This Perka BKPM No.5/2013 will come into effect in BKPM on 27 May 2013 and at the capital investment administrator level within provincies and/or municipalities/cities at the latest 90 (ninety) days as from its enactment on 12 April 2013 (in the middle of July 2013).

In general, Perka BKPM No.5/2013 has the following provisions, among others: (i) minimum investment for foreign capital (PMA) must be higher than IDR10 billion or the equivalent nominal value in USD; (ii) a simplification of licensing procedures that it removes the Capital Investment Registration Permit (Izin Pendaftaran Penanaman Modal) so that the investor can directly file an application for a Principle License (Izin Prinsip) after fulfilling the specific requirements; (iii) the use of domestically produced and/or imported machineries; (iv) a 2 year validity period for import duty facilities for the import of machinery/equipment, which can then be extended annually in accordance with the project completion period as specified in the Principle License.

To find out more and details regarding the capital investment guidelines and procedures under this Perka BKPM No.5/2013, please contact the partners in our firm.

Hanafiah Ponggawa & Partners’s aviation team, led by our Mr. Andre Rahadian, is proudly sharing its involvement in the negotiation and completion of the sale & lease back arrangement with Alafco, as well as the delivery of the aircraft.

The biblical story of Apostle Paul gives concrete evidence as to what those plain yet powerful words meant, extending to him privileges not enjoyed by other nationals. When the centurion commanded Paul “to be examined by scourging,” he virtually pleaded “Civis Romanus sum”; and asked, “Is it lawful for you to scourge a Roman citizen, and uncondemned? ” No Roman citizen could be condemned unheard. The Bible records it in Acts 16:36-39 “The next morning the officials sent some centurion with orders for the jailer to let Paul and Silas go. The jailer told Paul, “The officials have ordered me to set you free. Now you can leave in peace.” But Paul told the centurion, “We are Roman citizens, and the Roman officials had us beaten in public without giving us a trial. They threw us into jail. Now do they think they can secretly send us away? No, they cannot! They will have to come here themselves and let us out.” When the centurion told the officials that Paul and Silas were Roman citizens, the officials were afraid. So they came and apologized. They led them out of the jail and asked them to please leave town”. What a very compelling story. Let’s see the explanation below why it worked that way.

“Civis Romanus sum”. Patrick Edaburn, a journalist, well summed up the significance of that expression, as follows. ”In ancient times the strongest words a person could utter was ‘Civis Romanus sum’ or ‘I am a Roman citizen’. You could, according to legend, walk the length and breadth of the known world protected only by those words. People would refrain from harming you simply because they knew if the smallest harm came to you that the response of your government would be swift, sure, and in the case of those who did the harm, quite unpleasant.”

In some more recent examples, while no one is perfect in this life indeed, the U.S. has at least shown the world how they still walk what their past president once talked. When their nationals, regardless of race, were captured in a foreign country, they without hesitance, sent the very best resources they could make available: not their mighty armed forces, but their own former presidents. In 2009, the world witnessed the news how former President Bill Clinton brought home two Chinese American journalists, Euna Lee and Laura Ling from prison in North Korea. In 2010, former President Jimmy Carter also won the release of African American Aijalon Gomes from North Korea. Carter had flown to Pyongyang in response to the challenge of North Korea government that they would release Gomes to Carter if the former president came to get him. No one tried to argue against the efforts in those two cases, due to colors of their skin, or their last names. They are Americans. Period!

In reflection, Indonesians are now dearly missing and wishing for the return of the period when we could proudly boast, and trust the might and weight carried by the expression: “Civis Indonesiensis Sum”, “ I am an Indonesian citizen”, “Saya warganegara Indonesia”. We are still working very hard in reclaiming and regaining the time when while overseas, we could proudly wave our passports, and have our head held high and back straight, in answering a question about our nationality. If people were the kids, government was the parent. One of the main tasks of parents is to give their kids the family identity. The world has shown that the very root of all crises is not crises in food, clothes or homes, but in identity.

In the national context, “Bhinneka Tunggal Ika” is the essence of Indonesian national identity. Our national symbol is a bird, Garuda. Birds fly. But our Garuda for these many years has been just staying there, going nowhere. Why? See her legs. While her wings spread wide, her fingers grasp firmly a banner below written with the national value our fathers taught us “Bhinneka Tunggal Ika”, unity in diversity. The message is clear. Keeping the diversity there makes Garuda hold the banner tight. She would then just continue enjoying her home over the truth of the national motto, and would spread the magic of the motto: a united, prosperous Indonesia. A divided home cannot stand.

We deeply regret to see how our home has been fiercely attacked, tragically not by foreign countries, but by our fellow Indonesians who ironically seem to have forgotten their true identity. Terrorism, anarchy, and corruption are common words these days. They are in any sense the true common enemies of the people now and then, presently making homo homini lupus almost a daily reality. In foreign countries, Indonesian workers have been abused and beaten by their foreign individual employers, a news that has no ending to date. Such violence to those carrying Indonesian passports (needless to say, sending home much of their salaries) is, on its face, a direct attack on Indonesia’s national symbol. Now, where is “our parent”? We don’t really see our government, our leader, standing up, speaking up and doing something real and significant when a group is easily attacked by other domestic groups without any foundation only because of differences in colors of skin, eyes, last names, beliefs, and/or accents; or in an international context, when unreasonable employers overseas easily step offline beating their (powerless) Indonesian maids for petty reasons. KPK: Kemana Pemerintah Kami? Where is our government? Don’t they know that they exist because of, from and for the people?

