Indonesia’s construction industry is a promising arena for foreign investors, offering substantial growth opportunities amidst the country’s expanding infrastructure needs. However, tapping into this market requires a thorough understanding of Indonesia’s regulatory framework, which governs foreign investment in the sector. Key pieces of legislation that foreign investors must navigate include the Capital Investment Law No. 25/2007 and the Construction Services Law No. 2/2017. These laws set the foundation for how foreign entities can operate in Indonesia’s construction industry, specifying the requirements and limitations for foreign ownership and business operations.
For a foreign company to legally engage in construction activities in Indonesia, it must establish a local presence. This can be done by setting up either a Foreign Investment Limited Liability Company, commonly referred to as a PT PMA, or by registering a Representative Office for Construction Services, known as RO BUJKA. Each of these entities serves different business needs and comes with its own set of requirements and benefits.
A PT PMA is designed for foreign investors who are looking to establish a long-term presence in Indonesia. This entity requires a minimum investment of IDR 10 billion and allows for a maximum of 67% foreign ownership, which can be increased to 70% for investors from ASEAN countries. The PT PMA structure is particularly well-suited for companies that intend to engage in extensive, long-term projects and require a stable and permanent operational base in Indonesia. This entity also allows for a broader range of business activities and provides the stability needed for significant capital investments.
On the other hand, the RO BUJKA offers an alternative for foreign companies that prefer a more flexible, project-based approach. Unlike the PT PMA, the RO BUJKA can be wholly owned by a foreign company, but it is limited in scope to specific projects and must operate through a joint operation with a local Indonesian company. This setup is ideal for companies that are focused on short-term, high-value projects and do not require a permanent establishment in the country. The RO BUJKA is particularly advantageous for companies looking to test the market or engage in specialized construction services without committing to a long-term presence.
Regardless of the entity chosen, both PT PMA and RO BUJKA must obtain a Construction Business Entity Certificate (SBU), which is a mandatory requirement for all construction-related activities in Indonesia. The SBU ensures that the company complies with Indonesian standards and regulations, including those related to safety, quality, and environmental impact. In addition to the SBU, companies must adhere to various other local regulations, including those related to labor, taxation, and environmental protection.
In conclusion, foreign investors interested in Indonesia’s construction sector must carefully assess their business strategies, investment capabilities, and long-term objectives to determine whether a PT PMA or RO BUJKA is the most appropriate entity for their needs. By understanding the regulatory landscape and choosing the right business structure, investors can maximize their potential returns while ensuring compliance with Indonesian laws. This strategic approach is essential for successfully navigating Indonesia’s complex but rewarding construction market.
If you, a prospective client, have further inquiries about the topic discussed above, Schinder Law Firm is one of many corporate law firms in Indonesia that has handled numerous similar matters, with many experienced and professional corporate and civil lawyers in its arsenal, making it one of the top consulting firms in Indonesia. Feel free to contact us at info@schinderlawfirm.com for further consultation.
Author:
Budhi Satya Makmur