New Regulation Puts Focus On Local Resources In Indonesia’s Construction Sector.
Legal News & Analysis - Asia Pacific - Indonesia - Construction & Real Estate
6 October 2020
A new regulation has introduced significant changes to the implementation of Indonesia’s Construction Services Law, which will affect business actors in the country’s construction sector.
The new regulation, Government Regulation Number 22 of 2020 (“GR 22”) regarding Implementing Regulations of Law Number 2 of 2017 regarding Construction Services (January 12, 2017) (the “Construction Services Law”), was promulgated on April 23, 2020. With the enactment of GR 22, the following regulations have been revoked and are no longer applicable:
Government Regulation No. 28 of 2000 regarding the Business and Role of the Construction Services Community (May 30, 2000), as lastly amended by Government Regulation No. 92 of 2010 (December 29, 2010) (“GR 28/2000, as amended”);
Government Regulation No. 29 of 2000 regarding the Implementation of Construction Services (May 30, 2000), as lastly amended by Government Regulation No. 54 of 2016 (November 22, 2016) (“GR 29/2000, as amended”); and
Government Regulation No. 30 of 2000 regarding the Implementation of Construction Services Supervision (May 30, 2000) (“GR 30/2000”).
This article looks at changes under GR 22 for resources supply chain and human resources in the Indonesian construction sector.
Construction Resources Supply Chain Business
For the purpose of implementing Articles 17 and 18 of the Construction Services Law, GR 22 has introduced provisions regarding the construction resources supply chain business under Articles 24 – Article 33. Construction services activities shall be supported by the construction resources supply chain. Essentially, construction resources supply chain businesses are divided into:
construction material suppliers;
technology suppliers; and
human resources suppliers.
Construction “resources” include:
technological resources; and
GR 22 emphasizes priority for local construction resources, insofar as these resources can be produced locally, meet the required technical specifications and/or satisfy the needs of local demand.
Further, construction equipment will need to be registered with the Minister of Public Works and Housing (“MPWH”).
GR 22 provides that the optimization of locally produced resources and the registration of construction equipment will be further regulated in a regulation to be issued by the MPWH.
For construction human resources, construction services companies must employ manpower (read: engineers) that meet the prevailing work competence standards, evidenced by a work competence certificate that has been registered with the MPWH (“Work Competence Certificate”).
Construction human resources consist of (a) operators, (b) technicians/analysts (c) and experts.
Where expatriate workers are employed, the employed expatriates may only occupy certain positions and provide construction services after obtaining a registration letter from the MPWH through a “standardization process”, which comprises education, experience and expertise. GR 22 stipulates that a regulation to be issued by the MPWH will further regulate this process. Additionally, as with Indonesian construction manpower, expatriate workers are also required to have a Work Competence Certificate.
A Work Competence Certificate is issued through a competency test administered by the Professional Certification Institution (Lembaga Sertifikasi Profesi or “LSP”) subject to the prevailing work competence standards. A Work Competence Certificate is valid for five years and is extendable.
The definition of LSP as provided under MPWH Regulation No. 10 of 2020 regarding the Accreditation of Construction Services Business Entity Associations, Construction Services Professional and Construction Supply Chain-Related Associations (April 6, 2020) (“MPWH Reg. 10/2020”) is an institution that implements professional certification activities, established by an accredited professional association or a construction educational and work training institution, and licensed pursuant to the prevailing laws and regulations, after obtaining a recommendation from the MPWH. An accredited professional association is a construction services professional association that has been accredited by the MPWH through the LPJK.
Further to the above, the implementation of the work competency certification conducted by the LSP must comply with certification requirements governed under the laws and regulations regarding manpower. Law No. 13 of 2003 regarding Manpower (March 25, 2003) (the “Manpower Law”) governs that manpower shall be entitled to receive work competency recognition after participating in work training provided by a government work training institution or private work training institution, or after participating in workplace training.