Indonesia Amends 10 Local-Staff-per-Foreign-Worker (Expat) Rule
When the Indonesian government unveiled Ministry of Manpower Regulation No. 16/2015 in July, foreign companies in Indonesia became nervous. The regulation required that for every foreign worker (expat) in Indonesia, 10 locals would need to be hired. Although the regulation would not work retroactively, while new foreign companies in Indonesia would be allowed to hire low-paid non-permanent staff (such as office boys or drivers), the regulation met resistance from international chambers of commerce.
This resistance has had success. Today (28/10), it was announced that Ministry of Manpower Regulation No. 16/2015 has been replaced by Ministry of Manpower Regulation No. 35/2015 on Amendment to Minister of Manpower Regulation No. 16/2015 on Procedures for the Utilization of Foreign Manpower.
The most important changes caused by the amendment are the following:
• The 10-locals-per-1-expat requirement has been dropped. However, there remains a chance that for specific sectors this rule will be applied (based on unwritten policy).
• Non-resident directors and commissioners of companies in Indonesia will not be required to obtain work permits. Only those foreign directors and commissioners that reside in Indonesia need to obtain a work permit (as it was before implementation of Ministry of Manpower Regulation No. 16/2015)
• Temporary work permits (which are valid for a - non-extendable - maximum period of six months) are only required in case the foreigner conducts the following activities in Indonesia:
1) Making a commercial movie (which received authorization from authorities)
2) Conducting audits, business operation quality control or inspections of the Indonesian branch for a period that exceeds 30 days
3) Activities related to machinery or electrical installation, after-sales service, or products that are still in the business exploration stage
A temporary work permit is not necessary in the following situations (as was stipulated previously by Ministry of Manpower Regulation No. 16/2015):
a) Giving lectures in Indonesia
b) Providing counseling, guidance, and training regarding the implementation and innovation of industrial technology and overseas marketing cooperation for Indonesia
c) Participating in a business meeting in Indonesia
d) Foreign workers visiting Indonesia to undergo or deal with preparational matters regarding future work position in Indonesia
e) Work that can be finished in 'one go'
Indonesian Language Proficiency Requirement
The amendment makes no reference to an Indonesian language proficiency requirement for foreign workers. Earlier, the government wanted to implement such a requirement. However, after fierce resistance (as it would damage the investment climate) the requirement was dropped. However, recently the Indonesian Manpower Ministry said it may introduce a language requirement for those expats who have worked in Indonesia for one year (and remain working in Indonesia). This language proficiency requirement would enhance the transfer of knowledge and skills between expats and local staff.
New Ministry of Manpower Regulation No. 35/2015 also stipulates that a foreigner cannot act as commissioner of a domestic investment (PMDN) company.