Compulsory land acquisition powers available to private companies?

Under the New Land Acquisition Law - which grants to the government powers to extinguish land titles after a series of steps and appeal processes have been completed - only government institutions and state/regional-owned enterprises (BUMNs/BUMDs) that receive a special assignment from the government can utilize the New Land Acquisition Law to procure land for public interest projects.

The main implementing regulation of the New Land Acquisition Law - Presidential Regulation No. 71 of 2012 - was recently amended again (after two previous amendments in 2014) through Presidential Regulation No. 30 of 2015 ("PR 30/2015").

PR 30/2015 expanded the definition of "Institutions who need the land" to cover not only government institutions and BUMNs/BUMDs that receive a special assignment from the Government, but also private entities that obtain an authority/proxy based on an agreement with the relevant government institution or BUMN/BUMD. Despite legal queries which may arise on whether a presidential regulation may effectively expand a defined term under a Law, this amendment suggests that PR 30/2015 allows and facilitates direct land procurement by private entities - although when doing so, the private entities will act not on their own behalf but as "proxies" of the relevant government institution or BUMN/BUMD.

There are no further details in PR 30/2015 on how this "proxy" mechanism will be implemented. But in consideration of PR 30/2015, the National Land Agency (Badan Pertanahan Nasional - BPN) has also issued a new regulation to amend its previous technical guidelines for land procurement, namely BPN Regulation No. 6 of 2015 ("BPN Reg 6/2015"). For the land title of the procured land, BPN Reg 6/2015 stipulates that when the institution that needs the land is a private entity that obtains a proxy from a government institution or BUMN/BUMD, the government institution or BUMN/BUMD can be granted a right to manage upon land (hak pengelolaan). The private entity can be granted a right to build (hak guna bangunan) or right to use over right to manage (hak pakai di atas hak pengelolaan) over the procured land.

It seems that through this amendment the government expects private entities to be formally involved in the land acquisition process to expedite and assist with debottlenecking the prolonged land acquisition process, which has often been cited as one of the main obstacles to bringing infrastructure projects in Indonesia from plan to reality. But the next issue will be, whether government institutions or BUMN/BUMD will be willing to be responsible for any land acquisition delay risk when the land is procured by the developer through this "proxy" mechanism.

For further information please contact

Luke Devine
Foreign Legal Consultant
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Kirana D. Sastrawijaya
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Anita Karina Sungkono
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anita.k.sungkono@bakernet.com

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