability to repay; c. maximum cumulative amount of debt; d. Foreign Loan resource capacity; and e. debt risk. (3) The planned maximum limit of the Foreign Loan as referred to in paragraph (1) shall be for controlling the Foreign Loan. (4) The Minister may consult the Governor of Bank Indonesia in the context of the preparation of the planned maximum limit on Foreign Loan as referred to in paragraph (1). Paragraph 2 Activity Loan Planning Article 10 The Minister for Planning shall plan the utilization of Foreign Loan for medium-term and annual activity Loan for the financing as referred to in Article 7 letter b, d, e, and f set forth in the documents of: a. Foreign Loan Utilization Plan; b. DRPLN-JM; c. DRPPLN; and d. List of Activities. Article 11 (1) The Foreign Loan Utilization Plan as referred to in Article 10 letter a shall be prepared based on RPJM and shall observe the loan maximum limit plan as referred to in Article 9 paragraph (1). (2) The Foreign Loan Utilization Plan shall contain the indication of the need and plan for the use of the Foreign Loan in the medium term. Article 12

8 (1) The Ministry / Agency and SOE shall be deliver the proposed activities that can be funded by the Foreign Loan to the Minister for Planning based on the RPJM and shall observe the Foreign Loan Utilization Plan. (2) The proposed activities of the Ministry / Agency as referred to in paragraph (1) shall be including the financing of activities which will be donated to local government. (3) In the event the Ministry / Agency will propose the Foreign Loan to be used for state capital, the proposal must be submitted through the Ministry of Finance. (4) The Regional Government may propose activities that can be financed by Foreign Loan to the Minister for Planning based on the Medium Term Development Plan which shall observe the Foreign Loan Utilization Plan. Article 13 (1) The Minister for Planning shall assess the feasibility of the proposed activities as referred to in Article 12 by considering the Foreign Loan Utilization Plan as referred to in Article 11. (2) The Minister for Planning may request the consideration of the Minister of the Interior in the assessment of proposed activities proposed by the Local Government. (3) The results of assessment as referred to in paragraph (1) shall be stated in the DRPLN- JM. (4) The DRPLN-JM as referred to in paragraph (3) can be updated and revised as needed and / or according to the development of the national economy. Article 14 (1) The Ministry / Agency, Local Government, or SOE shall improve activities readiness plan for the activity plan listed in the DRPLN-JM in accordance with the criteria of preparedness of the activities that include: a. planning of activities;

9 b. monitoring and evaluation performance indicators; c. activity organization and management; d. and e. plan of land acquisition and / or resettlement, in terms the activities require land. (2) The Minister for Planning shall assess the compliance with the activities readiness criteria as referred to in paragraph (1). (3) Based on the activities readiness compliance assessment criteria as referred to in paragraph (2), the Minister for Planning shall prepare the DRPPLN. (4) In preparing the DRPPLN as referred to in paragraph (3), the Minister for Planning can perform coordination, communication, and consultation with the potential Foreign Lenders and relevant agencies. Article 15 (1) Based on the DRPPLN as referred to in Article 14 paragraph (3), the Minister for Planning shall submit a List of Activities that can be financed by Foreign Loan to the Minister. (2) The List of Activities as referred to in paragraph (1) shall contain the proposed activities that have met the criteria for readiness and ready to be negotiated with the candidate Foreign Lenders. Article 16 Further provisions concerning the procedures for planning, proposal submission, and assessment activities as referred to in Article 10 through Article 15 shall be stipulated in the Regulation of the Minister for Planning. Article 17 The Ministry / Agency, local government, or stateowned companies shall include the priority activities listed in the DRPPLN as referred to in Article 14 paragraph (3) in the Work Plan and Budget of the Ministry / Agency, Local

10 Government Work Plan, or SOE Work Plan. Part Four Foreign Loan Extension Plan Paragraph 1 General Article 18 The Foreign loans lent and / or granted as referred to in Article 7 paragraph (1) letter d, letter e, and letter f shall be implemented by the Minister. Paragraph 2 Nomination, assessment, and determination of Financing Article 19 (1) The Proposed Foreign Loan financing lent to the Local Government as referred to in Article 7 paragraph (1) letter d shall be submitted to the Minister by the Local Government after being considered by the Minister of the Interior. (2) The Local Government Loan as referred to in paragraph (1) may be lent by the Local Government to Regional-Owned Enterprises provided that the Regional-Owned Enterprises proposal submitted is by the Local Government after being considered by the Minister of the Interior. (3) The proposed Foreign Loan lent to SOEs as referred to in Article 7 paragraph (1) letter e shall be submitted by the SOEs to the Minister in accordance with the provisions of the legislations. Article 20 The proposed Foreign Loan financing granted to Local Government as referred to in Article 7 paragraph (1) letter f shall be submitted by the Minister / Head of relevant technical agency to the Minister after being considered by the Minister of the Interior.

