Legislation to protect local firms in construction sector

The legislation, known as the Construction Services Bill, is being deliberated at the House of Representatives.
An article in the bill stipulates that foreign companies or businesspeople intending to carry out construction work in the country will be obliged to set up a representative office in Indonesia or a joint company with a local construction firm.
The representative office will also be obliged to have a joint operation with a big national construction firm in the projects and to prioritise the hiring of local workers and the procurement of locally sourced materials and technology, among other things.
Foreign workers intending to work in Indonesia will be limited to experts who obtain government certification and are obliged to perform the transfer of technology and information.
“Even though we are in a competitive era, it doesn’t mean we can be open without any protection for local construction service companies. We have to take a side,” Public Works and Public Housing Minister Basuki Hadimuljono said on the sidelines of a hearing on the bill.
The minister said the current open market would not result in the liberalisation of the construction sector, even though national companies should not be too spoiled by protectionism.
Basuki also said that foreign companies would have to take on big projects and could not be involved in projects valued under Rp50 billion (Bt132.6 million) that are currently only allowed to be taken by regional industry players.
The bill, which will serve as a revision of the existing 1999 law on construction, will also address other things such as the organisation of the construction industry, certification, payments to workers and the criminalisation of failed construction projects. The bill stipulates that the cause of failed construction projects should be decided by expert assessment and that any legal process involving a construction project should be based on the assessment by the Supreme Audit Agency and the Development Finance Comptroller.
The government will also formulate a standardised minimal payment for human resources in the construction sector, especially for the experts, as well as assign the ministry to establish the Construction Service Registration and Certification Body to take over the role of the existing Construction Development Agency. “Compared to the oil and gas sector, the payment is way too small,” Basuki said, adding that the ministry aimed to boost the competitiveness and the competency of the country’s human resources in construction.
Legislator Muhidin Mohamad Said said that once it was passed into law the bill would empower construction associations to certify their members while the certification body would give accreditation to the associations.
“If there is a construction failure or negligence, we can also warn the association, so the association will not just give away the certification,” said Muhidin, deputy chairman for Commission V overseeing transportation and infrastructure.
He added that there would be requirements for an association before it is authorised to issue certifications, including having a certain number of branches across the country.
He said that the bill would likely be deliberated in May this year.
Meanwhile, Indonesian Construc-tion Association secretary-general Zali Yahya welcomed the government’s protection of national industries.
“Competitiveness is inevitable in the global market, but the political will is good,” he said.