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The Ministry of Manpower issued Regulation 35 of 2015 on Amendment to Minister of Manpower Regulation No. 16 of 2015 on Procedures for the Utilization of Foreign Manpower (Regulation 35). Regulation 35 amends Regulation 16.
There have been increased lobbying efforts by a number of international chambers of commerce and others on Regulation 16. This may be why Regulation 16 has been amended and why Regulation 35 has been issued much earlier than expected.
Set out below is the current position following the issuance of Regulation 35:
Non-resident Director and Commissioner Work Permits
There is no longer a requirement for non-resident directors and commissioners to obtain work permits. Regulation 35 has removed this requirement.
Regulation 35 states that foreign directors and commissioners that reside in Indonesia need to obtain a work permit. This is not new and was the case even before Regulation 16 was issued.
Temporary Work Permits
Regulation 35 has reduced the activities that require a temporary work permit from the 8 activities listed in Regulation 16 to the following 3 activities only:
Making a commercial movie that has received authorization from the relevant agency.
Conducting audits, production quality control or inspections of Indonesian branches for more than 1 month.
Work related to machinery or electrical installation, after-sales services, or products that are in the business exploration stage.
In relation to the activity referred to in point (b) above, Regulation 16 did not include a specific period for the activities of "conducting audits, production quality control or inspections of Indonesian branches". Regulation 35 clearly states that for these activities, a temporary work permit is only required if the activity is conducted for more than 1 month.
Under Regulation 35, a temporary work permit will be issued for a maximum period of 6 months and cannot be extended.
In light of Regulation 35, a temporary work permit is no longer required for the 5 following activities listed in Regulation 16:
Providing guidance, counseling, and training in the implementation and innovation of industrial technology to improve the quality and design of industrial products as well as overseas marketing cooperation for Indonesia.
Giving lectures.
Attending a meeting held with the headquarters or representatives in Indonesia.
Foreign workers undergoing assessments pertaining to capability to work.
Work that is completed in one go.
Ratio
Regulation 35 has removed the requirement for there to be a 10:1 ratio.
It remains to be seen whether the 10:1 ratio will be applied based on unwritten policy (which was the case before Regulation 16 was issued).
New Matters
PMDN Companies
Regulation 35 states that a domestic investment (PMDN) company cannot have foreign commissioners. This was not mentioned in Regulation 16.
Under the 2007 Investment Law, PMDN is defined as investment by domestic investors using domestic capital to conduct business in Indonesia.
A 1995 presidential decree stated that a foreigner cannot hold the position of commissioner of a company where all shares are owned by Indonesians. This presidential decree was revoked in 2014 and the presidential regulation that replaced it did not include a similar prohibition. Regulation 35 has now re-introduced this prohibition.
Transfer of Knowledge & Counterparting
Regulation 35 states that provisions in relation to transfer of knowledge and counterparting will be further stipulated in a decree of the Director General for Development of Placement of Workers and Expansion of Job Opportunities (Director General). The content of this decree is still unknown.
DKP-TKA
Regulation 35 has removed the requirement for the Compensation Fund for Foreign Worker Utilization (DKP-TKA) to be payable in Indonesian Rupiah. As such, the DKP-TKA is still payable in US Dollars. This is consistent with the Bank Indonesia Regulation and Circular Letter on currency which allow the payment of Non-Tax State Revenue to be carried out in foreign currency. DKP-TKA is considered as Non-Tax State Revenue. Additionally, Regulation 35 states that if DKP-TKA has already been paid for:
work permits for non-resident directors and commissioners; and
temporary work permits for the 5 activities that have been removed from Regulation 16,
it will not be refunded.
Language
Regulation 16 did not include any requirements for foreigners to be able to communicate in Indonesian. This requirement had previously been set out in the regulation that Regulation 16 replaced (i.e. Minister of Manpower and Transmigration Regulation No. 12 of 2013 on the Procedures for Employing Foreign Workers).
Recent media reports have indicated that the Minister of Manpower is considering reintroducing a language requirement for foreigners.
Regulation 35 makes no reference to language. It is not yet clear whether the language requirement is now off the table or is still being discussed. It is possible that it may be included in the provisions in relation to transfer of knowledge and counterparting, which are to be further stipulated in a decree of the Director General (as mentioned above).
Regulation 35 is effective as of Friday, 23rd October 2015.
Readers should still be mindful of the fact that regular visits to Indonesia (or visits for an extended period) can be regarded by authorities as an indication that someone is working in Indonesia. If a foreigner works in Indonesia, they need a work permit and other related documents.
Hadiputranto, Hadinoto & Partners, Member of Baker & McKenzie International - 28th October 2015
Capital: Jakarta
Population: 259 million (2016)
Currency: Indonesian Rupiah
Nominal GDP: $936 billion USD (IMF, 2016)
GDP Per Capita: $3,620 USD at Current Prices (IMF, 2016)
GDP Growth: 5.0% (2016)
External Debt: 36.80% of GDP (BI, Q2 2016)
Ease of Doing Business: 91/190 (WB, 2017)
Corruption Index: 90/176 (TI, 2016)
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