11 Article 21 (1) The Minister shall conduct feasibility assessment for the proposed Foreign Loan financing as referred to in Article 19. (2) In conducting the assessment as referred to in paragraph (1), the Minister shall observe the: a. real needs of foreign financing; b. ability to repay; c. maximum cumulative amount of Loan; d. requirements and the risk of loan agreement; and e. compliance with government policy under the provisions of the legislation. Article 22 (1) Based on the feasibility assessment as referred to in Article 21, the Minister shall determine the Foreign loans that will: a. be lent to the Local Government and SOEs; and b. be granted to the Local Government. (2) The determination as referred to in paragraph (1) shall be done before the negotiations with the potential Foreign Lenders. Article 23 Further provisions on the procedures for the proposal, assessment, and determination of the Foreign Loan extension shall be regulated by a Ministerial Regulation. Part Five Cash Loan and Activity Loan Paragraph 1 Cash Loan Article 24 (1) The Minister shall lodge the Cash Loan proposal to the Potential Foreign Lenders with regard to the planned maximum limit of Foreign Loan to obtain financing commitments. (2) In the event the potential Foreign Lender requires specific policies in the Cash Loan as

12 referred to in paragraph (1), these requirements must be approved by the Ministry / Agency related to the particular policy. (3) The fulfillment of the requirements as referred to in paragraph (2) shall be coordinated by the Coordinating Minister for matters related to the substance of the loan with the involvement of the Minister and the Minister for Planning. Paragraph 2 Activity Loan Article 25 The Minister shall lodge proposal for Activity Loan to the potential Foreign Lender sourced from Multilateral Creditors and / or Bilateral Creditors with regard to the planned maximum limit on Foreign Loan as referred to in Article 9 paragraph (1) and the List of Activities as referred to in Article 15 paragraph (1) to obtain financing commitments. Article 26 (1) The Minister shall determine one of the sources of financing in terms the List of Activities mentions the indications that the financing is sourced from a Foreign Private Creditor or Export Credits Agency. (2) The determination of source of financing as referred to in paragraph (1) shall be submitted to the Ministry / Agency, Local Government and SOEs proposing the activities as referred to in Article 12 and Article 19 as the basis for the procurement of goods / services. Article 27 In the event the Minister establishes that the source of financing is from a Foreign Private creditor, the financing procurement shall be conducted separately from the procurement of goods / services with the following provisions: a. The Ministry / Agency, Local Government and SOEs, shall procure goods / services after

13 receiving determination of the source of financing as referred to in Article 26 paragraph (2); and b. The Minister shall perform financing after the financing sources has been specified. Article 28 In the event the Minister establishes that the source of funding is from an Export Credit Agency, the financing procurement shall be carried out in a package deal with the procurement of goods / services under the following provisions: a. The Ministry / Agency, Local Government and SOEs, shall procure goods / services in accordance with the provisions of the legislation after receiving the determination of financing sources as as referred to in Article 26 paragraph (2); b. The Ministry / Agency, Local Government and SOEs, shall determine the winner of the procurement of goods / services as referred to in paragraph a after obtaining the consideration of the Minister concerning the financing requirements. c. The Ministry / Agency, Local Government and SOEs, shall submit the potential Foreign Lender according to the results of the goods / services procurement to the Minister for the Foreign Loan negotiations. Article 29 In the event the election of financing sources as referred to in Article 27 and Article 28 has been carried out but does not get funding from any Foreign Private Creditors or Export Credit Agency, the Minister may seek alternative financing sources. Article 30 Further provisions on the procedure for the determination of the source of financing, procurement of financing, and the search for alternative sources of financing shall be regulated

