Licensing in the Indonesian Construction and Projects Sector
By Denny Rahmansyah
The following licences are required to engage in the construction business in Indonesia:
- If construction business is carried out by individuals, an Individual Business Registration Licence (Tanda Daftar Usaha Perseorangan) (TDUP) is required. The TDUP is issued by the regency/city government.
- If construction business is carried out by an Indonesian business entity (including for a PT PMA), a Business Entity Certificate (Sertifikat Badan Usaha) (SBU) and a Construction Services Business Licence (Izin Usaha Jasa Konstruksi) (IUJK) are required. An SBU is issued by the Construction Services Development Institution (Lembaga Pengembangan Jasa Konstruksi) (LPJK) through a construction association appointed by the LPJK as its representative. For local business entities, an IUJK is issued by the regency/city regional government for local companies. For PT PMAs, these are issued by the Capital Investment Coordinating Board (Badan Koordinasi Penanaman Modal) (BKPM).
- If construction business is carried out by a BUJKA representative office, the relevant licence must be obtained from the BKPM.
- Construction professionals must obtain a Work Competence Certificate, under the Construction Law. The Work Competence Certificate is obtained after passing a competence test and is issued by the relevant professional certification institution.
Licences and other consents for projects
Licences that must be obtained before construction on a project commences include the following:
- Land Utilisation Permit (Izin Peruntukan Penggunaan Tanah)
- Building Construction Permit (Izin Mendirikan Bangunan)
- Environmental Permit (Izin Lingkungan)
Technical approvals and recommendations must also be obtained from the relevant government institutions. These licences, approvals and recommendations are generally obtained from the regional government. There may be small differences in the licences, approvals and/or recommendations required from region to region, due to differences in the provisions of the relevant regional government regulations and adopted policies.
During construction works, some of the necessary licences require the licence holder to submit periodical reports to the relevant regional authorities. For example, following the issuance of an IUJK, a PT PMA must submit a Capital Investment Activities Report (commonly known as an LKPM) every semester on its investment activities. If there is a change in design or construction layout, the licence may need to be updated or revised.
In some regions, a Certificate of Worthiness (Sertifikat Laik Fungsi) is required after the completion of construction. The regional government may also impose periodical reporting requirements and conduct periodical inspections to monitor the facility/building being constructed.
This is an excerpt from the Indonesia chapter of the Practical Law 2018 Global Guide to Construction and Projects. You can see the full chapter here.
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