Utilization of Village Land Through the Build Operate Transfer Scheme

In order to carry out government activities in the village, operational funds are required. Village operational funds are derived from the utilization of village assets owned and/or controlled by the village government. Village assets are goods owned by the village that originate from the village’s natural resources, purchased, or acquired under the Village Revenues and Expenditures Budget (Anggaran Pendapatan dan Belanja Desa – “APBDesa”) or other legitimate rights acquisitions.¹ One specific form of village assets itself is the village land.

Utilization of Village Land

The village land can be utilized by engaging other parties to participate in the government planning process by entering into a Build Operate Transfer Agreement. The utilization of village land as one of the village assets through Build Operate Transfer scheme is permitted under the Minister of Home Affairs Regulation Number 1 of 2016 concerning Village Assets Management (“MoHA Regulation 1/2016”), as long as it is not directly used to support the administration of the village government.²

Build Operate Transfer Scheme for Village Land

Build Operate Transfer (“BOT”) is the utilization of village-owned property in the form of land by a third party through the construction of buildings and or/facilities along with their associated amenities. The third party subsequently operates the property for an agreed-upon period, and upon the expiration of the term, return the land along with the building and/or facilities, including their amenities.³ The BOT scheme can be implemented on the village land under the following conditions: (i) the Village Government requires buildings and facilities for the purpose of village administration, and (ii) APBDesa funds are not available for the provision of such buildings and facilities.⁴

BOT Agreement

The implementation of BOT must be formalized through an agreement. This agreement must, at least, include the following⁵:

1. the parties bound by the agreement;
2. the subject matter of the BOT;
3. the duration of the agreement between the parties involved;
4. dispute resolution;
5. force majeure; and
6. any other deemed necessary requirements.

Period of BOT

The maximum period of the BOT on village land is twenty (20) years and may be extended.⁶ The extension of the BOT can only be granted after an evaluation conducted by the team formed by the Village Head and facilitated by the Regency/City Government.

Parties in the BOT

• Holder of Land Rights
  The Village Government is the holder of land rights of the village land, typically represented by the Village Head.

• Investor or BOT Partner
  The investor or BOT Partner is a party that granted the right to construct buildings and use or manage those buildings during the BOT period. During the operational period, the investor or BOT partner has obligations to: (i) contribute to the village cash fund account annually, and (ii) maintain the BOT property. The investor or BOT Partner is also prohibited from mortgaging, pledging, or transferring the land that is the object of BOT. All cost related to the preparation and execution of the BOT agreement, including the consultant’s fees, will also be borne by the investor or BOT partner.⁷

Closing

The utilization of the village assets in the form of village land can be carried out through the BOT scheme as regulated by MoHA Regulation 1/2016 and will specified further in the Regent/Mayor Regulation.⁸ Through the BOT scheme, the Village Government can meet the village needs for building and facilities without being solely dependent on APBDesa.

Ardelia Ignatius

1. Article 1 number 5 MoHA Permendagri 1/2016
2. Article 11 paragraph (1) MoHA 1/2016
3. Article 1 number 14 MoHA Regulation 1/2016
4. Article 15 paragraph (1) MoHA Regulation 1/2016
5. Article 16 paragraph (4) MoHA Regulation 1/2016
6. Article 16 paragraph (1) MoHA Regulation 1/2016
7. Article 15 paragraph (5) MoHA Regulation 1/2016
8. Article 45 MoHA Regulation 1/2016