Indonesia Update: New Regulation on the Recruitment of Foreign Workers

Indonesia Update | April 12, 2018
Authors: Kim Yaeger, Artha Sirait, Ian Saccomanno and Jade Hoang
LOOKING AHEAD
 
 

April 18: Breakfast Roundtable with Coordinating Minister Luhut Pandjaitan in Washington, DC

April 18: First Planning Call for the 2018 ASEAN Directors-General of Customs Meeting

April 19: Dinner in honor of H.E. Rudiantara, Minister of Communication and Information Technology

April 26: US-ABC Annual Gala Dinner

May 2-4: Mission to the 2018 to the ASEAN Directors-General of Customs Meeting

THE COUNCIL'S TAKE
 
 

New Regulation on the Recruitment of Foreign Workers

On March 29, the Government of Indonesia issued Presidential Regulation No. 20/2018 on the Recruitment of Foreign Workers (available here in Bahasa Indonesia) to simplify the permit application process for foreign workers and expand work opportunities in the country. Effective from June 29, 2018, the new regulation will revoke Presidential Regulation No. 72/2014 currently governing the same subject. The new regulation extends the scope of employers of foreign workers, allowing qualified employers operating within certain business sectors to recruit foreign workers who are currently working in similar positions at other companies. In addition, Foreign Worker Recruitment Plans (RPTKA) which have been approved by the Ministry of Manpower are now also considered valid permits for the recruitment of foreign workers (thus making them similar in function to Foreign Worker Recruitment Permits IMTA). Previously, employers were required to secure approvals for both RPTKA and IMTA. This initiative is a follow-up by President Joko Widodo in cooperation with Vice President Kalla, Minister of Law and Human Rights; Minister of Manpower; Minister of Trade; Minister of Industry; and Minister of Marine Affairs and Fisheries to discuss channels that can be utilized to stimulate investment, in an effort to improve Indonesia’s business environment and boost competitiveness.

Below are some important changes introduced by the new regulation:

For employers of foreign workers

  • Waiver for Foreign Worker Recruitment Permits (IMTA): A prospective employer is no longer required to apply for IMTA from the Ministry of Manpower in order to employ foreign workers. Only the Foreign Worker Recruitment Plans (RPTKA) are needed for the ministry’s approval, along with appropriate supporting documents.
  • Waiver for the RPTKA requirement was introduced for the following types of foreign workers: 1) foreign shareholders who are also directors or commissioners in a company in Indonesia, and 2) diplomatic or consular officers, 3) foreign workers in jobs deemed necessary by the government although not specified in the regulation.
  • Submission of foreign workers’ information: Upon approval of RPTKA, employers must submit the information of their foreign workers to the Ministry of Manpower and obtain a notification receipt for the submission and pay appropriate recruitment compensation via banks specially appointed by the Minister. Employers must also report annually and in the event of a contract termination.
  • Training requirement for employers of foreign workers to: 1) appoint Indonesian employees as associates for each foreign worker hired (with the exemption of foreign workers who are directors or commissioners), 2) conduct training for Indonesian employees in accordance with the position held by foreign workers, and 3) facilitate the teaching of Bahasa Indonesia to foreign workers.

For foreign workers

  • Foreign workers must obtain Limited-Stay Work Permits (Visa Tinggal Terbatas/VITAS) and Limited-Stay Residency Permits (Izin Tinggal Terbatas/ITAS) from the Ministry of Law and Human Rights or appointed immigration officers. Application to secure VITAS can also be used to secure ITAS. ITAS are valid for a maximum period of two years and are extendable.
  • Concurrent employment: Foreign workers are allowed to hold dual positions in two different companies in the same sector

More detailed guidelines will be issued by Ministry of Manpower at a later date though currently not set.

Indonesia Launches Roadmap for Industry 4.0: “Making Indonesia 4.0”

On April 4, the Ministry of Industry launched a “Making Indonesia 4.0” roadmap as part of the 2018 Indonesia Industrial Summit aimed at accelerating the development of the country’s manufacturing industry. The roadmap identifies five core manufacturing sectors, deemed as the backbone of Indonesia’s economy namely: food and beverages; chemical; textile; automotive; and electronics. “Making Indonesia 4.0” utilizes key technologies of the Fourth Industrial Revolution including the Internet of Things, Artificial Intelligence, Human Machine Interface, robotics and sensor technology, and 3D Printing technology to boost the industry’s output and efficiency.

