Indonesia is the largest construction market in ASEAN, which makes it interesting for the foreign construction service business player to enter Indonesian market. The construction sector has become one of the government’s priorities to enhance the domestic economic growth. This matter is in line with the Masterplan for Acceleration and Expansion of Indonesia’s Economic Development (MP3EI) and the implementation of ASEAN Economic Community (AEC) in Indonesia since 2015.
Opportunities in the construction development in Indonesia are reflected in Indonesia’s economic growth target that has been rising significantly of around 6% per year, and thus it requires an adequate infrastructure support. Therefore, the development of construction in Indonesia is designed to consolidate the national construction industry with the purpose to maximally creating contribution in controlling the ASEAN construction market within the framework of the AEC 2015, which indirectly will boost the national economic growth. This has attracted foreign construction service investors to enter and participate in doing construction services business in Indonesia.
In response to such matters, a clear regulation is required to filter the foreign construction service business player in entering Indonesia. One of effort by the regulator in fulfilling this requirement is to oblige both foreign and local construction service business entity wishing to conduct their operation in Indonesia to procure a Corporate Certificate (SBU/Sertifikat Badan Usaha) in Construction Services. The Law Number 2 of 2017 concerning Construction Services (“Construction Services Law 2017”) stating that Corporate Certificate of Construction Services is an evidence that the classification and qualification of the Construction Service entity including capability equalization result for foreign construction service business entity.
The Construction Services SBU must at least contain the following:
- Business type
- Nature of business
- Business classification
- Business qualification
Another use of SBU beside as a requirement in the application for Construction Business License (IUJK), it is also used as a proof that a construction service company is competent in conducting construction service business in Indonesia. The SBU will be issued through the following process:
- First Phase, the applicant for SBU will be assessed to obtain acknowledgement on classification and qualification of the business entity’s capability in Construction Services sector. This phase is conducted by the Ministry of Public Works;
- Second Phase, after the applicant for SBU is being determined as “feasible” the Ministry will register it, and furthermore the SBU will be recorded for assistance for Construction Services.
You may need to note that the participation in the construction project bidding in Indonesia is only open to the service provider which already satisfy the required construction service business license and have the certificate, classification, and qualification as a construction service company.
Therefore, every Foreign Construction Service Business Entity (BUJKA) that wishes to do Construction Service in Indonesia shall establish:
- Representative office; and/or
- Indonesian legal entity through cooperation in investment with the National Construction Service Business Entity (BUJKN)
In addition, the representative office of BUJKA is oblige to establish a joint operation with BUJKN which has already acquired the Construction Service business license in Indonesia. Such BUJKN must fulfill the qualification among other is having the SBU with large scale qualification.
In Indonesia, a construction service business entity providing construction service must own a certificate in accordance with its business classification and qualification. This certification is issued by the Indonesia’s Construction Services Development Institute (LPJK/Lembaga Pengembangan Jasa Konstruksi) or by an association with accreditation by National LPJK. In this certification process, a review process to determine the classification and qualification of expertise of such business entity, which later to be stipulated in the SBU. After acquiring SBU, the company must register itself to LPJK.
Thus, it can be concluded that SBU is a basic requirements that has become an absolute obligations by each of BUJKA that wishes to conduct its construction service business in Indonesia region. Every BUJKA without SBU may be imposed with administrative sanction in a form of administrative fine, temporary suspension of Construction Services and/or blacklisted.
How can SMART help you?
To provide legal certainty, SMART Legal Consulting will help you through legal aspects in conducting construction service business in Indonesia.
SMART Legal Consulting is a corporate legal service provider with experience in helping its client in the establishment of foreign construction service business entity. With our professionals, SMART is not only helping you with the establishment of the company, but also to help you as the foreign construction service business entity in creating corporate documents and handling your licenses in conducting construction service legal entity in Indonesia.
Please contact SMART for further information on our services, or you may arrange a meeting with us by contacting the following: