As part of its continuing bureaucratic and economic reform programme, the Indonesian government has streamlined the country's expatriate employment requirements. The new rules, which are set out in Presidential Regulation No 20 of 2018, come into force at the end of June 2018, three months after the Regulation's promulgation.
The changes contained in the Regulation are more procedural than substantive; in other words, the fundamental principles governing the employment of expats in Indonesia remain unchanged. The overarching principle in this respect is that an expat may only be hired if there are no suitably qualified Indonesian nationals available to fill the position.
Despite the largely procedural nature of the changes, they are nevertheless important for employers. The key change is that the expat licensing process has been substantially streamlined.
Previously, an intending employer was required to first prepare an expatriate employment plan (RPTKA) and to submit this to the Manpower Ministry for approval. Upon approval, a separate expatriate manpower employment licence (IMTA) had to be obtained.
Under the Regulation, it is now enough for the prospective employer to obtain approval for its RPTKA, which then doubles up as an IMTA.
The Regulation has also expanded the types of business entity that are permitted to employ expats. Under a previous decree (now revoked), partnerships, cooperatives and a number of other types of business entity were expressly prohibited from employing non-Indonesians. According to the Regulation, however, all business undertakings are permitted to employ expats as long as it is not prohibited by statute law.
While the new rules are clearly a step forward, further improvements could still be made. There continue to be various sectoral regulations on the statute books that set tight requirements for the employment of expatriates in particular professions and industries. However, there have been moves to centralise the assessment of these requirements in the Manpower Ministry, at least for some sectors, which should save employers the inconvenience of having to trek back and forth between government offices.
The Regulation was immediately greeted by a cacophony of criticism from opposition parties in Parliament, eager to capitalise on the fears of many Indonesians that the country is being swamped by foreign labour as China ramps up its investment. However, the government stood firm and the dissent has now largely abated.
© 2021 Euromoney Institutional Investor PLC. For help please see our FAQs.