Announcing the launch of the roadmap at the Jakarta Convention Center, Minister of Industry Airlangga Hartarto stated his confidence that this initiative presents a timely opportunity for Indonesia to upgrade its industry to make the country a competitive player in the new global context. In the early 2000’s, Indonesia’s manufacturing industry contributed 27.4 percent to the nation’s GDP. However, the figure fell to 21 percent in the third quarter of 2017. The new roadmap is expected to boost Indonesia’s economy by 1-2 percent, putting GDP growth rates at 6-7 percent per year. By 2030, Indonesia’s manufacturing industry is targeted to contribute between 21-26 percent to its GDP and job creation is estimated at 7-19 million.

In addition, “Making Indonesia 4.0” also contains ten cross-sectoral national initiatives to:

  • Improve the flow of goods
  • Develop a roadmap for comprehensive and cross-sectoral industrial zones
  • Improve sustainability standards
  • Empower small and medium-sized enterprises (SMEs)
  • Upgrade national digital infrastructure
  • Attract foreign investment
  • Boost the quality of local human resources
  • Develop an ecosystem for innovation
  • Provide incentives for investment in technology
  • Harmonize regulations and policies  

For such an ambitious initiative to succeed, in addition to preparing its labor and market, Indonesia also needs to ensure the literacy of policymakers in producing supportive regulations as a platform for growth. The initiative alone is commendable although it will be significantly affected if there is a lack of understanding in Industry 4.0. From an ASEAN perspective, ASEAN manufacturing has been overshadowed by the rise of Chinese factories in the past decade. The digital technologies associated with Industry 4.0 can help ASEAN manufacturers including Indonesia overcome relatively low productivity rates, although it requires a clear understanding of a shared vision of its potential benefits, and an environment that encourages implementation.

 
IN THIS UPDATE
 
 
National Affairs
It's official: Prabowo to join 2019 race

Customs
Government seeks port and shipping efficiency

Economics
Indonesia tries to lift trade barriers in Africa

Energy
Energy minister opposes mining law revision
Government transfers Rp 38.13 trillion PGN shares to Pertamina
Balikpapan oil spill: What we know and don’t know
New fuel distribution policy to maintain low inflation: Official
Borneo oil spill costs Indonesia’s poor

Financial Services
Bank Indonesia remains alert on rupiah exchange rate

Food & Agriculture
Govt destroys Rp 7b in illegally imported Chinese fruits
Land allocated to restore forests, ecosystem in Puncak

Health & Life Sciences
Autoimmune disease patients hope for better care
Health app offers HPV vaccination home service
Q&A: BPJS Kesehatan, health for all Indonesians

ICT
Bank Indonesia to launch QR code payment regulation
Indonesia goes hi-tech in hunt for tax assets after amnesty
USTR flags new digital trade barriers in Indonesia
5th BATIC to Commemorate Borderless Digital World
Indonesia selects key sectors for industrial revolution drive

Infrastructure
West Kalimantan to have new port in 2019
 
ARTICLE CLIPS
 
 
National Affairs

It's official: Prabowo to join 2019 race The Jakarta Post 12th Apr 2018
Gerindra Party chairman and chief patron Prabowo Subianto accepted his party’s mandate to run for the presidency at its national coordination meeting in Hambalang, West Java, on Wednesday. 

Customs

Government seeks port and shipping efficiency The Jakarta Post 12th Apr 2018
Transportation Minister Budi Karya Sumadi promised on Thursday to improve the efficiency of ports with the aim of reducing logistics costs by between 20 to 30 percent. 

Economics

Indonesia tries to lift trade barriers in Africa The Jakarta Post 11th Apr 2018
Trade Minister Enggartiasto Lukita held bilateral meetings with delegates from Morocco, Somalia and Nigeria on the sidelines of the Indonesia-Africa Forum on Tuesday in Nusa Dua, Bali as part of the efforts to eliminate trade barriers. 

Energy

Energy minister opposes mining law revision The Jakarta Post 12th Apr 2018
Energy and Mineral Resources Minister Ignasius Jonan has questioned the House of Representatives’ efforts to amend the 2009 Mining Law, saying that another change to the law would only bring uncertainty in the country’s mining sector. 

Government transfers Rp 38.13 trillion PGN shares to Pertamina The Jakarta Post 12th Apr 2018
The government has transferred its shares in state-owned gas distributor PT Perusahaan Gas Negara (PGN) worth Rp 38.13 trillion (US$2.77 billion) to state-owned energy company Pertamina, as a significant step toward the establishment of a state-owned oil and gas holding company. 

Balikpapan oil spill: What we know and don’t know The Jakarta Post 11th Apr 2018
On March 31, a burst pipeline – which is used to transfer crude oil from the Law-Lawe Terminal in North Penajam Paser regency to an oil refinery facility in Balikpapan – caused the oil spill that polluted Balikpapan Bay. 

