1. Indonesia’s Government Regulation 32 of 2021 (GR 32/2021), an implementing regulation of the Omnibus Law, aims to support the recent liberalization of Indonesia’s aviation industry.
2. In the country’s new positive investment list, domestic air transport is open to a maximum of 49 percent foreign ownership whereas airports and airport supporting services are now open to 100 percent foreign investment.
3. GR 32/2021 provides a simplified process to obtain aircraft licensing and registration in Indonesia, as well as reduces the minimum number of aircrafts an operator must own and operate/possess.
4. Indonesia’s Government Regulation 31 of 2021 (Reg 31/2021) — an implementing regulation of the Omnibus Law — amends several aspects of the country’s shipping law.
5. The Indonesian government hopes the enactment of the new shipping regulation will attract more foreign investors into the country’s shipping industry, particularly as President Joko Widodo intends to transform Indonesia into a global maritime axis.
AIRCRAFT LICENSING AND REGISTRATION IN INDONESIA
1. The criteria for aircraft licensing and registration in Indonesia under GR 32/2021 are still in line with the 2009 Aviation Law. The aircraft registration must be submitted by the owner or authorized person with the following requirements:
- Having proof of aircraft ownership or control;
- Having proof of aircraft insurance;
- Showing proof of not being registered in other countries;
- The aircraft has met the limit age set by the Minister of Transportation; and
- Showing proof of fulfilling the requirements for the procurement of aircraft.
2. There are some additional technical and/or administrative requirements that have been introduced under GR 32/2021 required to obtain technical certificates.
3. Aircraft manufacturer certificate - Entities carrying out production or assembly activities of aircraft must also develop a safety management system guideline, which was not previously required.
4. Air operator certificate - Entities must now have a validated air transportation security program to obtain an air operator certificate.
5. Minimum aircraft ownership requirement in Indonesia - The government has loosened the minimum ownership limit from five self-owned and five operated (leased) aircraft to one self-owned and two leased aircraft for a scheduled commercial operator. This makes it easier for foreign businesses to begin operating in Indonesia.
BUSINESS LICENSING FOR THE AIRPORT AND AIRPORT-RELATED SERVICES
1. MoT 81/2021 divides the business activities for airports into two services:
- Airport services; and
- Airport-related services.
2. Both sectors are now open to 100 percent foreign investors who must first establish a legal Indonesian entity in order to engage. In doing so, businesses must obtain a business identification number, which is now assessed based on the risk level of the business (risk-based business licensing).
3. Airport services in Indonesia - Airport services relate to the providing and/or developing of:
- Terminal facilities for passengers, postal, and cargo transportation services;
- Facilities for aircraft landing, parking, maneuvering, and storage;
- Waste disposal activities, electronics, water, and electricity; and
- Buildings and land-related to air transportation activities.
4. The above-mentioned services can only be undertaken by an airport business entity that is legally allowed to commercially operate airports or an airport unit operator that was established by the central or regional government.
5. The airport business entity refers to an Indonesian legal entity or a state-owned enterprise. Each business type will go through a different procedure to become a commercial airport operator.
6. For the Indonesian legal entity, they must go through a tender process, where they must adhere to one of the following cooperation schemes for the project:
- Cooperate with the central government and other business entities; or
- Cooperate with a state-owned enterprise.
7. After winning the tender process, the Indonesian legal entity must next obtain the ‘airport business entity standard certificate’ (sertifikat Badan Usaha Bandar Udara), through the Online Single Submission System (OSS).
ENHANCE INTER-ISLAND CONNECTIVITY
1. The government has begun improving inter-island connectivity and upgrading port infrastructure – a huge and complex task considering the Indonesian archipelago spans over 6 million square kilometers and consists of over 17,000 islands. An inter-connected archipelago will boost trade and commerce in the more remote islands and develop new markets for marine-based fisheries and maritime tourism.
