May

05

Indonesian Omnibus Law: Simplification on Construction Services Licensing Procedures

Law number: 11 of the Year 2020, concerning Job Creation or commonly known as Omnibus Law, is one of the breakthrough bills aimed to boost economic and business activities and growth in Indonesia. One of the sectors majorly affected currently is the Construction industry. Though in 2018, the government had simplified licensing procedures and regulations for the said business activity with Government Regulation Number: 24 of the Year 2018 concerning Electronic Integrated Business Licensing Services, the Indonesian government seeks the need to make further and more drastic changes to ease the construction companies. It was enacted in 2021 with Government Regulation Number: 5 of the Year 2021 on Implementation of Risk-Based Business License (“GR 5/2021”) based on the Omnibus Law.

Article 52 of Omnibus Law has replaced the term “Construction Services Business License” or IUJK with the new terminology “Business License” thereby effectively revoked the existence of such a permit. Article 81 section 1 juncto Article 176 section 1 of GR 5/2021 underlined the new regulation by listing the business permits needed to perform Construction Services which consisted of Business Registration Number (NIB) and Standard Certificate. All of which are valid as long as the construction services are conducted and need not be extended to National Construction Companies (BUJKN) andfor Foreign Construction Companies, the said licenses are valid for three years and can be further extended.

The Standard Certificate is issued by OSS Institution to the companies by making a statement for which the obtainer shall meet the standards of conducting the related business activities and shall be willing to be verified by the authorized Government authority(Central or Regional). After the verification, the details will be updated in the system, and the verified Standard Certificate will be issued, which can be downloaded by the obtainer through OSS System.

The simplification mentioned above was enacted alongside article 81 section 1 of GR 5/2021, which required Construction Companies to obtain other supporting business licenses that include :
  • Construction Business Entity Certificate (SBU);
  • Construction Work Competence Certificate (SKK);
  • Registration of Foreign Construction Companies Representative Offices (BUJKA);
  • License from Construction Companies Certification Institution;
  • License from Construction Services Profession Certification Institution;
Apart from the type of licenses, Omnibus Law also removed Article 31 of Law Number: 2 of the year 2017 concerning Construction Services that required middle and large-scale construction companies to obtain acknowledgment and registration certificates on their business expertise related to construction services.  Should you need legal advisory or consultation for investment within Indonesia, please do not hesitate to contact us. Drop us an email at info@schinderlawfirm.com.

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