New fuel distribution policy to maintain low inflation: Official The Jakarta Post 10th Apr 2018
Deputy Energy and Mineral Resources Minister Arcandra Tahar has said the government’s wish to maintain low inflation is behind the plan to revise regulations related to fuel distribution and retail prices. 

Borneo oil spill costs Indonesia’s poor The Interpreter - Lowy Institute 9th Apr 2018
“We believe this is the worst oil spill to catch fire since the 2010 Deepwater Horizon disaster,” said Fathur Roziqin Fen, Director of WALHI East Kalimantan. WALHI is Indonesia’s largest environmental organisation and is closely monitoring the consequences of last week’s large oil spill in Balikpapan Bay, Borneo. “Over 130 square kilometres of sea are covered in oil,” Fen told me. 

Financial Services

Bank Indonesia remains alert on rupiah exchange rate The Jakarta Post 12th Apr 2018
While the rupiah's exchange rate has been stable in April, Bank Indonesia will remain alert as domestic and external factors could cause volatility, said outgoing BI Governor Agus Martowardojo in Jakarta on Wednesday. 

Food & Agriculture

Govt destroys Rp 7b in illegally imported Chinese fruits The Jakarta Post 12th Apr 2018
The Trade Ministry has destroyed seven containers of apples and oranges worth Rp 7 billion (US$508,440) that were illegally imported from China. 

Land allocated to restore forests, ecosystem in Puncak The Jakarta Post 10th Apr 2018
Two tea plantation companies and state forestry company Perhutani have allocated land for forest restoration in an effort to rehabilitate the ecosystem Puncak, Bogor, West Java, which was previously the upstream area of Ciliwung river basin (DAS). 

Health & Life Sciences

Autoimmune disease patients hope for better care The Jakarta Post 11th Apr 2018
Not everything associated with the word “auto” is a good thing. For example, when the word “auto” is combined with “immunity”, it means something really bad is happening. 

Health app offers HPV vaccination home service The Jakarta Post 6th Apr 2018
Living a healthy life has become more convenient with the many health apps downloadable from Google Play and App Store. 

Q&A: BPJS Kesehatan, health for all Indonesians The Jakarta Post 6th Apr 2018
Universal health coverage (UHC) remains a challenge for many countries worldwide and is thus the theme for World Health Day 2018. Achieving UHC is also one of the sustainable development goals (SDGs), which stipulates for good health and well-being. 

ICT

Bank Indonesia to launch QR code payment regulation The Jakarta Post 4th Apr 2018
Bank Indonesia (BI) has confirmed that it will issue a new regulation on quick response (QR) codes due to the method’s growing use among payment service providers. 

Indonesia goes hi-tech in hunt for tax assets after amnesty Reuters 4th Apr 2018
JAKARTA (Reuters) - Indonesia’s tax office plans to spend hundreds of millions of dollars to update its outdated technology to boost low tax compliance and raise revenue collection in Southeast’s largest economy, the country’s tax chief told Reuters. Indonesia completed one of the world’s most successful tax amnesties in 2017, but its very success has created headaches.

USTR flags new digital trade barriers in Indonesia Inside Trade 4th Apr 2018
The Office of the U.S. Trade Representative's 2018 National Trade Estimate report cites new data localization policies and other digital practices in Indonesia, Nigeria, Vietnam and Thailand as “key barriers to digital trade,” in addition to reiterating concerns with China and others. 

5th BATIC to Commemorate Borderless Digital World Markets Insider 4th Apr 2018
PT. Telekomunikasi Indonesia International ("Telin"), a subsidiary of PT. Telekomunikasi Indonesia, Tbk ("Telkom") proudly hosted Bali Annual Telkom International Conference ("BATIC") 2018, a 3 day platform for telecom carriers and wholesale providers from across the related segments, regions and the world to collaborate, share ideas and business opportunities. 

Indonesia selects key sectors for industrial revolution drive Xinhua 4th Apr 2018
Indonesian President Joko Widodo said on Tuesday that the government has singled out five industrial sectors for its industrial revolution drive, which would heavily utilize information technology mechanism. 

Infrastructure

West Kalimantan to have new port in 2019 The Jakarta Post 12th Apr 2018
The Indonesian Port Corporations (IPC), also known as state-owned port operator PT Pelabuhan Indonesia II, announced on Wednesday the construction of the Pantai Kijing Port in West Kalimantan, which is projected to begin operation in the third quarter of 2019.