While it is also being criticized, the recent verdict of the Indonesian Constitutional Court in the case of Lapindo mud has in fact upheld, and by doing so, also reminded us of, a truth that the state has the constitutional obligation to protect the people. There is now less than two years for our present national leaders to boldly show how they intend to be long remembered by the people, i.e., as statesmen or (mere) politicians. The difference is simple. The former uphold the constitution. The latter merely advance their constituents. By making a correct choice, one day, when they return to their ordinary citizen status, they could also join a new generation for whom they have made a difference, in proudly boasting “Saya warga negara Indonesia”, “Civis Indonesiensis Sum” because of all the might and weight carried by that expression.

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Fabian Buddy Pascoal is a partner at the law firm Hanafiah Ponggawa & Partners (www.hplaw.co.id). This article is written as a general guide only, and is not intended to contain definitive legal advice. Should you have any comments, please send us an email to fab.buddy@alum.berkeley.edu

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Labor unions have been a strong voice of workers bringing workers’ interests to surface and public attention. Their voices are getting louder and louder from time to time, more particularly these days, when the present administration is getting closer to the end of its term in 2014. It is a general trend in  such a period as this that the pendulum of policies  moves more in favor of workers, who form the majority of potential voters in the next general election. Their fights are gaining momentum  as they are seizing the moment, bringing the market place bumpy days  when labor unions organize thousands of workers in general strikes in many parts of the country. Some public groups, particularly those taking transportation, have inevitably been annoyed as the labor unions’ activities also restrict access to public roads creating frustrating traffic jams. It has been reported that  the recent strikes have covered 80 industrial areas in 21 regencies and cities. What a strike! One of their demands is the removal of outsourcing schemes from labor rules and practices.

Outsourcing is legitimate, as made possible by the present Labor Law of 2003. This law could be seen as a masterpiece of President Megawati’s administration. Although the law cannot be taken as a perfect piece of legislation, nevertheless the law has been praised as being able to put together onto a common platform the various and even somewhat conflicting interests of business owners, workers and government. The outsourcing provisions of the law in its Articles 64, 65 and 66 have been put there to accommodate the real need of business owners  for flexibility in employment. It is generally well known that in Indonesia, hiring is easy, but firing is another thing. By  outsourcing some of their workforce,  business owners  have a convenient way of replacing a worker if he doesn’t perform. But, because employment is a very sensitive and complex subject, the Labor Law and its implementation don’t appear to sufficiently anticipate the downsides of the outsourcing provisions.

Those provisions have  attracted and induced many to run this potentially lucrative business. With an average growth rate of 30% since 2009 and annual turnover of around Rp. 15 trillion,  it has been reported that there are around 5000 firms in this business registered with the government competing for slices of this cake. Yes, “competition” is the word that we can hold responsible for the downside effects  of this business. For the sake of the competition to win the slices offered by the customer companies,  outsourcing companies are compelled by the natural force of supply and demand to make their offers the most competitive among the bidders. Ironically, the price of all those fights must be paid by the outsourced workers. When an outsourcing firm wins the bid at a competitive price, the profit margin they  make is not  sufficient for the firm to meet all benefits those outsourcing workers are statutorily entitled to. The apparent lack of sufficient supervision by the related government agencies has made  the downsides even worse.

Like a snow ball, the complications are becoming bigger over time, as companies generally tend to outsource even core-business activities, against the law that only allows outsourcing for non-core activities. The current legislation on this subject is too vague to ensure  compliance. The companies are instructed to make a flow chart of business activities and from there to group the activities into core and non-core. As each industry is distinctive, each company as a matter of fact has  wide room to put  certain activities in the group they favor at their own discretion. We must praise Bank Indonesia and BP MIGAS that have taken the initiative to issue their own regulations on the subject as an effort to ensure prudent practices when businesses in their respective industries engage outsourcing services for supporting activities.

In daily life, most  companies do not draw a clear line in their management practices to differentiate between their own workers and the outsourced workers. Although it should not be taken as discriminating against the latter,  proper management in this matter is significant. Legally, the outsourced workers are not in an employment relationship with the companies. The employer of those workers is the labor supply firm. In the companies’ accounting books, payments for the outsourcing services are not payroll to the workers, but  service fees payable to the labor supply firm. This  firm is expected to cover the statutory employment benefits of the workers from those payments. But, in reality, the firm has no ability to do that if they don’t want to suffer losses due to the narrow profit margin they make from the outsourcing services, as mentioned above. Commonality would be the first impression when an outsider pays a visit to a company. The visitor would be unlikely to be able to identify which workers are the employees of the company, and which ones are the outsourced workers.  This is because the company doesn’t create  distinctive identities. All employees could be found wearing identical uniforms and insignia. Even worse, when workers apply for leave, for example, instead of going to the labor supply firm as their legal employer, they go to the company’s management, who then interestingly entertain such practices. Repeated actions in their turn, create a common, accepted practice. Many other daily actions  within the company  then naturally create a (wrong) impression and perception that the outsourced workers  are  employees of the company. This  then establishes reasons for them to (incorrectly) believe that they have the right to claim from the company  (better) employment benefits, with all the other unfavourable  consequences this might entail.

