investing in indonesia’s ports, - handelskammer hamburg · investing in indonesia’s ports, ......
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Hutabarat Halim & Rekan - Lawyers 20/F DBS Bank Tower, Ciputra World 1 Jl. Prof. DR. Satrio Kav. 3-5 Jakarta 12940 – Indonesia www.hhrlawyers.com
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Investing In Indonesia’s Ports,
Shipbuilding & Shipping Lines Sectors:
Legal Perspectives
By: Nini N. Halim
Hutabarat Halim & Rekan
Presented on 5 September 2016
At the
Indonesian Business Updates on Ports, Shipbuilding & Shipping Line
Hamburg Chambers of Commerce, Hamburg – Germany
FACTS
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The world’s largest archipelago.
Made up of over 17,000 islands, water transportation plays a vital role for Indonesia’s
economy.
Has an immense need for transporting goods and people across the archipelago.
The shipping business is a strategic industry.
Indonesia has ratified several international conventions on shipping and navigation.
Negative List of Investment 2016: Liberation of 35 business activities out of Negative List,
additional of 20 new business activities open for foreign investment
OVERVIEW
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FSCs can engage in the Indonesian shipping business only by establishing an Indonesian
JVSC licensed to engage in this business.
The capitalization, permitted foreign shares ownership, manpower requirements and mainline
of business of the JVSC must be in line with the prevailing regulations. The JVSC must
directly own at least one seaworthy Indonesian-flagged vessel with a minimum 5,000 GT.
Cabotage regulations & its implications.
• Domestic shipping routes can only be undertaken by Indonesian flagged vessels or by
foreign vessels with a fully Indonesian crew on board.
• Cabotage regulations have recently been revised to exempt vessels which perform: (i) oil
and gas survey; (ii) drilling; (iii) offshore production; (iv) offshore support; (v) dredging; or (vi)
salvage and underwater works.
BEFORE ENTERING THE MARKET
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Understanding the culture & language
Take time to explain the business you wish to do in Indonesia
ISIC (Indonesian Standard Industrial Classification) or the KBLI Code (Klasifikasi Baku
Lapangan Usaha Indonesia)
Indonesia’s spider-web of regulations & bureaucracy
No centralized information system
Business partner
Market entry format
Local assistance & people on-ground
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REGULATORY FRAMEWORK
Company Law
• MOLHR’s Regulations
• MOF Regulations
Investment Law
• Negative List of Investment
• KBLI
• BKPM Guidelines
Shipping Law
• Shipping Regulations
• Port Regulations
• Shipyard Regulations
Manpower Law
• Minister of Manpower Regulations
• BPJS Regulations
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THE SCOPE OF ACTIVITIES (Regulation Based)
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Port Shipbuilding/Shipyard Shipping
Art. 1 para. 14 Shipping Law:
Elucidation of Art. 124 para. 1
Shipping Law:
Art 1 para 3 Shipping
Law:
Everything associated with the
implementation of port functions to
support the smooth, security, and
orderly flow of the vessel traffic,
passengers and/or goods, the safety
and security of sailing, the
displacement of intra and/or
intermodal and to encourage the
national and regional economy with
regard to spatial.
What is meant by "ship building" is
a new shipbuilding, both
domestically and abroad, that is
immediately Indonesian flagged.
Transport in the waters, is
an activity of
transporting
and/or moving
passengers and/or goods
using a vessel.
THE SCOPE OF ACTIVITIES (Indonesian Standard Industrial Classification or KBLI Code)
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Port Shipbuilding/Shipyard Shipping
KBLI 52221 - Activities on Sea
Port Services
KBLI 30111 - Industry of Ships
and Boats
KBLI 5011 - Domestic Sea
Shipping for Passengers
Port services related to water
transportation for passengers,
animals or goods, such as the
operation of terminal facilities for
example ports and docks,
operation to secure the
waterways and others,
navigation, shipping and berthing
activities, mooring services,
guiding services
Which includes the
manufacturing or assembling
of a variety of commercial
ships and boats, made of
steel, fiber glass, wood or ferro
cement, both motorized and
non-motorized, such as
passenger ships, ferry boats,
cargo ships, tankers, towboat,
commercial sailboat, war ships,
ships for research, fishing
vessels and fish processing
plant vessels.
KBLI 5013 - Domestic
Sea Shipping for Goods
KBLI 5012 - Overseas
Shipping for Passengers
KBLI 5014 - Overseas
Shipping for Goods
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THE SCOPE OF ACTIVITIES … (… cont’d)
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Items Port Shipbuilding/Shipyard Shipping
Who can conduct
the business
Indonesian legal entity:
(i) wholly-local owned,
(ii) PTPMA, (iii) state-
owned companies, (iv)
regional state-owned
companies, or (v)
cooperative
(Art 26 para 1, Art 27
para 2, jis. Art 1 para 20,
21 and 22 MOTR No.