14 by a Ministerial Regulation. Part Six Negotiations and Agreements Paragraph 1 Implementation of Foreign Loan Negotiation Article 31 (1) The Minister or authorized official shall negotiate on the terms and conditions of the Foreign Loan. (2) In the event of Activity Loan, the negotiations shall be conducted by: a. Multilateral creditors prior to the goods / services procurement; b. Bilateral creditors prior to the goods / services procurement or after the goods / services procurement; c. Foreign Private creditors simultaneously or after the goods / services procurement; or d. Export Credit Agency after the goods / services procurement contract. (3) The implementation of the negotiations as referred to in paragraph (1) shall involve the elements of the Ministry of Finance, Ministry of National Development Planning / National Development Planning Agency, Ministry / Agency, local government, state, and / or other relevant agencies. (4) The negotiations with the potential Foreign Lender shall be performed after the activity readiness criteria have been met. (5) If necessary, the Minister may request the document of negotiation readiness to Minister / Head of Institution, Local Government, and SOEs. Paragraph 2 Foreign Loan Agreements and Foreign Loan Extension Agreement Article 32 (1) The results of the negotiations as referred to in Article 31 shall be stipulated in the Foreign Loan Agreement signed by the Minister or the authorized official and the Foreign Lender.

15 (2) The Foreign Loan Agreement shall at least contain the: a. amount; b. designation; c. rights and obligations; and d. terms and conditions. (3) In the event that the source of financing is from a Foreign Private Creditor or Export Credit Agency, the Foreign Loan Agreement as referred to in paragraph (1) shall be signed, if the procurement of goods / services contract has been signed by the Ministry / Agency, Local Government, or SOEs. (4) Copies of the Foreign Loan Agreement shall be submitted by the Ministry of Finance to the Audit Board and other relevant agencies. Article 33 (1) The Agreement for a Foreign Loan sourced from Multilateral Creditors and Bilateral Creditors may be preceded by a master agreement. (2) The master agreement as referred to in paragraph (1) shall be signed by the competent authority in accordance with the provisions of the legislation and / or international law. (3) The master agreement shall contain terms that do not result in the burden of the state budget or limited only by the terms that shall be indicative, unless it: a. obtains a written approval of the Minister with regard to the indication of binding financial requirements burdening the state budget; and / or b. obtains a written approval of the Minister for Planning with regard to the indication of the requirements for the use of funds for financing specific activities and / or activity groups. Article 34 (1) The Foreign Loan extended shall be poured in a Foreign Loan Extension Agreement.

16 (2) The Foreign Loan granted shall be poured in a Foreign Loan Grant Agreement. (3) The Foreign Loan Extension Agreement and the Foreign Loan Grant Agreement shall at least contain the: a. amount; b. designation; c. rights and obligations; and d. terms and conditions referring to the Foreign Loan Agreement. (4) The Foreign Loan Extension Agreement as referred to in paragraph (1) shall be signed by the Minister or the authorized official and the governor, regent / mayor, or director of SOE. (5) The Foreign Loan Grant Agreement as referred to in paragraph (2) shall be signed by the Minister or the authorized official and governors, regents / mayors. Article 35 (1) The Foreign Loan Extension Recipients must make payment of obligations in accordance with the provisions set forth in the Foreign Loan Extension Agreement. (2) Payment of principal, interest, and other obligations of the Foreign Loan Extension Recipient to the Government shall be made through the State Treasury or other account designated by the Minister. (3) The principal repayment receipt shall be recorded as financing, and the interest and other liabilities receipt shall be recorded as revenue. Article 36 (1) In the event that the Local Government does not meet the obligations of principal repayments, interest, and other obligations as referred to in Article 35 paragraph (2), the payment obligation shall be calculated by DAU and / or DBH that are the entitlements of the region in accordance with provisions of the legislations. (2) In the case of SOEs do not meet the

17 obligations of principal repayments, interest, and other obligations as referred to in Article 35 paragraph (2), the SOEs shall liable to a penalty for delay and / or other sanctions in accordance with the provisions set forth in the Foreign Loan Extension Agreement. Article 37 The Minister shall coordinate with the Minister / Head of Institution, governors, regents / mayors, or directors of state to ensure compliance with all terms and conditions of the Foreign Loan Agreement and / or the Foreign Loan Extension Agreement. Paragraph 3 Foreign Loan Agreement Amendment Article 38 (1) The Minister may propose changes to the Foreign Loan Agreement to the Foreign Lender in terms of: a. The Minister considers it necessary to do amendments; b. there are proposed changes to the loan agreement from the Minister / Head of Institution; and / or c. there shall be proposed changes from the Local Government or SOE, to the Foreign Loan Extension Agreement. (2) In the event that the proposed amendments as referred to in paragraph (1) is done for the implementation of activities, the proposal of amendment shall be made after considering the recommendations of the Minister for Planning. Part Seven Budgeting, Withdrawal of Loan and Payment of Obligations Paragraph 1 Budgeting Article 39 (1) The Ministry / Agency shall prepare the Work

