Empowerment of Infrastructure Guarantee on Public Private Partnership (PPP) Projects in Indonesia: Implementation of the Balance Principle on the Effectiveness of the IIGF Guarantee Agreement

Abstract

Infrastructure Guarantee is one of the government's much-needed support programs for PPP projects in Indonesia, with the goal of increasing creditworthiness, bankability, and investor trust. Until now, the usage of Infrastructure Guarantees has had its upsides as well as downsides, including complaints from private proponents about the lengthy evaluation process, payment of excessive fees, and the lack of scope of risk that the Indonesia Infrastructure Guarantee Fund Institute (IIGF) as guarantor can bear. In order to achieve an equal position between the Government Contracting Agency (GCA) and the Private Sector Entities (PSE) in the fulfilment of the PPP project in Indonesia, this study will examine the efficiency of the IIGF Guarantee Agreement using the principle of balance. The method of writing used in this paper is normative juridical method, which will be linked to the use of Guarantee Agreement in practice. The conclusion that can be drawn is that IIGF has provided a Guarantee Agreement in accordance with the balance principle, where the principle can also be seen in the risk allocation that has been agreed upon by the parties, apart from the arrangement of the Guarantee Agreement clauses. If an unbalanced position is later discovered, the parties can suggest action to restore balance so that the PPP project can be guaranteed until the concession time is completed.

Keywords: PPP, Infrastructure Guarantee, Guarantee Agreement, Risk Allocation

DOI: 10.7176/JLPG/119-04

Publication date:March 31^st 2022