Indonesia

Screenshot 2019-07-30 at 3.03.56 PMBy Heru Mardijarto, Dirgantara Adi Nugroho and Stephen Sim, Makarim & Taira S.

 

 

 

On 13 June 2019, the Minister of Public Works and Public Housing (“MPW”) issued Regulation No. 09/PRT/M/2019 on Guidelines on Licensing Services for Foreign Construction Business Entities (“Reg No. 9/2019”) replacing: (i) MPW Regulation No. 10/PRT/M/2014 on Guidelines on Issuing Licence to Representatives of Foreign Construction Service Corporate Bodies (“Reg No. 10/2014”); and (ii) MPW Regulation No. 03/PRT/M/2016 on Technical Guidelines on Issuing Construction Service Business Licence to Foreign Investment Construction Service Enterprises as amended by MPW Regulation No. 30/PRT/M/2016 (“Reg No. 3/2016”). Reg No. 10/2014 and Reg No. 3/2016 are collectively referred to as “Old Regulations”.

Reg No. 9 /2019 provides more details than the Old Regulations. Although, most of the provisions under Reg No. 9/2019 are the same as those of the Old Regulations, Reg No. 9/2019 introduces some significant changes to the provisions related to Foreign Construction Representative Offices (“BUJKA-RO”) and construction foreign investment companies (“PMA Construction Company”) which are outlined as below:

A. The licensing procedure for a BUJKA-RO Licencse
Reg No. 9/2019 finally addresses the issues in the procedures for applying for a licence for a BUJKA-RO (“BUJKA RO Licence”) and for PMA Construction Company (“PMA Licence”) through the Online Single Submission (“OSS”) system. Under Reg No. 9/2019, a conditional BUJKA RO Licence and conditional PMA Licence will be issued by OSS before the issuance of the business entity certificate (“SBU”).

A BUJKA-RO Licence will only become effective after it has obtained the SBU. On the other hand, a PMA Licence will only become effective after several commitments, such as SBU, completion of investment requirement and shareholding requirements, have been completed.

B. Shareholders requirements for a PMA Construction Company
Reg No. 9/2019 provides a more stringent requirement on the foreign shareholders of a PMA Construction Company, as Reg No. 9/2019 now requires them to have a large qualification. However, it remains to be seen how the MPW determines the large qualification of the foreign shareholder.

C. Partners for joint operations for BUJKA-RO
Reg No. 09/2019 no longer allows for a BUJKA RO to form a joint operation with a foreign investment construction company. Previously, under Reg No. 10/202014 a BUJKA RO may form a joint operation with a foreign investment company (subject to the fulfilment of several conditions and has been approved by MPW).

D. Requirements for the Person in Charge of the BUJKA-RO
Under Law No. 2 of 2017 on Construction and Reg No. 9/2019 Person in Charge of the Business Entity (“PJBU”) of BUJKA RO must be an Indonesian national.

Reg No. 9/2019 provides that if the Indonesian citizen does not meet the criteria for a PJBU, the Indonesian citizen’s position can be that of the Technical Person in Charge of the Business Entity (Penanggung Jawab Teknis Badan Usaha – PJTBU). The criteria for a PJBU will be regulated further under a separate MPW regulation which has not been issued yet.

E. Foreign manpower restriction
Reg No. 9/2019 now imposes a more stringent manpower requirements for BUJKA RO as BUJKA RO is now required to employ more Indonesian experts than foreign experts. This provision has not been expressly governed under the previous regulation.

F. Requirements to engage in construction services
Reg No. 9/2019 now requires a BUJKA-RO to engage in at least 1 (one) construction service during the term of the BUJKA RO Licence, otherwise its licence will be revoked.

Reg No. 9/2019 also requires a PMA Construction Companies to engage in at least 1 (one) construction service during the term of the SBU, otherwise its licence will be revoked.

Note that under Reg No. 9/2019, if BUJKA RO Licence/ PMA Licence is revoked it can only be reapplied at least 5 (five) years after the original licence was revoked.

G. Requirements for an extension of a BUJKA-RO Licencse
BUJKA-RO now must extend its licence before the licence expire, otherwise, the BUJKA-RO will have the following progressive sanctions imposed on it, ie written warning, being blacklisted and eventually having its licence revoked.

* * * * *

This article was prepared by the Indonesian law firm, Makarim & Taira S. It is only intended to inform generally on the topics covered and should not be treated as a legal advice or relied upon when making investment or business decisions. Should you have any questions on any matter contained herein or other comments generally, please contact your usual M&T contact or advisories@makarim.com.

 

 

Screen Shot 2019-04-12 at 5.08.23 PM

W: www.makarim.com

E: heru.mardijarto@makarim.com
E: dirgantara.nugroho@makarim.com
E: stephen.sim@makarim.com
E: info@makarim.com

T: (62) 21 5080 8300
F: (62) 21 252 2750

 

Related Articles by Firm
Joko Widodo re-elected: How will it affect doing business in Indonesia?
The presidential election is over and the incumbent president of Indonesia, Joko Widodo, known familiarly as ‘Jokowi’, has officially been re-elected for the 2019-2024 term.
Settlement of disharmony between laws and regulations through mediation
On February 12, 2019, the Minister of Laws and Human Rights (MOLHR) issued Regulation No. 2 of 2019 on The Settlement of Disharmony between Laws and Regulations through Mediation (MOLHR Reg 2/2019), which came into effect on February 14, 2019 ...
Bank Indonesia issues a new regulation on the reporting of foreign exchange flows
Bank Indonesia (BI) recently issued Regulation No. 21/2/PBI/2019 on the Reporting of Foreign Exchange Flow Activities ...
Related Articles
New challenges for investors in the US – CFIUS
It would be a mistake to underestimate the growing power of CFIUS to regulate foreign investors in US companies.
New transparency registry for all private BC companies in the offing
If the bill comes into force it will have far reaching compliance consequences for all private BC companies.
Doing business and ease of doing business in India
The government has taken numerous steps to give an impetus to foreign investment, but a lot remains to be done.
Related Articles by Jurisdiction
Settlement of disharmony between laws and regulations through mediation
On February 12, 2019, the Minister of Laws and Human Rights (MOLHR) issued Regulation No. 2 of 2019 on The Settlement of Disharmony between Laws and Regulations through Mediation (MOLHR Reg 2/2019), which came into effect on February 14, 2019 ...
Bank Indonesia issues a new regulation on the reporting of foreign exchange flows
Bank Indonesia (BI) recently issued Regulation No. 21/2/PBI/2019 on the Reporting of Foreign Exchange Flow Activities ...
Latest Articles
Press Release: New Bilingual Standard Templates for China’s New Foreign Investment Regime
Top multinational and China SOE in-house lawyers and heavyweight Chinese and international law firms join forces with legaltech start-up docQbot and The In-House Community™ to help create new bilingual standard templates for China’s new foreign investment regime ...
New challenges for investors in the US – CFIUS
It would be a mistake to underestimate the growing power of CFIUS to regulate foreign investors in US companies.
New transparency registry for all private BC companies in the offing
If the bill comes into force it will have far reaching compliance consequences for all private BC companies.