18 Plan and Foreign Loan Budget as part of the Work Plan and Budget of the Ministry / Agency as referred to in Article 17. (2) The Minister shall prepare a financial plan on the Foreign Loan that will be: a. lent to the Local Government or SOE; or b. granted to the Local Government, as part of the State General Treasurer's Budget. Paragraph 2 Withdrawal of Loan Article 40 (1) The Withdrawal of Foreign Loan from a Foreign Lender shall be done through: a. transfer to the State Treasury; b. direct payments; c. special account; d. Letter of Credit (L / C); or e. preliminary financing. (2) Further provisions on the procedure of withdrawal of Foreign loans as referred to in paragraph (1) shall be regulated by a Ministerial Regulation. Paragraph 3 Payment of Obligations Article 41 (1) The Minister shall pay the principal, interest, and other obligations until the end of the loan through Bank Indonesia. (2) The Minister shall allocate funds in the state budget to pay the principal, interest, and other obligations as referred to in paragraph (1) every year until the end of this obligation. (3) In the event that the funds to pay the mortgage principal, interest, and other obligations as referred to in paragraph (2) exceed the estimated funds available in the state budget, the Minister shall make payment. (4) The realization of payment as referred to in paragraph (3) shall be contained in the state budget changes or in the state budget accountability.

19 CHAPTER III GRANT Part One Forms, Types, and Resources of Grant Paragraph 1 Form and Type of Grant Article 42 (1) The Grant received by the Government shall be in the forms of: a. cash; b. money to finance; c. goods / services; and / or d. securities. (2) The grant as referred to in paragraph (1) shall be implemented as part of the state budget. Article 43 The grants received by the Government in cash as referred to in Article 42 paragraph (1) letter a shall be directly deposit into the State Treasury or the account specified by the Minister as part of the state budget revenues. Article 44 The grants received by the Government in the form of money to finance the activities as referred to in Article 42 paragraph (1) letter b shall be included in the budget execution document. Article 45 The grants received by the Government in the form of goods / services as referred to in Article 42 paragraph (1) letter c shall be assessed with Rupiah currency at the time of handing over the goods / services to be recorded in the financial statements of the Central Government. Article 46 The grants received by the Government in the form securities as referred to in Article 42 paragraph (1) letter d shall be assessed by Rupiah in the nominal value agreed upon acceptance by

20 the Grantor and the Government to be recorded in the financial statements of the Central Government. Article 47 (1) The Government may receive grants in the form of money to finance activities as referred to in Article 42 paragraph (1) letter b through a Trust Fund. (2) The provisions on the Trust Fund as referred to in paragraph (1) shall be regulated by a Presidential Regulation. Article 48 (1) The Grant Receipt by types shall consist of: a. Planned Grant; and / or b. Direct grants. (2) Planned Grant shall be a Grant implemented through a planning mechanism. (3) Direct Grant shall be a grant implemented directly shall not through a planning mechanism. Paragraph 2 Source of Grant Article 49 Grants shall be sourced from: a. domestic; and b. overseas. Article 50 (1) Grants sourced from domestic sources as referred to in Article 49 letter a shall be derived from: a. domestic financial institutions; b. domestic non-financial institutions; c. Local Government; d. foreign companies domiciled and doing activities in the territory of the Republic of Indonesia; e. other institutions; and f. individuals. (2) Grants shall be sourced from abroad as referred to in Article 49 letter b shall be derived from:

21 a. foreign countries; b. agency under the United Nations; c. multilateral institutions; d. foreign financial institutions; e. foreign non-financial institutions; f. national financial institutions domiciled and conducting business outside the territory of the Republic Of Indonesia; and g. individuals. Part Two Use of Grant Article 51 The Grant as referred to in Article 49 shall be used for: a. supporting national development programs; and / or b. supporting disaster mitigation and humanity relief. Part Three Grant Planning Paragraph 1 Receipt of Planned Grant Article 52 (1) The Minister for Planning shall prepare the medium-term and annual activity plan sourced from Grants based on the Development Plan. (2) The medium-term and annual activities plan as referred to in paragraph (1) shall include the: a. Grant utilization plan; and b. DRKH. Article 53 (1) The grant utilization plan as referred to in Article 52 paragraph (2) a shall contain the direction of policies, strategies, and the use of the medium-term grants in accordance with national development priorities. (2) The DRKH as referred to in Article 52 paragraph (2) b shall contain the annual plan of activities of the Ministry / Agency, Local

