A new Minister of Public Works and Housing ("MOPWH") regulation, Regulation No. 9 of 2019 on Guidelines for Foreign Construction Services Business Entities ("Regulation 9"), came into force on 13 June 2019. Like previous regulations on similar subjects, Regulation 9 requires foreign contractors to engage as their business partners 100% Indonesian-owned local construction companies.
Overview on Foreign Contractors in Indonesia
As a general rule, a foreign contractor can operate in Indonesia through either:
(a) a joint venture company - in the form of foreign investment construction company ("BUJK PMA") with an Indonesian local partner
(b) a representative office ("BUJKA"), i.e., by establishing a BUJKA in Indonesia and forming a joint operation/consortium with a local construction company to implement a particular project
Under the previous regulations, the Indonesian local partner in both the BUJKA and BUJK PMA structures was generally required to be a 100% Indonesianowned construction company (except for certain exemptions applicable to BUJKAs). In addition, BUJKAs were only allowed to do work that fulfilled the cumulative criteria of requiring advanced technology, and being high risk and high value.
Regulation 9 revoked the previous regulations, i.e., MOPWH Regulations No. 10/PRT/M/2014 (for BUJKA) and No. 03/PRT/M/2016 as amended (for BUJK PMA) ("Old MOPWH Regulations"). However, the general rule above is still applicable.