A new regulation has introduced significant changes to the implementation of Indonesia’s Construction Services Law, which will affect business actors in the country’s construction sector.
The new regulation, Government Regulation Number 22 of 2020 (“GR 22”) regarding Implementing Regulations of Law Number 2 of 2017 regarding Construction Services (January 12, 2017) (the “Construction Services Law”), was promulgated on April 23, 2020. With the enactment of GR 22, the following regulations have been revoked and are no longer applicable:
a. Government Regulation No. 28 of 2000 regarding the Business and Role of the Construction Services Community (May 30, 2000), as lastly amended by Government Regulation No. 92 of 2010 (December 29, 2010) (“GR 28/2000, as amended”);
b. Government Regulation No. 29 of 2000 regarding the Implementation of Construction Services (May 30, 2000), as lastly amended by Government Regulation No. 54 of 2016 (November 22, 2016) (“GR 29/2000, as amended”); and
c. Government Regulation No. 30 of 2000 regarding the Implementation of Construction Services Supervision (May 30, 2000) (“GR 30/2000”).
This article looks at changes to the Construction Services Development Agency and the restriction on construction consultation services under GR 22.
New Construction Services Development Agency (Lembaga Pengembangan Jasa Konstruksi or “LPJK”)
As prescribed in the Construction Services Law, the Central Government and/or Regional Government (together, the “Government”), in implementing its authority, may involve the construction services community. Under GR 28/2000, as amended, the LPJK was established to carry out the role of the construction services community in matters related to construction services development (the “Current LPJK”). The Current LPJK, a nonprofit, carries out its role on a national scale, independently and autonomously. It is meant to act independently, without being influenced by any other party, either private business owners or state agencies or officials, pursuant to the principles of construction services regulations.
Now, under GR 22, the construction services community’s involvement in implementing the Government’s authorities will be done through an institution to be formed by the Minister of Public Works and Housing (“MPWH”). In that regard, the MPWH has issued MPWH Regulation No. 9 of 2020 regarding the Formation of Construction Services Development Agency (April 6, 2020) (“MPWH Reg. 9/2020”).
MPWH Reg. 9/2020 stipulates the formation of a new LPJK (the “New LPJK”), which will be under the auspices of the MPWH. The New LPJK will, among other things, implement the registration and accreditation process for construction service companies, issue licenses, appoint experts and form a Professional Certification Institution (Lembaga Sertifikasi Profesi or “LSP”). As part of its responsibilities, the New LPJK will have the authority to issue Business Entity Certificates, in Indonesian, Sertifikat Badan Usaha (“SBU”).
The Current LPJK will continue to carry out the certification and registration of construction companies and employees until the MPWH appoints the Board of the New LPJK. The Current LPJK will then hand over to the MPWH its assets including its informational system and important documents regarding construction services, in accordance with the prevailing laws and regulations. And upon the determination of the Board of the New LPJK, the Current LPJK will be dissolved. Consequently, while the LPJK will still perform registrations, it will no longer act as an independent institution, but rather as a non-structural body under the MPWH.
Based on an informal consultation with an LPJK official, the Board of the New LPJK is expected to be formed sometime in December 2020 and begin work around January 2021. It remains to be seen how the move from the Current LPJK to the New LPJK will impact the licensing and registration process, including the impact on the issuance of SBUs. We would expect that the licensing authority of the LPJK after this move will be more closely scrutinized by the MPWH.
Restriction on Construction Consultation Services
In line with the Construction Services Law, the types of construction service businesses under GR 22 are consultation services, construction services and integrated services. Integrated services include a combination of consultation and construction services.
Under GR 22, a construction services business that provides consultation services cannot engage in another category of construction service business. What this means is that a construction services company shall engage in only one type of construction service business and cannot carry out other work outside of the type of construction service business in which it engages, except for integrated service companies, which may also perform construction services. GR 22 does not address the implication of the above provision for already-established construction consultation companies that provide a combination of services.
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