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Legal Updates | New Manpower Law: Foreign Domiciled Directors Must Have Indonesian Work Permit

The newly issued Indonesian Ministry of Manpower Regulation No. 16 of 2015 regarding Procedures to Utilize Foreign Manpower (“New Regulation”) has replaced the contentious Minister of Manpower Regulation No. 12 of 2013 regarding the same (“Old Regulation”).

The Old Regulation was known mostly for its provision that the Government would introduce an online Indonesian-language proficiency test for foreign workers, which never came to pass.

With the New Regulation the Government has dropped the provision on Indonesian-language proficiency tests for foreign workers. That should, for the time being at least, end discussion of foreign nationals being required to master Indonesian before they are able to obtain a work permit.

But the New Regulation may not be all good news. One point in particular stands out, with the Government creating a new requirement for members of the Board of Directors (“BOD”) and  Board of Commissioners (“BOC”) of Indonesian companies, and the Board of Patrons, Board of Management and Board of Supervisors of Indonesian foundations who are domiciled abroad to obtain a work permit in Indonesia.

As a bit of background, this point of requiring overseas members of the BOD and BOC of companies in Indonesia to have an Indonesian work permit is one of the most frequent requests by manpower officials when they conduct an inspection. There had been no legal basis for this request until the New Regulation created one for the Ministry of Manpower to require Indonesian work permits for overseas-based BOD and BOC members, among others.

What is disconcerting and not clear in the New Regulation is whether there is a transition period for compliance with this provision or potential sanctions for noncompliance.

It is also important to note that the work permit requirement will have a significant impact on foreign workers in Indonesia and companies that employ them. Foreign nationals who work in Indonesia for more than six months must have a tax registration number, evidence of insurance from a local insurance company, social security contributions under the BPJS and evidence of payment of US$100 per month per foreign worker to the Indonesian Workers Skill Development Fund (Dana Pengembangan Keahlian dan Ketramplian or “DPKK”).

The New Regulation came into effect on June 29, 2015.

SSEK - 11th August 2015

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Indonesia Snapshot

Capital: Jakarta
Population: 259 million (2016)
Currency: Indonesian Rupiah
Nominal GDP: $936 billion USD (IMF, 2016)
GDP Per Capita: $3,620 USD at Current Prices (IMF, 2016)
GDP Growth: 5.0% (2016)
External Debt: 36.80% of GDP (BI, Q2 2016)
Ease of Doing Business: 91/190 (WB, 2017)
Corruption Index: 90/176 (TI, 2016)