The Government has drawn up a draft of the Omnibus Law Bill which consists of Employment Creation Law, Tax Facilities Law and State Capital Law. On 12 February 2020, the chief of the House of Representatives has received an academic paper and a draft of the Employment Creation Law for further discussion. Through this draft of Employment Creation Law finally our Government provides a legal basis for land banks, a discourse that has been discussed since 1993.
This writing will only focus on the land banks and reinforcement of Right of Management (Hak Pengelolaan) in the draft of Employment Creation Law.
Land Bank and Right of Management
A Land Bank is a special body formed by the Central Government to manage land. The management is carried out in the form of planning, land acquisition, procurement, management, land utilization and distribution functions. Land Bank is held for the purpose of:
- Public interest;
- Social interests;
- Development interests;
- Economic equality;
- Land consolidation;
- Agrarian Reform.
In addition, to support investment, holders of Right of Management are also given the authority to:
- Zone planning;
- Provide facility for Business License/approval;
- Carry out land acquisition; and
- Determine service rates.
Article 130 of the draft of Employment Creation Law stipulates that a Land Bank is a party that can be granted a controlling right from the State in the form of land with Right of Management. Thus according to the draft of Employment Creation Law the parties that can be granted the Right of Management are:
- Central Government Institute;
- Regional Government;
- Land Bank body;
- State-Owned Enterprises/Regional-Owned Enterprises;
- State/regional-owned legal entity; or
- Legal entity appointed by the Central Government.
There is a provision which is unusual, namely Article 127 of the draft of Employment Creation Law. Referring to this article, land managed by a Land Bank is given a Right of Management and on top of it, a Right to Cultivate, Right to Build and Right of Use may be granted for a period of 90 years. The existence of this article cannot be separated from Article 130 and Article 131 of the Employment Creation Law draft related to Right of Management. Article 130 regulates the authority for holders of Right of Management, one of which is to use and utilize all or part of the land of Right of Management for their own use or for cooperation with third parties.
So it can be concluded that a land bank can bind itself with a third party into a land use agreement and a 90-year term is given for Right to Cultivate, Right to Build or Right of Use over a Right of Management land can only be implemented if the land is managed by the Land Bank body.
The following table is a comparison of the duration of land rights between those regulated in Government Regulation No. 40 of 1996 concerning Right to Cultivate, Right to Build and Right of Use (“PP No. 40/1996”) and which are regulated in the draft of Employment Creation Law applicable only for land right issued over the Right of Management of Land Bank.
The Land Bank is a newly formed body and still needs time for adaptation and trial and error in managing land. If the Land Bank is not ready yet or a third party given a 90 year commitment is unable to fulfill the commitment, the initial purpose of the Land Bank, namely for public and social interests, risked to be disrupted and it would also mean that public and social interests are also disrupted. Therefore, there needs to be a more detailed assessment or arrangement regarding the granting of a 90-year period that can be done simultaneously in advance, for example granting stricter conditions to third parties who are entitled to a 90-year commitment.
On the other hand, giving a 90-year commitment is a beneficial for businessman. This means that business actors will have more time to develop their businesses, get capital returns and get profits for longer period.