It took 17 years for Indonesian legislators to produce a new generation law on Construction Services. The bill, passed by the House of Representatives at the end of December 2016, became law on January 12th, 2017 and was officially announced as Law Number 2 of 2017 (“New Construction Law”).

Replacing Law Number 18 of 1999 (“Old Construction Law”), the New Construction Law contains provisions on the following important matters:

  1. Government’s responsibility and authority in the construction sector
  2. Types of construction services
  3. Construction services business entities – forms and qualifications
  4. Foreign construction service providers
  5. Appointment of construction service providers
  6. Prevailing language for construction work contracts
  7. Funding of construction services
  8. Construction manpower
  9. Construction security, safety, and continuity
  10. Building failure
  11. Information systems for construction services
  12. Dispute settlement
  13. Sanctions.

Major changes from the Old Construction Law are the following:

  • Under the New Construction Law, the tender requirements for the appointment of a construction service provider only apply to projects which are funded by the state budget.
  • The New Construction Law simplifies the categories of construction services by merging the previous Construction Planning Services and Construction Supervision Services categories into one category, i.e. Construction Consultancy Services. At the same time, construction consultancy services are further designated as general or specific services - a distinction which was not provided for under the Old Construction Law.
  • The New Construction Law also contains a provision which could be an issue for construction projects involving a foreign party. Like the Old Construction Law, the New Construction Law requires Construction Work contracts involving a foreign party to be bilingual, in Indonesian and English. However, the New Construction Law rules that the Indonesian language version is to prevail in the event a dispute arises under the contract. The Old Construction Law was silent on the prevailing language, leaving it to the agreement of the contracting parties.
  • Another new feature being introduced by the New Construction Law is the classification of construction workers on the basis of their qualifications into Operators, Technicians or Analysts, and Experts. The old law simply referred to them as “workers” who are obliged to have a competency certificate.
  • The New Construction Law allows the employment of foreign construction workers in Indonesia, although the positions which are officially open to them are limited. Employers of foreign construction workers are required to have a plan for the foreign workers employment (RPTKA) and secure a permit to employ expatriates (IMTA). (by: Kevin O. Sidharta)