22 Government, or SOEs that may be financed with grants and has received funding indication from the Grantor. (3) The DRKH shall be used as one of the Government Work Plan preparation materials. Article 54 (1) The Minister / Head of Institution shall propose activities to be financed by grant to the Minister for Planning. (2) The Minister for Planning shall assess the proposed activities as referred to in paragraph (1) by referring to the RPJM and with regard to the Grant utilization plan. (3) The results of assessment as referred to in paragraph (2) shall be set forth in the DRKH and submitted to the Minister. (4) Based on DRKH as referred to in paragraph (3), the Minister shall propose the activities funded by Grants to the potential Grantor. Article 55 Further provisions on the procedure for the preparation of action plans, proposal submission, and assessment activities as referred to in Article 52 and Article 54 shall be regulated by a Regulation of the Minister for Planning. Paragraph 2 Direct Grant Receipt Article 56 (1) The Minister / Head of Institution may receive direct Grants from the Grantor under the principle of receipt of grant as referred to in Article 2. (2) The Minister / Head of Institution as referred to in paragraph (1) shall examine the intent and purpose of the Grant and shall be responsible for the Grant that will be received. (3) The Minister / Head of Institution shall consult the direct Grant receipt plan in the current year to the Minister, the Minister for Planning, and the Minister / Head of the other related institution prior to the signing of the

23 Grant Agreement. (4) If necessary, the Minister, the Minister for Planning, and the Minister / Head of other related institution may provide written comments on the Grant receipt plan as referred to in paragraph (2). Part Four Grant Extension Article 57 (1) The Grant sourced from abroad can: a. be granted or lent to the Local Government; or b. be lent to SOEs, to the extent provided in the Grant Agreement. (2) The Grant sourced from abroad extended as referred to in paragraph (1) letter a shall be set forth in the Grant Extension Agreement signed by the Minister or the authorized official and the governor or regent / mayor. (3) The Grant sourced from abroad lent as referred to in paragraph (1) shall be set forth in the Grant Loan Agreement signed by the Minister or the authorized official and the governor or regent / mayor or director of SOE. (4) The Grant Extension Agreement or Grant Loan Agreement as referred to in paragraph (3) shall at least contain the: a. amount; b. designation; and c. terms and conditions. (5) The Ministry of Finance shall submit copies of the Agreement and copies of the Grant Loan Agreement as referred to in paragraph (4) to the Audit Board and other related agencies. Article 58 (1) The Grant granted and / or lent to local governments shall be recorded in the national and regional budgets. (2) The Grant and / or Grant Loan to Regional- Owned Enterprise shall be conducted through the Regional Government.

24 Part Five Grant Negotiation Article 59 (1) Planned grant negotiation shall be made by the Minister or the authorized official. (2) The implementation of the negotiations as referred to in paragraph (1) shall involve the elements of the Ministry of Finance, the Ministry of National Development Planning / the National Development Planning Agency, and / or other related technical Ministry / Agency. Article 60 The direct Grant negotiations shall be done by the Minister / Head of Institution or the authorized official. Part Six Grant Agreement Paragraph 1 Planned Grant Article 61 (1) The Grant Agreement shall be signed by the Minister or the authorized official. (2) The Grant Agreement as referred to in paragraph (1) shall at least contain the: a. amount; b. designation; and c. terms and conditions. (3) The Minister shall submit copies of the Grant Agreement to the Chairman of the Audit Board and heads of other relevant institutions. Article 62 (1) The Minister may propose amendment to the Grant Agreement to the Grantor in the events of: a. a. The Minister considers it necessary to do amendments; b. There shall be proposed changes from the Grant Agreement Minister / Head of Grant recipient; and / or

25 c. there shall be proposed changes to the Local Government on the Grant Agreement. (2) The submission of proposed changes referred to in paragraph (1) shall be made after observing the consideration of the Minister for Planning. Paragraph 2 Direct Grant Article 63 (1) The Minister / Head of Institution or the authorized official shall sign of the Grant Agreement. (2) Grant Agreement as referred to in paragraph (1) shall at least contain the: a. amount; b. designation; and c. terms and conditions. Article 64 The Minister / Head of Institution shall deliver copies of the Grant Agreement that has been signed by the Minister, Chairman of the Audit Board, and heads of other relevant institutions. Article 65 (1) The Minister / Head of Institution may propose amendment to the Grant Agreement to the Grantor. (2) In proposing changes to the Grant Agreement as referred to in paragraph (1), the Minister / Head of coordinating the proposed plan changes Grant Agreement to the Minister for Planning, Minister, and heads of other relevant institutions. (3) After the proposed change shall be approved by the Employer Grant Agreement Grant, Minister / Head of submitting documents changes to the Minister for Planning, Minister, and heads of other relevant institutions. Part Seven Grant Budgeting and Implementation Article 66

