Construction Service Business Types

Law 1999 specified the following construction service business types:

  1. Construction implementation businesses (usaha pelaksanaan konstruksi);
  2. Construction planning businesses (usaha perencanaan konstruksi); and
  3. Construction supervision businesses (usaha pengawasan konstruksi).

The Law 1999 does not set clear requirements for each business type. Moreover it does not clearly explain the differences between each business type. This lack of clarity lead to confusion among construction companies.

The Draft Law replaces the above business types with the following business types:

  1. Construction work businesses (usaha pekerjaan konstruksi);
  2. Integrated construction work businesses (usaha pekerjaan konstruksi terintegrasi); and
  3. Construction consultation businesses (usaha konsultansi konstruksi).

For each of the above three business types the Draft Law specifies its business classifications and business activities. The construction work and the construction consultation business types are further subdivided into:

  1. General Services; and
  2. Specialist Services

Establishment Requirements for Foreign Construction Companies

In this column we focus on the establishment requirements of a construction company by foreign parties, set by the Draft Law. Foreign parties may establish either of the following companies:

  1. A construction representative office, which must fulfill at least the following requirements:
    1. establish a joint operation with a local PT (local limited liability company). This local PT must at least be a large scale construction company (B scale);
    2. in the possession of a construction representative office license;
    3. have more Indonesian employees than foreign employees;
    4. is high-tech, cutting-edge, efficient, environmentally sound, and is considering the local knowledge; and
    5. performs transfer of technology.
  2. A PT PMA (foreign limited liability company) which is formed by way of a joint venture with a local PT which is a large scale construction company (B scale). A construction PT PMA must fulfill at least the following requirements:
    1. in the possession of a business license and related licenses;
    2. have more Indonesian employees than foreign employees;
    3. is high-tech, cutting-edge, efficient, environmentally sound, and is considering the local knowledge; and
    4. performs transfer of technology.

The Draft Law is currently awaiting signing of the President.

Update (May 02, 2017):

The new Law Number 2 of 2017 on Construction Services has now been issued

This column is provided by PNB Law Firm Jakarta

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