EASE OF DOING CONSTRUCTION BUSINESS

THE MINISTRY OF PUBLIC WORKS AND HOUSING EASE OF DOING CONSTRUCTION BUSINESS IN INDONESIA



EASE OF DOING CONSTRUCTION BUSINESS IN INDONESIA

PREFACE HOW TO START CONSTRUCTION BUSINESS HOW TO SET UP THE PARTNERSHIP HOW TO MANAGE CONSTRUCTION BUSINESS CONCLUDING REMARKS

Chapter #1 National GDP Overview GDP Construction Sector PREFACE

GDP DISTRIBUTION (CURRENT PRICES) 2020 GDP Distribution 36% The value of Gross Domestic (Current Prices) 6% Product (GDP) in Indonesia has 10% increased from year to year. 2020 13% The Construction Sector 15% contributes 10% of the overall 20% GDP value in 2020. Mining & excavation Construction Wholetrade and retail sale; Car and motorcycle repair Agriculture, forestry, and fishery Source: Central Bureau of Statistics, 2020

CONSTRUCTION SECTOR GROWTH TO GDP (BILLION Rp) 14,000 forecasting 12,000 11,484,22 Billion RP 10,000 8,982.52 9,434,61 9,912.93 10,425.85 10,949.04 10,722.44 11,891.26 12.298.30 8,000 12.705.34 6,000 13,112.38 4,000 2,000 8,564.87 0 826.62 879.16 925.04 987.92 1,048.08 1,108.43 1,072.33 1,166.62 2014 1,213.71 1,260.81 1,307.91 1,355.00 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Construction Gross Domestic Product Source: Central Bureau of Statistics, 2020 Due to Pandemic Covid-19, Construction Growth in 2020 decreased several millions. But, the GDP value of the construction sector is predicted to return and continue to increase in 2021 to 2025.

CONSTRUCTION BUSINESS INVESTMENT REGULATION UNDER (Law Of The Republic Of Indonesia Number 11 Of 2020) Cutting Bureaucratic Simplified process of Elimination of Construction business licenses Services Business Permits Submit business license Corporate Income Tax application through the “Online Reduction The corporate income tax rate: Single Submission (OSS)” 22% (2020 and 2021 fiscal year) 20% (2022 fiscal year onwards) Limited Period of Territorial Basis Taxation Source: Source: https://binakonstruksi.pu.go.id/ A foreign citizen who has stayed in Indonesia for more than 183 days within 12 months will be considered as a domestic taxpayer





Chapter #2 Starting Construction Business Recognition Foreign Engineers HOW TO START CONSTRUCTION BUSINESS

Foreign Construction Business Entity can take part in Indonesia infrastructure project as: FOREIGN-OWNED LIMITED FOREIGN CONSTRUCTION LIABILITY COMPANY SERVICES BUSINESS ENTITY • Maximum allowed foreign ownership for • Type of LegalEntity: Representative Office construction companies: 67 %for Non- • Activities Area: Construction service work; ASEAN and 70%for ASEAN investors; • 100%Foreign Owned; • Handlingconstruction projectsthat arehighrisk, • Minimum Capital requirement: IDR 50 billion (~USD 3.7 million)net equity for high technology or have high cost; Foreign Owned Limited Liability Company in • Conductingconstructionworkwiththe permissionof construction servicewithB classification; theOffice of ForeignConstructionRepresentatives; • Can be involved in construction projects • Have Joint operation with a 100%Indonesia owned with a value of more than IDR 50 billion (~USD 3,7 million); construction company when delivering project. • Deliver construction projectsin Indonesia • No minimum capital requirement; without cooperating with any local • Apply for a limited stay permit for its foreign companies. executives • Open a bank account • Work on construction projects together with a local construction company without acquiring a construction license Source: GovernmentRegulationNumber05of2021ontheImplementationofrisk-basedbusinesslicensing

