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6 July 2020 (closed)
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Construction projects by foreign investors are often performed through a Construction Representative Office. A Construction Representative Office is required to set-up a cooperation with a local construction company by way of a Joint Operation, which can then perform construction contracts. Foreigners which are assigned by the foreign investor to work for such projects are required to obtain a work permit. In this column we examine the often raised question "does the expatriate work for the Construction Representative Office or for the Joint Operation?".
Joint Operation Between Construction Companies
Based on article 1 (6) of Ministry of Public Works Regulation number 10 of 2014 (Public Works Regulation), a Joint Operation is defined as:
A Joint Operation is a business cooperative between the representative of a foreign construction company (Construction Representative Office) and one or more local construction companies, with a temporary nature to deal with one or several construction jobs and does not constitute a new legal entity based on the laws in Indonesia.
The joint operation is thus not considered as a new legal entity. The Public Works Regulation does however not give any further explanation about the legal status of the business entity.
Work Permit Application for Expatriates Working for Construction Projects
Based on article 4 Ministry of Manpower Regulation 15 of 2015 regarding Procedures for the Use of Foreign Manpower (Manpower Regulation), the following types of business entities can employ expatriates:
1. government agencies;
2. international agencies;
3. representatives of foreign countries, such as embassies;
4. international organizations;
5. Foreign trade representative offices, representative offices of foreign companies, representative offices of foreign news;
6. foreign private companies, foreign enterprises which are registered in the competent authority;
7. legal entities established under the laws of Indonesia in the form of limited liability companies or foundation;
8. social, religious, educational and cultural institutions; and
9. impresario service business.
The Manpower Regulation does not clearly state whether or not a Joint Operation can be considered a “foreign enterprise which is registered in the competent authority”. Based on our discussion with officials of the Ministry of Manpower, a Joint Operation cannot be included in any of the business entities mentioned in article 4 of the Manpower Regulation.
Therefore, based on the current explanation of the Ministry of Manpower, expatriates should be hired by the Construction Representative Office to work for projects performed by the Joint Operation.
This column is provided by PNB Immigration Law Firm Indonesia