Indonesian Omnibus Law: Main Changes in the Construction Services Sector

published on 14 December 2020 | reading time approx. 1 minute
Author: Astari Fadhila Rahmani

On 5 October 2020 the Indonesian House of Representatives approved the job creation law, commonly known as "Omnibus Law", which is effective since 2 November as Law No. 11 of 2020, issued in the State Gazette of the Republic of Indonesia No. 245 of 2020. As also seen in other sectors affected by the Omnibus Law, the central government has been established as authority to set the norms, standards, procedures, and criteria to be observed by regional governments in terms of overall supervision of practice and policy implementation in the construction services sector. Further implementing regulations of the changes in the sector have been stipulated to mainly take the form of government regulations, while previously many of them were either ministerial or presidential regulations.

      
The Business License for Construction Service (Izin Usaha Jasa Konstruksi or IUJK), Individual Business Registration (Tanda Daftar Usaha Perseorangan or TDUP), and License for Representatives of Foreign Construction Services Business (Badan Usaha Jasa Konstruksi Asing or “BUJKA”) have now been replaced with a more general term “Business License”. As the necessary implementing regulations have not yet been issued, we have yet to see whether this newly stipulated license type is merely a change of terminology for ease of reference, or if it will be implemented as new licensing format. In addition to the Business License, the obligation for businesses to obtain the Business Entity Certificate (Sertifikat Badan Usaha or “SBU”) is still retained in the Omnibus Law, with the central government emphasized as the presiding authority in terms of the registration and certification process.

 
A further change concerning the BUJKA is seen in the revocation of administrative penalties imposed to representatives breaching their obligations stipulated in Law No. 2 of 2017 on Construction Services, that include, among others, fulfilling the required qualifications and licenses, forming a cooperation with national licensed construction service businesses and employing more Indonesian than foreign workers. However, it remains unclear whether the respective penalties will be regulated in any of the implementing regulations concerning the practices of the BUJKA.

Other changes relating to sanctions also include the introduction of a new administrative offense for construction workers holding the Work Competency Certificate, who failed to observe practices in accordance to national, international, or any special standards. Such workers risk to receive penalties ranging from written warnings to the revocation of their Work Competency Certificate. Service providers and/or users who grant authorization or approval of operations violating the health, safety, security and sustainability standards may also have their SBU revoked, in addition to the existing administrative penalties.