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Summary of the New Construction Law

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by Naz Juman, founder of Schinder Law Firm
Published on Asian Legal Business Magazine

On 12 January 2017, the President of Republic Indonesia enacted the New Construction Law No.2 of 2017 (“New Construction Law”), which replaced Law No.18 of 1999 (“Construction Law”). The New Construction Law was approved by the House of Representatives on 15 December 2016.

Highlights of the New Construction Law

1. Tender – The New Construction Law stipulates that construction work financed by the state budget shall be conducted through a tender or selection; direct or indirect selection is possible in accordance with the prevailing laws and regulations.

2. Public Facility – The New Construction Law sets out that a construction services user is prohibited from appointing an affiliated company to provide construction services for public facilities without first carrying out a tender.

3. Prevailing Language – The New Construction Law stipulates that construction contracts shall be made in the Indonesian language but can be made in bilingual format; however, the Indonesian Language version will be the prevailing version in the event of a dispute. This provision takes a stricter interpretation than Law No.24 Year 2009, concerning the National Flag, Language, Emblem and Anthem.

4. Foreign Construction Services – Under the New Construction Law, the Chief Representative of a foreign construction services business entity (“BUJKA”) must be a citizen of Indonesia. Furthermore, BUJKA must employ more local manpower than foreign manpower.

5. Expert Certification – Under the New Construction Law, Certificate of Expertise has been revised to become a Work Competency Certificate (Sertifikat Kompetensi Kerja, ”SKK”). The SKK must be registered and then issued by the ministry; previously, it was issued by the construction services development agency (“LPJK”). This provision shall not be valid until a further implementing regulation is issued.

6. Experience Registration Certificate – Under the New Construction Law, in order to obtain acknowledgment of construction business experience for medium and large scale construction companies, the companies are required to register their experience at the ministry to obtain an Experience Registration Certificate (Tanda Daftar Pengalaman, “TDP”). Only work that has been completed with a formal hand-over is eligible for a TDP. However, further requirements and procedures for TDP will be provided in an implementing regulation.

In conclusion, this is but a brief summary due to space constraints. Please do not hesitate to contact us, should you require further details.