EASY STEPS TO ESTABLISH CONSTRUCTION SERVICES BUSINESS ENTITY 5 Days 7 Days ±15-23 Days START Determine Business Fulfillment of Business Business Entity Capability Publishing Certification of END Classification & Entity Certification & Feasibility Assesments Business Entity Requirements Payment Qualification Through Online Single Submission � Statement letter of Administration fee for commitment fulfillment new foreign business (OSS) � Foreign Data Company entity certificate 5 Minutes (include Experiences USD 10.000 and Financial Capacity) � Application � Annual Sales Big Qualification Construction Services � Data of Representative • Financial Capability Business Entities, Office in Indonesia • Engineers/Construction QUALIFICATION Starting by COMPANY registering Business � Construction Workers Availability Identification Number Equipment • Supply Capability of (NIB) through OSS � Total Manpower Construction Equipment ASSESMENT REQUIREMENTS Source: Government Regulation Number 05 of 2021; Government Regulation Number 14 of 2021; Government Regulation Number 38 of 2021

A COMPARATIVE OF DONG BUSINESS IN SOUTH EAST ASIA Doing Business records all “ procedures required for a business in the construction industry to build a project along with the time and cost to complete each procedure on 190 countries. “This data is taken before the publishment The Omnibus Law in Indonesia. So the time required is still very long. But, under spirit of Omnibus Law the needs of time and procedures has been shortened and simplified, with only the maximum of 35 days in establishing construction services business permits in Indonesia. Source: https://www.doingbusiness.org/ à World Bank Group

RECOGNITION FOREIGN ENGINEERS Recognition of the competence of foreign construction workers carried out through submission of applications to the Construction Services Development Board through the Integrated Construction Services Information System.

RECOGNITION FOREIGN ENGINEERS COMPETENCY Circular Letter Of Construction Services Development Board Number 4 Of 2021 Application 1 day Engineering 2 day Registration for Competency 02 04 Competency Test Equalization (portofolio verification) 01 Data 03 Result 05 Verification 1 day 1 day 1 day DATA ENTRY Engineers Identity: • Job position based on plan • Personal Data • Construction works data • Citizenship • Assistant data, also • Passport Number • Employer company data technology and knowledge • The number approval of transfer activities foreign workers employment plan (RPTKA)



Chapter #3 Construction Services Business Entities HOW TO SET UP THE PARTNERSHIP Construction Workers Construction Association Construction Material Production

JOINT OPERATION WITH INDONESIAN CONSTRUCTION SERVICES BUSINESS ENTITY • Foreign Construction Services Business Entity can carry out construction projects only through joint operations with a local construction company • Foreign Construction Services Business Entity can have separate partners/joint operations for different projects • Both Foreign Construction Services Business Entity and its local construction company will have the same liability regarding the construction based on Contract Construction

INDONESIAN CONSTRUCTION SERVICES BUSINESS ENTITY CONSTRUCTION SERVICES BUSSINESS ENTITIES IN INDONESIA (Big Qualification) General Specialist Integrade Contractors Contractors Contractin 5.939 266 Services 192 Source: : Construction Services Development Board, June 2021

INDONESIAN CONSTRUCTION WORKERS Construction Engineers 2021 JUNIOR SENIOR SUPER Construction Workers SENIOR 110.699 146.040 • Total Certified Engineers in 14.913 Indonesia is 271.652. Construction Skilled Workers 2021 • Total Construction Skilled Workers in 2021 is 722.562. GRADE 3 GRADE 2 GRADE 1 229.226 94.385 398.951 Source: Central Bureau of Statistics, 2020

ACCREDITED BUSINESS & PROFESSIONAL ASSOCIATION IN CONSTRUCTION Accredited Business Association In Construction Professional Association in Construction • INKINDO (National Association of Indonesian • HAKI (Indonesian Construction Experts Association) Consultants) • IAKI (Indonesian Construction Experts Association) • HATTI (Association of Indonesian Soil Engineers) • AKTI (Indonesian Integrated Contractors Association) • ATAKSI (Association of All Indonesian Construction • GAPENSI (Indonesian National Construction Experts) Implementer Association) • ISI (Indonesian Surveyors Association) • ASKONAS (National Contractors Association) • INTAKINDO (National Association of Indonesian • AKI (Indonesian Contractors Association) • ASPEKNAS (Association of National Construction Consultant Experts) • ASTTATINDO (Association of Indonesian Expert and Contractors) • ASPEKINDO (Indonesian Construction Entrepreneurs Skilled Engineers) • ATAKNAS (National Association of Construction Experts) Association) • IAI (Indonesian Institute of Architects) • AABI (Indonesian Asphalt and Concrete Association) • A2K4 – Indonesia (Indonesian Construction K3 Expert • GAPENRI (Indonesian National Design and Build Association) Company Association) • ASDAMKINDO (Indonesian Construction Human • GAPEKSINDO (Indonesian National Construction Resources Association) Company Association) • IAMPI (Indonesian Association of Project Management • PERKINDO (Indonesian Consultant Association) • GAPEKNAS (National Guard of Builders) Experts) • IAPPI (Association of Precast and Prestressing Experts) Source: Ministry of Public Works and Housing Decree Number 1410/KPTS/M/2020

