Construction Companies Active in Public Works only Open for Local SMEs

Under the new negative investment list 2016, two business fields are closed for foreign investment and only open to local small and medium enterprise (SME) companies, i.e.:

  • Construction implementation services that are using low/medium technology and/or low a/medium risk and/or with a work value of maximum 50 billion rupiah.
  • Construction consulting services that are using low/medium technology and/or low a/medium risk and/or with a work value of maximum 10 billion rupiah.

Under the PR 44/2016, any company fulfilling the above requirements is subject to the investment restriction. Previously there was a long list of business fields which were subject to the restriction. The new regulation gives much more clarity for foreign investors.

Construction Companies Active in Public Works Open to Foreign Investors with Restrictions

The new negative investment list 2016 has reregulated the restricted construction companies as follows:

  • Construction implementation services that are using high technology and/or high risk and/or with a work value of more than 50 billion rupiah are open 67% for foreign investors and for 70% for foreign investors from ASEAN countries. Previously under the PR 39/2014 the work value amount was set at 1 billion rupiah.
  • Construction consulting services that are using high technology and/or high risks and/or a work value of more than 50 billion rupiah are open 67% for foreign investors and for 70% for foreign investors from ASEAN countries. Moreover the construction consulting companies which are using high technology and/or high risks and/or have a work value of more than 10 billion rupiah but less than 50 billion rupiah seem to be open for 100% for foreign investors. Previously under the PR 39/2014 all construction consulting services were restricted to maximum 55% foreign investment.

In line with the restrictions set for local SMEs, all construction companies are subject to abovementioned requirements, which creates more clarity for foreign investors.

This column is provided by PNB Law Firm Jakarta

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