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Recently the Minister of Public Works (Minister) issued a new regulation no. 03/PRT/M/2016 regarding the Technical Guidelines for Granting a Foreign Investment Construction Business License (New Construction Regulation). The New Construction Regulation sets implementing guidelines on how to obtain a construction business license for foreign investment limited liability companies (PT PMA), including the documents required to be submitted and the obligations of the construction PT PMA.
Types of Construction Companies in Indonesia
In Indonesia there are three types of construction companies:
- An Indonesian construction limited liability company (PT), where 100% of the shareholders are Indonesian citizens or legal entities, often abbreviated as BUJK or BUJKN;
- Foreign construction companies which have a construction representative office in Indonesia through which they perform construction activities in Indonesia, abbreviated as BUJKA; and
- A foreign investment construction limited liability company (PT PMA), where part of the shares is hold by foreign investors. The negative investment list of 2014 allows foreign investor ownership ranging generally between 55% and 67%, depending on the type of construction company.
The New Construction Regulation sets regulations for obtaining a business license of a PT PMA construction company (point 3 above).
Business License Foreign Investment Construction Company
A construction business license for construction PT PMAs is abbreviated as IJUK PMA. The business license is required when companies wish to start business operations in Indonesia. In BKPM (the investment body) the IUJKA PMAs can be secured:
- New business license
- Extension of business license; and
- Amendments of business license.
The New Construction Regulation sets the document requirements for all application of above IUJKA PMAs.
Obligations of Foreign Investment Construction Company
The New Construction Regulation sets out a number of obligations to be followed by the construction PT PMA, including:
- It can engage in construction projects with high technology, high risk and high costs;
- It must perform technology transfer to local companies;
- It must perform corporate social responsibilities;
- It must submit a business report every half a year to BKPM;
- It can hire foreign employees only based on certain terms;
- And others
In case a construction PT PMA does not act in compliance with its obligations it shall be subject to administrative sanctions, which include warning letters, suspension or revocation of the business license.
This column is provided by PNB Law Firm Jakarta