51/2015)
(i) Legal entity, and (ii)
non-legal entity domiciled
in Indonesia, for wholly
local owned.
(Art 1 para 8, 9, and 10
Industry Law)
A legal entity/PTPMA for
foreign investment.
(Art. 5 (2) Investment
Law)
Indonesian legal entity:
(i) wholly-local owned,
(ii) PTPMA, (iii) state-
owned companies, (iv)
regional state-owned
companies, or (v)
cooperative
(Art 68 para 1 MOTR
No. 93/2013)
Type Single purpose
company.
Not specifically
determined
(manufacturer)
Single purpose
company.
Scheme Concession or other
arrangement with the
Port Authority
(government)
JV JV
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THE PERMITTED FOREIGN SHARES OWNERSHIP & CAPITALIZATION REQUIREMENTS
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Items Port Shipbuilding/Shipyard Shipping
Negative List of
Investment &
Permitted foreign
SHARES
ownership.
Max 49% foreign ownership. Shipbuilding made of wooden
materials: partnership with local
Micro, Small and Medium
Enterprises. The permitted
foreign ownership is not
determined.
Shipbuilding made of other
materials: 100% foreign
ownership.
Max 49% foreign ownership.
Capitalization
Requirements
Minimum paid-up capital:
IDR 1 trillion: main ports.
IDR 200 billion: collecting
ports.
IDR 25 billion: crossing ports.
Minimum capitalization:
Authorized capital: min IDR 10
billion.
Issued and Paid-up capital: min
IDR 2.5 billion.
Minimum capitalization:
Authorized capital: IDR 50
billion.
Paid-up capital: IDR 12.5
billion.
Other
Requirements
Owns at least one seaworthy
Indonesian-flagged vessel with
a minimum 5,000 GT.
Fully Indonesian crew.
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KEY ITEMS - INCORPORATING BUSINESS IN INDONESIA
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Issues Discussion Notes
Investment Value Must be >IDR 10 billion or its USD equivalent Minimum shares owned
must be at least IDR 10
million
Source of investment funds Paid-up capital and/or reinvested profit, combined (if
necessary) with loan.
Structuring the investment May comprise of EQUITY (only) or a combination
between EQUITY and LOAN.
Debt to equity ratio 4:1
Domicile & project location Company domicile must be pre-determined. Project location will greatly
affect the total Investment
value to be made.
Shareholders Minimum 2 shareholders. Legal entities or individuals
or a combination of the
two.
Management structure Two-tiers management system:
Board of Directors (BOD)
Board of Commissioners (BOC)
BOD day-to-day
operations
BOC supervisory duties
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KEY ITEMS - INCORPORATING BUSINESS IN INDONESIA (… cont’d)
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Issues Discussion Notes Capitalization structure Authorized capital
Issued capital
Paid-up capital
Issued Capital & Paid-up
capital at least 25% of the
authorized capital.
Minimum paid-up capital: IDR
2,5 billion
Special treatment Will be applied to certain business sectors
having:
An investment value of at least IDR 100
billion
Employing at least 1.000 workers
The License will be issued
within 3 hours
Employment related matters Technical certification based on type of
industry.
Prohibition of double position.
Positions that are prohibited for expatriates.
Mandatory work permit & stay permit for
expatriates.
Expatriate President Director must possess
a work permit & stay permit.
Indonesia Social Security (BPJS) obligation.
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THE ENTRY FORMAT – GENERAL PROCESS & PROCEDURES
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Acquisition Process Period*) Establishment Process
Pre-acquisition Actions: Pre-incorporation Actions:
Identification of target company Identifying local partner (if applicable)
Due Diligence of target company & negotiations -
Identification of activities in Negative List & KBLI Identification of activities in Negative List & KBLI
Identifying the permitted foreign shares ownership
%
Identifying the permitted foreign shares ownership
%
Other administrative notification (if applicable) -
Identifying the new name of the target company
(if any)
Identifying the name of PTPMA
Identifying the management composition (BOD-
BOC) & shares ownership composition of the
target company that will be restructured
-
Terms of JV Agreement (if applicable) JV Agreement (if applicable)
POAs to process the acquisition POAs to process the establishment
Shares Sale Agreement & other related
agreements
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THE GENERAL PROCESS & PROCEDURES (cont…)
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Acquisition Process Period*) Establishment Process
Acquisition: Incorporation Actions:
BKPM Approval Investment In-Principle
License
14 WD BKPM Approval Investment In-Principle License
Amendment to the Articles of Association 2 WD Deed of Establishment
- Basic licenses
- 2 WD Bank account of PTPMA
MOLHR Approval 3 WD MOLHR Approval to Deed of Establishment
Updating the Register of Shareholders 2 WD Register of Shareholders
Post-acquisition: Post-incorporation
Other administrative notification (if applicable) Corporate Housekeeping actions
- Business License by BKPM
- Operational licenses / related business sectors’
licenses
Period*): is an estimate only and cannot be deemed as a commitment to time.
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Thank You