Problems relating to Trade and Investment on Indonesia
24. Indigested legislation, abrupt changes |
|||
Issue |
Issue details |
Requests |
Reference |
| (1) Promulgation of Conflicting Legislations | - There are cases where an earlier promulgated legislation is contradicted by the later promulgated legislation while both retain their validity. (For example, there are conflicting provisions concerning the participation of Indonesian enterprises between the provisions on oil and gas related business for the production sharing contract (PSC) and new legislation related to oil and gas business, etc.) | - It is requested that GOI resolves the contradictions between legislations. | - The Production Sharing Contract (PSC) - Decree (2009) No.35 |
| (Action) - On 9 September 2015, President Joko Widodo announced economic policy packages toward economic recovery. The 1st economic package includes deregulation: "from the 154-regulations, 89-duplications will be eliminated. After that 17-decrees, 11-presidential regulations, and 63-ministerial regulations will be promulgated." |
|||
| (2) Nebulous Implementing Legislative Provisions and their Implementation | - What has been most striking at this time under the new legislation to tighten tax collection by means of simple invoice rules is the ambiguity that has emerged over the issue if GOI really follows up the newly promulgated legislation by actual implementation. This ambiguity has caused much confusion at the job site. - Laws and Regulations are ambiguous, defying comprehension. In various circumstances, big gaps in their interpretation arise. - While the code of good corporate governance Indonesia, insurance company act, etc., which materially impact the insurance company operations, are being enforced in great numbers. In the absence of GOI's prior in-depth explanation as to the true intent of the law, it takes much time and cost for their interpretation. Moreover, GOI expects full observance of the law in a short time, while in some cases, GOI determines without grasping the actual state of affairs. |
- It is requested that GOI: -- strictly implements the legislation once it is promulgated and enforced, and conversely -- ensures to conduct sufficient prior research, and to give prior notification of the intended legislation when promulgating new rules and regulations. - It is requested that in introduction of new legislation, GOI takes step to: -- spare ample time to seek and evaluate the public comments -- arrange opportunities to exchange dialogues with foreign funded insurance carriers, accountants, and the interested parties, -- ensure transparency by prior provision of ample explanation to attain the maximum transparency, and -- enhance practical effectiveness of the rules and regulations, by provision of ample transitional time necessary to make a thorough preparation. |
- The Code of Good Corporate Governance Indonesia - 2014 Insurance Company Act - OJK Letter No.S-77/D.05/ 2014 on Optimization of Local Capacity dated 8 December 2014, etc. |
| (Action) - Regarding the Tax Policy Reform as mandated by the PI No.5/2003, the CMEA's Press Release of August 2004 reported that through its letter No. S-243/KMK.03/2004 (23 July 2004) MOF submitted to DPR the bill to amend the current taxation and customs laws. The bill is aimed to increase tax receipt, to enhance Indonesia's taxation regulation competitiveness vis-a-vis other countries, and to simplify tax coverage and structure. The bill covers tariff, tax subject/object and procedure/implementation of taxation, customs and excises). Unfortunately, the bill has not been passed until formal closure of the House's 1999-2004 periods (and the inauguration of new members for the period of 2004-2009) on 1 Oct. 2004. - On 19 May 2006, GOI released "Implementing Policy on Risk Management" that sets forth the procedure for governmental assistance, reporting, supervision, etc., and payment mode for Political Risk, Business Risk and Demand Risk, related to the PPP Promotion. - On 5 June 2006, "Presidential Regulation No.36/2005 On Expropriation of Land Property for Development of Public Infrastructure" was amended to stipulate, inter alia, the definition for expropriation of land property, consultation mechanism for price decisions, compensation and transfer of ownership. - On 13 March 2008, Decree No.43/PMK.03/2008 was promulgated. It sets forth the guideline concerning assessment of enterprise's values upon formation of a joint venture enterprise. - On 4 April 2008, GOI enforced a New Regulation on prevention of double taxation by levying tax only on profits from short-term government bonds (Surat Perbendaharaan Negara or SPN). However, GOI has not yet issued its implementing regulations and guidelines. |
|||
| (Improvement) - On 30 July 2012, Supreme Court ruled on temporary suspension of imported or exported goods, which are suspected for infringement of trademark right, etc. and for interlocutory injunction for infringement of Intellectual Property Rights, such as patent right. - On 7 August 2012, President Yudhoyono clarified the procedural rules for Expropriation Law No.2/2012 (enforced in January 2012) by signing upon "Presidential Order 2012 No.71" that serves as the implementing rules for Expropriation Law. - On 11 February 2014, for the first time in Indonesia, the Comprehensive Trade Law was enacted. (http://jdih.kemendag.go.id/id/news/2014/04/29/undang-undang-no-7-tahun-2014-tentang-perdagangan) |
|||