26 (1) The Ministry / Agency shall prepare the Grant Work Plan and Budget as part of the Work Plan and Budget of the Ministry / Agency to be included in the budget implementation document as referred to in Article 44. (2) In the event that the Grant in the form of money to finance the activities is lent to local governments and / or to local governments and state-owned enterprises, the Minister shall prepare the budget implementation document as referred to in Article 44. (3) The Grants in the form of goods / services shall be conducted in accordance with the provisions of Article 45. (4) The Grants in the form of securities carried out in accordance with the provisions of Article 46. Article 67 The Ministry / Agency implementing the activities shall be required to provide support funds, in terms required under the Grant Agreement. Article 68 The Local Government and SOEs implementing the activities required to provide matching funds, in terms required under the Grant Agreement, the Agreement granting, and Grant Loan Agreement. Article 69 The Grant Funds for activities that have not been completed, shall be accommodated in next year's budget implementation document. Article 70 (1) In the event that the Grant is received after the state budget limit has been stipulated, the Grant budget implementation document may be issued after the ministry / agency has submitted a proposal to the Minister. (2) The grants as referred to in paragraph (1) shall be proposed by the Minister in the Budget changes. Article 71

27 (1) In case of emergency, the Grant in the form of cash to finance the activities as referred to in Article 42 paragraph (1) letter b can be implemented preceding the publication of the budget implementation documents. (2) The Grant implementation accountability as referred to in paragraph (1) shall be conducted in accordance with the mechanism of the state budget. Article 72 (1) The Grant in the form of money to finance the activities can be carried out directly by the ministry / agency. (2) The activities as referred to in paragraph (1), can be implemented preceding the publication of the budget implementation document. (3) The Grant implementation accountability, as referred to in paragraph (1) shall be conducted in accordance with the mechanism of the state budget. (4) Further provisions on procedures for accountability of the grants as referred to in paragraph (3) shall be regulated in a Ministerial Regulation. Article 73 (1) Withdrawal of the Grant in the form of money to finance activities shall be carried out through: a. transfer to the account of the State Treasury; b. direct payments; c. special account; d. Letter of Credit (L / C); or e. preliminary financing. (2) Further provisions on the procedure for withdrawal of Grant as referred to in paragraph (1) shall be regulated in a Ministerial Regulation. CHAPTER IV ADMINISTRATION OF FOREIGN LOANS AND GRANTS

28 Article 74 (1) The Minister shall administer the Foreign Loan and Grant. (2) The Administration of Foreign Loan and Grant shall include the following activities: (3) administrative management; and (4) management accounting. (5) Any Foreign Loan Agreement and Grant Agreement shall be registered by the Ministry of Finance. (6) Further provisions on the administration of Foreign Loan and Grant shall be regulated by a Ministerial Regulation. CHAPTER V PROCUREMENT OF GOODS / SERVICES Article 75 (1) The procurement of activities goods / services funded by Foreign Loan or grants shall be made in accordance with the provisions of the legislations regarding the procurement of goods / services. (2) In the event of any conflict between the provisions of the legislation regarding the procurement of goods / services and the provision of goods / services that shall be applicable to Foreign Lender or Grantor, the parties may agree on the terms of procurement of goods / services to be used. (3) The procurement of activities goods / services planned financed from Foreign Loan from Foreign Private Creditors or Export Credit Agency conducted after determination issued by the Minister of financing sources. (4) Contract procurement of goods / services funded by Foreign Loan or Grant shall be made after the enactment of the Foreign Loan Agreement or Grant Agreement or after the Foreign Loan parent agreement. (5) The provisions on the activities goods / services contract funded by Foreign Loan as referred to in paragraph (4) is not applicable to the procurement of activities goods / services planned to be financed by Foreign Loan from

