Omnibus law: Construction service regulations to be made more flexible
This article has been translated by PwC Indonesia as part of our Indonesia Infrastructure News Service. PwC Indonesia has not checked the accuracy of, and accepts no responsibility for the content.
Bisnis Indonesia: Omnibus law: Aturan jasa konstruksi bakal direlaksasi
15 November 2019
By: Rivki Maulana
Bisnis, Jakarta – The Public Works and Public Housing (PUPR) Ministry is reviewing several regulations that hamper investments to be more flexible. This is in line with the omnibus law preparation plan that is expected to revise 74 regulations that are laws.
Infrastructure Financing Director General of the PUPR Ministry Eko D. Heripoerwanto said that there were at least two laws that would be made more flexible, namely Law Number 28 of 2002 on Building Construction and Law Number 2 of 2017 on Construction Services.
“We are reviewing [the regulations to determine] which ones are the priorities. [The regulations are made to be more flexible] so there will be no obstacle for investments,” he explained in Jakarta on Thursday (14/11).
Eko said that several regulations were opposed by players. He said that simple building permit and certificate of worthiness of function in the Building Construction Law were among those that would be made more flexible.
Generally, the PUPR Ministry will reorganise the business process of infrastructure cooperation projects. Eko mentioned that the participation of businesses was crucial to support the vision of the ministry in 2024.
Infrastructure construction in the next five years is estimated to cost Rp2,058 trillion. Meanwhile, the state budget, in the last five years, only covered Rp623 trillion, or 30.27% of the overall requirement.
Eko is optimistic about the participation of businesses in the cooperation projects increasing in the next five years. He said that this was caused by the ecosystem of public-private partnership that was more prepared than the last five years.
“The ecosystem is different. It is more prepared institutionally and legally. For the future, we are also prepared if there are requests to revise the scheme or [to make the regulations] more flexible,” he said.
Safety Committee
PUPR Minister Basuki Hadimuljono said that, if building permit and environmental impact assessment are removed, there was a building construction safety committee that would determine the feasibility of the building design.
“The building construction safety committee will select and approve the building design,” he said.
Besides that, he also confirmed that building permit and environmental impact assessment could be optional for buildings that already had Detailed Spatial Layout Plan (RDTR) and Location Permit (RTRW).
“As what has been discussed at the cabinet meeting, the environmental impact assessment will be removed if there is already an RTRW. For example, [constructions] in housing areas,” he said.
According to him, RTRW already accounted several supporting factors, which includes environmental impact assessment. Like killing two birds with one stone, building permit is also included in the RDTR.
Building permit and environmental impact assessment removal will be one of the effects of omnibus law implementation.
The Indonesian Real Estate Association (REI) Chairman Soelaeman Soemawinata agree to the building permit removal plan. According to him many instruments in building permit are too detailed and cannot be applied on all constructions.
“The building permit is a monster; a construction takes 2 years, but the permit is issued in 4 years. There are foreign investors that come to Indonesia, but they abort because of the building permit. At least the process for building permits must be simpler than the construction,” he explained.
In his opinion, the tedious process for building permit and environmental impact assessment hampers developers. The process causes problems for developers, especially amid the property market that is underperforming in the last several years.
“Interests from banks continue, taxes too. If the permit has not been issued, we cannot build, cannot sell, so how are we supposed to pay for the interests and the taxes,” he said.
The Jakarta Indonesian Builders Association (Gapensi) General Secretary Erwin Princen Sihite has addressed PUPR Minister Regulation No. 9/PRT/M/2019 on Guideline on the Licensing Service for Foreign Construction Service Business Entities
According to him, there are many foreign construction services that cannot extend their business certificates as it conflicted with the foreign investment conditions in the new regulation.
In PUPR Minister Regulation Number 9 of 2019, one of the conditions for foreign construction services or foreign investors to be a shareholder is to be a business entity. Besides that, foreign investors must also have the same business line as their partner, who is a domestic investor.
Erwin said that, without a more flexible regulation, the regulation on foreign construction services would threaten business sustainability. Without permit extension, hundreds of foreign construction services will go out of business, which will cause the lack of service providers.
According to him, PUPR Minister Regulation Number 9/PRT/M/2019 is not in line with the government’s efforts to secure foreign investments for Indonesia.
