Legal Alert : New Requirements and Licensing Procedures for Foreign Construction Service Business in Indonesia

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Author: Edly Febrian Widjaja, Rizqi Bangun Lestari, Zefanya Prabowo

As part of Government of Indonesia’s continuous effort in integrating the licensing procedures for the construction service sector, the Ministry of Public Works and Housing (“Ministry”) has issued the following regulations:

1. Ministry Regulation No. 08/PRT/M/2019 regarding Licensing Service Guidelines for National Construction Service Business (“MR 08/19”); and

2. Ministry Regulation No. 09/PRT/M/2019 regarding Licensing Service Guidelines for Foreign Construction Service Business (“MR 09/19”).

Generally, the issued regulations govern new licensing procedures and requirements for construction service companies in Indonesia in wake of the establishment of the Online Single Submission (“OSS”) system. MR 09/19 unified several previous regulations regarding Representative Office of Foreign Construction Services Business Entity (Kantor Perwakilan Badan Usaha Jasa Konstruksi Asing or Representative Office”) and Foreign Direct Investment Construction Service Business Entity (Badan Usaha Jasa Konstruksi Penanaman Modal Asing or “PMA Construction Company”). In light of the unification, MR 09/19 revoked the following regulations:

  1. Ministry Regulation No. 10/PRT/M/2014 regarding Requirements Guidelines for Granting Representatives License of Foreign Construction Service Companies;
  2. Ministry Regulation No. 22/PRT/M/2014 regarding Delegation of Authority for Granting Business License in the Field of Public Works and Housing in the Context of the Implementation of One-Stop Integrated Services at the Indonesia Investment Coordinating Board; and
  3. Ministry Regulation No. 03/PRT/M/2016 regarding Technical Guidelines for Granting Construction Service Business License, as amended by Ministry Regulation No. 30/PRT/M/2016.

Similar with the previous regulations, in order for a foreign construction company to establish its business in Indonesia, it must establish either a Representative Office or PMA Construction Company. MR 09/19 regulates 3 (three) types of business for construction services to be carried out by Representative Office or PMA Construction Company, as follows:

1. Construction consultation works;
2. Construction works; and
3. Integrated construction works (consultation and construction service).

Compared to the previous regulations, MR 09/19 addressed some key changes in terms of procedures for obtaining licenses, personnel requirements, term of licenses, and sanctions.

We set out below the overall summary of the important new provisions, as stipulated under MR 09/19:

1. Key basic requirements for the establishment of Representative Office and PMA Construction Company, as viewed from the company organs’ aspect:

Failure to comply with the abovementioned obligations will result in a written sanction, temporary suspension for conducting construction service activities, and/or inclusion in the construction service blacklist.

2. New procedures for procuring a Representative Office License or PMA Construction Company License (“PMA License”) through OSS:

3. Obligations to be followed after the licenses becomes effective:

4. Administrative sanctions to be imposed for failure of meeting the requirements, inter alia:

  1. written warning;
  2. administrative fine;
  3. temporary suspension for conducting construction service activities;
  4. inclusion in the construction service Blacklist;
  5. suspension of license; and/or
  6. revocation of license.

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