29 Foreign Private Creditors or Export Credit Agency. CHAPTER VI MONITORING, EVALUATION, REPORTING, AND CONTROL OF FOREIGN LOANS AND GRANTS Article 76 The Minister / Head of Institution, governor, regent / mayor or director of SOE, as the executor of activities funded from Foreign Loan and / or Grant, must submit quarterly reports to the Minister and the Minister for Planning at least on the: a. procurement of goods / services; b. physical progress of activities; c. realization of absorption; d. problems in the implementation; and e. plan for resolution follow-up. Article 77 (1) The Minister shall perform monitoring, evaluation, and reporting quarterly on the realization of the absorption of Foreign Loan and / or Grant and other financial aspects. (2) The Minister for Planning shall perform monitoring, evaluation, and reporting quarterly on the performance of the activities financed from Foreign Loan and / or Grant. (3) Further provisions concerning the procedures for monitoring, evaluation, and reporting absorption realization of Foreign Loan and / or Grant and other financial aspects as referred to in paragraph (1) shall be regulated by the Minister. (4) Further provisions concerning the procedures for monitoring, evaluation, and reporting the performance of the activities financed from Foreign Loan and / or grants as referred to in paragraph (2) shall be governed by the Regulation of the Minister for Planning. Article 78 The Minister and Minister for Planning can perform together in semi-annual evaluation of the

30 implementation of activities funded by Foreign Loan and / or Grant. Article 79 (1) The Minister shall take steps to resolve the implementation of a slow or low absorption and / or not in accordance with the designation, including proposing the cancellation of some or all of Foreign Loan and / or Grant. (2) The settlement steps as referred to in paragraph (1) shall be conducted after being considered by the Minister for Planning. (3) The Minister shall propose change and / or cancellation of some or all of Foreign Loan and / or grants in the framework of the completion of the implementation of the activities as referred to in paragraph (1) to the Foreign Lenders and / or Grantor. Article 80 (1) In the event that the Foreign Lender or Grantor does not specify the implementation of activities in accordance with the Foreign Loan Agreement or Grant Agreements and Foreign Loan Agreement or Grant Agreement requires the Government to restore some or all of the Foreign Loan or Grant, the Ministry / Agency, local government, or state-owned enterprises implementing the activities should provide return fund. (2) Further provisions concerning the provision and the refund as referred to in paragraph (1) shall be regulated by a Ministerial Regulation. Article 81 Supervision of the implementation and use of Foreign Loan or grants shall be made by internal and external monitoring bodies in accordance with the provisions of the legislation. CHAPTER VII PUBLICATION Article 82

31 (1) The Minister shall carry publication of information on Foreign Loan and Grant at regular intervals of at least 6 (six) months. (2) The Publication of information on Foreign Loan as referred to in paragraph (1) shall include: a. Policy on Foreign Loan; b. Foreign Loan positions including structures of maturity and interest rate composition; c. Foreign Loan sources; d. absorption of realization of Foreign Loan; and e. fulfillment of the obligations of Foreign Loan. (3) The publication of information regarding grants as referred to in paragraph (1) shall at least include: a. Grant policy; b. number, position, and type of currency composition of the Grant; c. source and receiver of the Grant; and d. types of the Grant. CHAPTER VIII ACCOUNTABILITY Article 83 The minister shall prepare accountability for the management of the Foreign Loan and Grant as part of the accountability of the state budget. CHAPTER IX TAXES AND DUTIES Article 84 (1) The tax treatment of the Foreign Loan or Grant receipt shall be carried out in accordance with the provisions of the legislations in the field of taxation. (2) The treatment of import duty on Foreign Loan or Grant acceptance shall be carried out in accordance with the provisions of the legislations in the field of customs. CHAPTER X TRANSITIONAL PROVISIONS Article 85 At the time of this Government Regulation comes

32 into force: 1. The implementation of the procurement of Foreign Loan and Foreign Loan extension derived from: a. Multilateral Creditors and Bilateral Creditors whose List of Activities has been submitted by the Minister for Planning to the Minister; b. Foreign Private creditors or Export Credit Agency, whose government loan allocation or export credit has been issued, c. shall still be carried out under the provisions of Government Regulation No. 2 of 2006 on Procedures for the Procurement of Loan and / or Grant Receipt and Foreign Loan and / or Grant Extension up to the procurement of Foreign Loan and Foreign Loan extension have been completed. 2. The Grant Agreement that has been signed, under the provisions of Government Regulation No. 2 of 2006 on Procedures for the Procurement of Loan and / or Grant Receipt And Foreign Loan and / or Grant Extension shall remain valid until the Grant Agreement has expired. 3. The Trust Fund established before this Government Regulation, shall remain valid until the mandate has expired. CHAPTER XI CLOSING PROVISIONS Article 86 At the time of this Government Regulation comes into force: 1. Government Regulation No. 2 of 2006 on Procedures for the Procurement of Loan and / or Grant Receipt and Foreign Loan and / or Grant Extension (State Gazette of the Republic of Indonesia Year 2006 Number 3, Supplement to the State Gazette of the Republic of Indonesia Number 4597) shall be revoked and declared invalid ; 2. All implementing regulations of Government Regulation No. 2 of 2006 on Procedures for

