Setting Up a Representative Foreign Construction Company (BUJKA) in Indonesia

Due to the government’s delayed re-allocation of the budget during the Covid-19 pandemic and the nationwide lockdown that followed, the business operations of construction company in Indonesia receded by 3.3% in 2020. 

However, GlobalData recorded a growth of 4.8% in 2021 and forecasts the industry to begin its recovery this year provided the work at construction sites returns to normalcy. Further projection predicts the recovery at an annual growth rate of 5.6% between 2022-2025.

Moreover, the government has taken a number of initiatives to stimulate private investment in national infrastructure projects, including lowering the number of licenses necessary for power plant construction by more than 75%. Furthermore, the government aims to invest USD 412 billion in transport, industrial, energy, and housing infrastructure projects by 2024 under the National Medium-Term Development Plan (2020-2024 RPJMN).

Foreign investors looking to expand their construction company in Indonesia have the following options: form a foreign-owned limited liability company (PT PMA) or establish a representative office for their foreign construction company (BUJKA).

BUJKA: A Shortcut to Establish Construction Company in Indonesia

What is BUJKA?

BUJKA, or Badan Usaha Jasa Konstruksi Asing, is a type of representative office that foreign construction companies can open in Indonesia. Hence, one of the criteria for establishing a BUJKA is having an existing construction company outside of Indonesia.

While small-scale projects are reserved for local construction companies, a BUJKA is ideally suited for larger global construction companies because they are only permitted to engage in large-scale construction projects.

BUJKA vs. PT PMA

Why Choose BUJKA instead of PT PMA?

As established in the previous section, representative offices are different from limited liability companies. However, what gives BUJKA an edge over PT PMA? Following are some of the reasons:

• Unlike PT PMA, BUJKA does not require any local shareholders.
• Once a BUJKA is set up, it can engage in tenders and receive information about construction projects all over Indonesia.
• Best suited for the larger global construction companies as BUJKAs are authorized to engage in large-scale construction projects.

Note: A BUJKA must have a local construction company as a partner during the execution of the project.

How to Establish a Representative Foreign Construction Company (BUJKA) in Indonesia

New Provision based on Omnibus Law

The Omnibus Law is intended to stimulate business activities and economic growth in Indonesia. Moreover, construction is one of the industries that is presently affected the most by this law.

Article 52 of the Omnibus Law has replaced the phrase “Construction Services Business License” or IUJK with the new term “Business License”, essentially invalidating the existence of such permission

Besides the Omnibus Law, GR 5/2021 on Risk-Based Business Licensing outlined the business permissions required to conduct Construction Services, which included just a Business Registration Number (NIB) and a Standard Certificate.

Processes and Requirements

The BUJKA Licensing procedure is carried out using the OSS Risk-Based Approach (OSS RBA) platform. According to GR 5/2021, in order to create BUJKA, company owners must produce a Standard Certificate of Business Licensing for the construction services sub-sector, which includes the following:

• Construction Business Entity Certificate (SBU);
• Construction Work Competence Certificate (SKK);
• License from Construction Companies Certification Institution;
• License from Construction Services Profession Certification Institution;

Set Up Your BUJKA/Construction Company in Indonesia with Cekindo

If you want to set up a construction company in Indonesia through BUJKA, Cekindo will provide you with a seamless company registration experience. Our consultants can further assist you with the acquisition of business licenses with the least delay.

The point to note here is, BUJKA is not eligible to obtain a business license for construction service, hence the entity can not perform any construction work without signing a Joint-Operation Agreement with a local company.

Hence, if you want to analyze businesses and know more than what the stats say before investing or partnering with them, Cekindo’s due diligence team can assist you to review your possible investments and help you with a perfect local partner selection. Moreover, Cekindo provides legal agreement services and can assist in creating a tailored legal document based on the client’s interests, needs, and requests.