Those various factors have been mutually reinforcing the growing size of the outsourcing  snow ball into its current complicated shape . A well-made set of regulations, effective government supervision and direction, correct labor management and practices, productive communications between business owners and labor (including labor unions),  all of which are sources of good outsourcing practice, are still lacking. This  has unnecessarily sacrificed almost everyone. The current exciting global developments and our own thrilling economic growth actually offer Indonesia a precious chance to be a favorable place for relocation of international players due to troubles occurring in other countries where they have their current places of business. But when they find many businesses in Indonesia are closed, as most of their workers are out there in the streets on strikes and demonstrations, with some of them  unreasonably restricting the flow of public transportation facilities, they might then  change their mind about the cost of Indonesia’s investment climate. In such a case, no well-intentioned people would benefit.

It is time now for all related elements to better understand and be aware that all of us occupy the same boat of Indonesia. If the boat has a problem, everyone’s welfare is at stake. The common understanding and awareness must also be coupled with concrete, fast action  accompanied by a sense of urgency and sensible engagement. Selfish personal interests must be set aside. Otherwise, we could lose a diamond when we are too busy collecting stones. There are indeed still many impossibilities in the endeavors. But, an impossibility can often be broken down into possibilities. Let us just begin now with the possible steps.

Hanafiah Ponggawa & Partners (“HP&P”) is delighted to share our involvement in this transaction as the legal counsel led by one of its partners, Mr. Giovanni Mofsol Muhammad and the associate in-charge, Ms. R.A. Sabrina Stamboel.

Certain provisions provided for in this PBI are among others:

1. the determination of maximum share ownerships is based on:
   a. categories of shareholder: (i) financial institution legal entities (banks and non banks), (ii) non-financial institution legal entities, and (iii) individuals with the maximum share ownership for each of these categories is 40%, 30%, and 20% of the paid-up capital respectively, plus the maximum share ownership in sharia commercial banks for individuals is 25%; and
   b.   links between shareholders which is based on owner relationships, family relationships (up to the second degree), and/or shareholders acting in concert; shareholders who have the links as explained earlier will be considered 1 party.
2. Central Government and the Deposit Guarantee Institution (LPS) are categories of shareholder are not subject to the maximum limit on share ownership.
3. shareholders in the category of bank financial institution legal entity may hold more than 40% of shares in a bank on fulfillment of certain conditions and on obtaining approval from Bank Indonesia.
4. shareholders:
   a. shareholders in sharia commercial banks which are the result of divestment under the prevailing Sharia Banking Act,
   b. who are strategic investors in banks produced by LPS dealings or rescues, Banks Under Special Supervision (BDPK), and Banks Under Intensive Supervision (BDPI); or
   c. existing shareholders in banks merging or consolidating with other banks,
   can adjust to the maximum shareholding over a longer period by fulfilling of certain conditions.
5. Besides subject to this PBI, a bank’s shareholder who fulfill the criteria as controlling shareholder also subject to Bank Indonesia regulations regarding controlling shareholder, and for prospective controlling shareholder who are foreign entity and/or legal entity domiciled outside Indonesia, must also subject to the following requirements:
   a. having commitment to support Indonesian economic development through the bank that he/they own,
   b. obtain recommendation from supervisory authority of the origin country, for financial institution legal entity, and
   c. at least has a minimum rating above the lowest investment level: for bank financial institution legal entity of 1 level above, for non-bank financial institution legal entity of  2 level above, or for non financial institution legal entity of 3 level above.
6. the implementation of the maximum share ownership in banks:
   a. for the new shareholders, shall be applied from when this PBI is issued, while
   b. for the existing shareholders, this PBI puts the policy’s priority for shareholders in banks with a Minimum Soundness Rating (TKS) and/or Mandatory Minimum Capital Availability (KPMM) of 3 or worse.

Until December 2013, existing shareholders who increase their shareholdings must adjust to the maximum shareholdings in accordance with this PBI.

7. This PBI also regulates administrative sanctions in the form of: (a) written warnings, (b) prohibition on opening networks of new offices, and/or (c) suspension of certain business activities, for banks who breach the obligation to adjust to the maximum shareholdings as referred to in this PBI, and in addition to that, Bank Indonesia may conduct a fit and proper test of the members of the bank’s Board of Directors and/or Board of Commissioners.

            The same sanctions will also be applied for the banks breaching the obligation to administer the action plan in order to adjust to the maximum shareholdings for those with TKS and/or KPMM criteria as referred to in this PBI.