33 the Procurement of Loan and / or Grant Receipt and Foreign Loan and / or Grant Extension (State Gazette of the Republic of Indonesia Year 2006 Number 3, Supplement to the State Gazette of the Republic of Indonesia Number 4597), shall remain valid as long as not contrary to government regulation and has not been replaced with new regulations under this Government regulations. Article 87 This government Regulation shall come into force on the date of promulgation. For public cognizance, this Government Regulation shall be promulgated in the State Gazette of the Republic of Indonesia. Stipulated in Jakarta on February 12, 2011 THE PRESIDENT OF, Signed. DR. H. Susilo Bambang Yudhoyono Promulgated in Jakarta on February 12, 2011 THE MINISTER OF JUSTICE AND HUMAN RIGHTS OF THE REPUBLIC OF INDONESIA, Signed. PATRIALIS AKBAR STATE GAZETTE OF YEAR 2011 NUMBER 23 Issued as a true copy

34 SECRETARIAT OF Head of Economic and Industrial Legislation Bureau, SETIO SAPTO NUGROHO

35 ELUCIDATION TO REGULATION OF THE GOVERNMENT OF THE REPUBLIC OF INDONESIA NUMBER 10 OF 2011 ON PROCEDURES OF FOREIGN LOANS PROCUREMENT AND GRANTS RECEIPT I. GENERAL Law No. 1 of 2004 on State Treasury establishes that to finance and support the priority activities in order to achieve development objectives, the Government may procure loan and / or receive grants both from domestic and from foreign sources as well as extend loans or grants to the Local Government / State / Regional Owned Enterprises. In order to implement the provisions of Article 38 paragraph (4) of Law No. 1 of 2004 on State Treasury, Foreign Loan and Government Grant require a legal basis established by a government regulation to ensure the orderly implementation of the administration and management of Foreign Loan and Grant. The legal basis for Foreign Loan and grants has been regulated in Government Regulation No. 2 of 2006 on Procedures for the Procurement of Loan and / or Grant Receipt and Foreign Loan and / or Grant Extension. But in its progress the Government Regulation is deemed no longer meeting the development of the management of Foreign Loan and Grant, financial market development, as well as the demands on the management principle of Foreign Loan and Grant (good governance). This requires improvement of Government Regulation No. 2 of This regulation has accommodated various provisions of the Foreign Loan management in the form of separation of powers and responsibilities of each of the institutions involved, perfecting the concept of a limit on Foreign Loan intended as a means of control in the framework of optimal Loan portfolio management and fulfillment of real financing needs, concept of flexibility of selection financing sources, Foreign Loan Utilization Plan, Grant receipts through the Trust Fund. It is also clarifying the policy for the extension Foreign Loan good for budget financing needs through Foreign Loan and Grant by the Government sourced from Foreign Loan to finance

36 specific activities for Local Government by government policy and for SOEs needs for investment. Regulation on the government grant receipt shall be aimed at opening the widest entry of Grant to the Government both from domestic and foreign sources to support the Government's priorities in order to achieve national development goals, while maintaining prudence (prudent), transparency, and accountability in the process of acceptance. Therefore, the Ministry / Agency / Local Government should be given the authority to seek grants as much as possible but must be with regard to the principles of good Grant receipt. The Grant receipt mechanism also needs to be facilitated and simplified so as to avoid the complicated bureaucratic process that can cause a disincentive for potential grants because it seemed complicated. For that, in the process of receiving grants, there should be opened two alternative types, namely Grant implemented through planning mechanisms and direct grants, namely grants that do not need to follow the planning mechanism but are still registered and administered. Both alternatives of grant receipt shall be expected to bridge the differences in the interests of the potential grants which requires ease of administration of grants and of the interests of the Government as grants recipients who require admission Grant must comply with the state budget process shall be considered less provide convenience, and be accountable to all stakeholders (stakeholders). The grants received by the government from overseas can be lent or loaned to local governments, or lent to SOEs so long as provided in the Grant Agreement. To ensure the realization of transparent and accountable grant receipt, then the acceptance of the grant should be administered properly, in accordance with the Governmental Accounting Standards, published for information, continuous monitoring, evaluation, and supervision. Therefore, to adjust the development of the management of Foreign Loan and Grant, it is necessary to replace Government Regulation No. 2 of 2006 on Procedures for the Procurement of Loan and / or Grant Receipt and Foreign Loan and / or Grant Extension.