2. A centralized business licensing system - A centralized system with oversight by the central government will help simplify the business licensing regime so that relevant permits can be processed under one framework.
3. Previously, all licenses and approvals related to port activities were issued by the Ministry of Transport (MoT). In addition, vessels operating in Indonesia had to obtain multiple certifications for safety to seaworthiness from a multitude of institutions, such as local port authorities, the Sub-Directorate of Vessel Pollution Prevention, and Safety Management (under the MoT), and a classification agency, also under the MoT.
4. Retention of the cabotage rule - The Omnibus Law keeps the cabotage rule which requires the domestic transportation of goods and passengers to be undertaken only by Indonesian-flagged vessels with an Indonesian crew.
5. However, the Omnibus Law does add a provision in which foreign-flagged vessels can conduct other activities in Indonesian waters if Indonesian-flagged vessels are unavailable or not sufficient. The MoT has an exhaustive list of the types of activities for which foreign-flagged vessels can be used, namely:
-Salvage and underwater works;
-Offshore construction;
-Oil and gas survey;
-Drilling;
-Dredging;
-Terminal construction; and
-Offshore operational support.
6. Foreign ownership restrictions - Under another implementing regulation, Presidential Regulation 10 of 2021 (PR 10/2021) — also dubbed as the positive investment list and liberalizes foreign ownership limitations in most sectors — places a 49 percent restriction on foreign ownership in marine shipping activities.
7. Removing the requirement of appointing a general agent for foreign shipping companies - Foreign shipping companies can conduct their activities without requiring a general agent. If required, they can establish a domestic company in Indonesia. Previously, foreign shipping companies were mandatorily required to appoint a domestic shipping company or a special sea transportation company as a general agent if they wanted to conduct shipping activities at a port or terminal open to international trade in Indonesia. GR 31/2021 has revoked this requirement.
8. GR 31/2021 adds three conditions for the ownership of Indonesian-flagged vessels. These are:
- The vessel can only be owned by an Indonesian citizen or a legal entity established in Indonesia and is domiciled in Indonesia;
- The vessel must have a minimum gross displacement of 7 GT; and
- If the vessel is owned by an entity under a joint venture, the majority shareholder must be an Indonesian citizen.
PORT ACTIVITIES
1. The central government, through the Omnibus Law, has centralized the licensing regime for port-related activities including building permits and business licenses for port services. Further, it is the central government and not the MoT that regulates which ports are open for international trading in Indonesia.
2. GR 31/2021 provides details on the types of activities allowed in ports and the type of entities that can construct and operate them. A port can be constructed and operated by a port business entity (Badan Usaha Pelabuhan – BUP), or a government agency, which can be a port administrator unit (Unit Penyelenggara Pelabuhan) or a port authority (Otoritas Pelabuhan).
3. GR 31/2021 makes minimal changes to the types of activities a BUP can undertake but the regulation does add provisions on stevedoring (loading or offloading cargo to and/from a ship). Under the regulation, BUPs must have a partnership with a local stevedoring company; this is intended to support domestic micro, small and medium-scale enterprises (MSMEs).
4. A BUP can provide stevedoring services in certain types of terminals, namely, ro-ro terminals, container terminals, liquid bulk terminals, and dry bulk terminals.
5. According to GR 31/2021, the following sanctions can be imposed on businesses that violate the shipping law:
-Written warnings;
-Freezing business activities;
-Revocation of the business license; and
-Administrative fines.
6. The Omnibus Law has increased the fines by approximately 30 to 50 percent, the highest of which is the fine of 10 billion rupiah (US$698,000) (from 200 million rupiah (US$13,967) for not removing cargo from shipwrecks by the shipowner.
Source:
https://www.aseanbriefing.com/news/new-provisions-for-indonesias-shipping-sector-under-the-omnibus-law/
https://www.aseanbriefing.com/news/indonesias-omnibus-law-looks-to-support-the-aviation-industry/