ACCREDITED BUSINESS & PROFESSIONAL ASSOCIATION IN CONSTRUCTION Professional Association in Construction Construction Supply Chain Association • PERTAPIN (Association of Indonesian Professional • AP3I (Indonesian Association of Precast and Prestressed Experts) Companies • GATENSI (National Association of Engineers) • HATSINDO (Association of Indonesian Construction Engineers) • PETAKINDO (Association of Indonesian Experts and Skilled Workers) • ASTEKINDO (Indonesian Construction Engineer Association) • ATAKI (Association of Indonesian Construction Experts) • HPJI (Indonesian Road Development Association) • KNIBB (Indonesian National Committee for Large DAM’s) • ASTTI (Indonesian Technical Workers Association) • HATHI (Indonesian Association of Hydraulic Engineers) • IAP (Indonesian of Association Urban and Regional Planners) • GATAKI (Indonesian Construction Experts and Skilled Association) Source: Ministry of Public Works and Housing Decree Number 1410/KPTS/M/2020

DOMESTIC CONSTRUCTION MATERIAL 2021 Material Production Amount Of Producer Business Entity In Business Entity of Indonesia Foreign Investment Cement 13 11 2 110.301.480 ton 1 1 0 16 16 0 Oil Asphalt 162 133 29 695.718 ton 20 19 1 33 30 3 Buton Island Asphalt 932.700 ton Construction Steel 27.886.127 ton Lightweight Steel 3.749.400 ton Precast & Prestressed Concrete 35.927.178 ton Source: MPWH Construction Materials and Equipment Information System, 2021



Chapter #4 Potential National Strategic Projects HOW TO MANAGE CONSTRUCTION Construction Technology Applied BUSINESS Indonesian National Standard (Sni) For Construction Sector Ad Hoc Committee Supporting Infrastructure Development

NATIONAL STRATEGIC PROJECTS 2020 - 2024 THE MINISTRY OF PUBLIC WORKS AND HOUSING Bridges Highways Flats 38.328 m 2.500 Km 51.340 Unit Flyover/Underpass Special Houses 31.053 m Roads 10.000 Unit 3.000 Km Self-help Houses DAM 813.660 Unit Infrastructure PSU Houses 262.345 Unit 61 unit Indonesia New Capital City Infrastructures Sources: MPWH Strategic Plan 2020-2024

CONSTRUCTION TECHNOLOGY DEVELOPED IN INDONESIA Green Building Modular ENCToMInTsoItEdrSuuclatiron Building and Information CONTRUCConTsIOtrNucBtiUoSnINESS Modelling Lean (Pre-fabricated/ Construction and Asset Pre-cast Management Material) System

INDONESIAN NATIONAL STANDARDS Indonesian National 494 192 154 Standard in Water Construction Sector General Highway, Resources Construction Toll road Infrastructure and Bridges 315 Human Settlement, Building, and Housing

INDONESIA CONSTRUCTION DEVELOPMENT COMMITTEE Construction Building Safety Construction Road, Bridge, DAM Safety Commission Services and Tunnel Safety Safety Committee Committee Development Commission Board



Chapter #5 CONCLUDING REMARKS

Omnibus Law opens new windows of opportunity for foreign business to come and to invest in Indonesia’s construction sector



CONTACT PERSON: TICNHOIAMNNEDKTOYONOEIUSNIV&AEST Putut Marhayudi | Director of Construction Services Development | +62-857-1090-0777 | [email protected] Ellis Sumarna | Head of Sub Directorate of Construction Contract | +62-816-1695-646 | [email protected]