| (3) Frequent Changes in Tax Act and Regulations | - It has become a common sense among expatriates to Indonesia "not to jump up immediately to changes in legislative provisions", because these get implemented in a haphazard manner by whims and fancies, without much thought given into the details, such as API import licences in 2012, API-P (Producer Importer) and API-U (General Importer Identification Number), 15-year rule for foreign funded enterprises (FFEs) in 2013, and export restrictions on mineral resources in 2014. - While frequent changes take place on import/export rules and regulations, their contents are difficult to comprehend. Some rules seem not to be given thought to intermediary measures, and issues that can be caused on actual implementation. |
- In introduction of new tax system or changes in the tax system, tax rates, etc., it is requested that these are enforced only after the precise details are cleared defined and decided upon. - It is requested that GOI, in drafting rules and regulations, gives thought to transitional period and practical problems in their implementation. |
- Bank Central letter No 13/373/DSM 20 May 2011 - On Example: MOT Regulation No.67/M-DAG/ PER/11/2013, related Label in Bahasa Indonesia on the Product |
| (Action) - The rules and regulations concerning implementation of the Tax Act are disclosed on the official web site of General Directorate of Taxation (Direktorat Jenderal Pajak) with a search function online. |
|||
| (4) Obligations to use Indonesian in Contracts and Memoranda | - Law No.24 of 9 July 2009 compels the use of Bahasa Indonesia in the contracts with Indonesian enterprises, without however, promulgating its implementing regulation that purportedly defines the details of its implementation (due within 2-years of promulgation of the Law). It is unclear if the Law is in fact validly enforced now, and if so, in what kind of contracts the use of Bahasa Indonesia is required. Assuming arguendo that the Law is valid, the language of the contract is the matter for the parties to the contract to decide. It must be said that compulsion of the use of Bahasa Indonesia unduly burdens the foreign enterprises and individuals. - Law No. 24, July 2009 has stipulated the use of Indonesian language in all contracts. While in December of the same year, law and human rights minister issued minister's decree that authorises the use of English on contracts between private parties. However, in May 2014, Jakarta high court gave decision it was invailed to use foreign language in the contract between a private foreign enterprise and a private Indonesian enterprise. This decision appealed to the supreme court is now being contested and is pending. |
- It is requested that GOI: -- repeals the Law that compels the use of Bahasa Indonesia in contracts, -- clarifies at least the validity of the Law, and -- defines the scope of the contracts in which Bahasa Indonesia must be used, provided, however, that the scope so defined should give clear-cut reasons that justify the use of Bahasa Indonesia, and that the burden therefrom must be reasonably acceptable to foreign enterprises and individuals. - In order to avoid materially binding the private enterprises activities, it is requested that GOI takes step to promulgate and implement laws that faithfully reflect the actual state of affairs. |
- Law No. 24, dated 9 July 2009, regarding Flag, Language, National Emblem, and National Anthem - Law No. 24, 9 July 2009, on Flag, Language, National Emblem, and National Anthem --(UU Nomor 24 Tahun 2009 tentang Bendera, Bahasa, dan Lambang Negara, serta Lagu Kebangsaan) |
| (5) Promulgation of Import Regulation and Retroactive Application without Grace Period | - In January, Minister of Trade hastily implemented regulations on treatment of special goods, compelling pre-shipment inspection on electric products upon import customs clearance. Despite the announcement made on 7 January 2013, its retroactive application from 1 January 2013 halted customs clearance on the ground of absence of pre-shipment inspection. It resulted in a great bedlam. | - It is requested that GOI: -- conducts in-depth research on the impact upon importers before implementing law amendments, and -- provides the grace period to ensure a thorough dissemination of the law amendment. |
- Minister of Trade Regulation No. 83/M-DAG/PER/12/2012 |
| (6) Abrupt Implementation of Laws and Regulations | - Bank Indonesia abruptly promulgated "The implementation of prudential principles in managing external debt of the non-bank corporation (MED-NC)", the contents of which are ambiguous. This regulation released at the end of October got amended again in two months later, necessitating renewal of the requisite action, which had been taken based on the former regulation, merely stating: "The company with external debt". It was not clear if the company only with accounts payable in trade (external debt in foreign currency) were subject to the control. - Rumors about bank Indonesia regulation (enforcement in February 2014) on foreign capital control on import wholesale business that requires "acquisition of credit rating upon borrowing from head office, and hedging", etc. spread across, without BI's formal announcement. One day, BI promulgated the regulation suddenly. |
- Upon introduction of New Regulation, it is requested that GOI takes step: -- to seek public comment, to give sufficient deliberation on the impact upon the concerned parties, -- to provide detailed prior explanation, and -- to grant sufficient transitional period for preparation of the requisite measures. - It is requested that BI gives its advance information from the official source of information. |
- Bank Indonesia Regulation No. 16/20/PBI/2014, 16/21/2014 |
<<BACK |