Asia Pac Immigration in Focus: Corporate Immigration, Compliance Management and Best Practices in Indonesia ­ - Fragomen Seminar Highlights

Contributors: Mark Buchanan (Partner, Singapore), Ferris Leong (Assistant Manager - APCC, Singapore) and Kinari Patel (Client Services Manager, Singapore)

On 28 May 2015, Fragomen hosted its inaugural Asia Pac Immigration in Focus Seminar in Indonesia, the first symposium of its kind to be conducted by Fragomen in Southeast Asia. As Indonesia’s importance in the region grows and its presence on the world stage increases, the seminar focused on the ongoing developments to the country’s immigration system. It also served as a timely reminder of the difficulties many businesses face when balancing their immigration needs with the complexities and dynamics of the Indonesian work permit process. 

Invited by Fragomen as panel guests were representatives of the Ministry of Manpower and Transmigration (MOMT), the government agency with primary responsibility for the expatriate work permit process. Also invited were the Directorate General of Immigration (DGI), and the heads of Fragomen’s co-counsel firms in Indonesia.

Chaired by Fragomen Partner and panel moderator, Mark Buchanan, speakers and participants included:

• Bp. Ruwiyono Septy Priharso – MOMT, Head of Permission to Employ Foreign Workers in Service Sector Section;
• Bp. Mas Agus Santoso S. Sos – DGI, Head of Visa Section;
• Mr. Partomuan Siregar – Director, PT. Biantara Jaya Services; and
• Mr. Philo Dellano – Managing Partner, PNB Law Firm.

Discussions focused on recent developments in the Indonesian immigration process, including the introduction of upcoming policies.

Efforts to streamline MOMT processes and short-term assignment options

The MOMT emphasized its efforts to move toward paperless processing, but acknowledged that the manual process continues to be utilized for a number of applications. It is expected that the MOMT will continue to push for greater levels of process automation.

The presence of an MOMT representative at the Indonesia Investment Coordinating Board (BKPM) – as part of the One Stop Service (OSS) – is further evidence of the efforts to streamline the processes. The MOMT indicated that the OSS process is designed to be faster and the documentation requirements fewer compared to the regular process. 

As a further potentially positive development, the MOMT also indicated additional options may become available for temporary, short-term work assignments. If the DGI is agreeable, the MOMT may introduce new policies to provide for faster processes to obtain work permits for short-term installations and after-sales services. Such policies may also allow for the facilitation of short courses and short-term on-the-job training. The MOMT further ventured that, for emergency situations such as relief work during natural disasters and the repair of vital equipment in key installations, the RPTKA (Foreign Manpower Utilization Plan) and an IMTA (work permit) would still be required but would benefit from the introduction of an expedited process that enables both to be issued in one working day. 

Furthermore, it seems that the MOMT may soon also dispense with the need to obtain the TA-01 (recommendation for work permit) step, further expediting the overall work permit process.  At the Seminar, it was indicated that this development could come as soon as June 2015. 

Potential changes to business visitor policy

While the changes above can be seen as positive developments, the MOMT also indicated the potential for further limits to what it considers to be permissible business activities under a business visa, a visa-on-arrival, or visa-exempt status (i.e., “business visitor status”).

For instance, the MOMT has now indicated it is holding discussions with the DGI to revise the regulations that require work permits for the following activities (which previously could be performed under business visitor status):

• Participating in seminars;
• Inspecting factories;
• Attending business meetings and discussions;
• Conducting interviews;
• Attending short courses or on-the-job training; and
• Providing training in the application and innovation of industrial technology to improve product quality and the design of industrial products and international marketing cooperation for Indonesia.

It is important to note, however, that such a policy will still need to be discussed with the DGI (as this represents an important departure from current policy). The MOMT indicated that, for such business visitors, however, a local appointment letter and a local Indonesian co-laborer may not be required.

Finally, the MOMT also confirmed that, from its perspective, foreign directors listed as such on an Indonesian company’s title deed would require a work permit irrespective of how often they visited the country. Directors may not need a KITAS (limited stay permit), however, depending on DGI policy. Therefore, companies that have elected foreign nationals to be directors of an Indonesian entity must be careful when sending such individuals to Indonesia for business meetings as a business visa may not suffice.

Bahasa Indonesia language proficiency requirement

Possibly one of the most controversial seminar topics, and the one most likely at the top of many attendees’ minds, was the newly re-emphasized requirement for expatriates to prove their proficiency in Bahasa Indonesia in order to obtain a work permit. The MOMT noted that the requirement had been in the regulations for a number of years and emphasized that it did not expect this to apply to all expatriates or foreign workers, citing directors, commissioners, and short-term assignees as being exempt from the requirement. 

In a departure from previous reports, the MOMT indicated that, in a bid to improve foreign investment, the language requirement would only be imposed for work permit renewals, not initial applications. Their rationale is that an expatriate would have some degree of Bahasa Indonesia proficiency after an initial year of working in the country. The MOMT also stressed that although nothing has been implemented yet, new policies should be expected in the near future.

As to the method for proving proficiency, the MOMT is now indicating that, as a company is obliged to provide Bahasa Indonesia language courses for its expatriate employees, it can also issue its own language proficiency certificate in place of a formal language certificate issued by a language institute. However, this does not preclude the possibility of further regulation of such testing and certification in the future.

Job titles and maximum periods permitted for expatriates

It was mentioned early in the panel discussion that there were certain industries, including the service, consulting and trading industries, where the MOMT had imposed strict rules and policies regarding the use of job titles.

The MOMT indicated that, in the past, it had reference to a “negative list” of job titles which could not be used by expatriates. While such a list still exists, it is now focused on “positive lists” of job titles. The MOMT recognizes the difficulty of identifying suitable Indonesians with the correct skills or expertise to fill certain job positions and, in this regard, these positive lists are developed in consultation with the relevant government agency or ministry which has jurisdiction over the specific industry (for example, the Ministry of Trade has jurisdiction over the trading sector). Furthermore, the lists are now more specific in that they also regulate the period of work allowed for expatriates holding specific job titles. In the manufacturing/footwear industry, for instance, a manager or technical operator may only be granted a two-year work permit which has no option for an extension.

For the trade sector specifically, the MOMT indicated that any advisor position would only be granted for a non-extendable period of six months. In the MOMT’s opinion, such expatriates would not provide significant knowledge to Indonesian workers (and the MOMT’s goal is to maximize the usage of the local workforce).

However, the MOMT did recognize that new job titles are constantly being created by companies and many of these may not be a perfect fit for the MOMT’s list. To this end, the MOMT stated that there is still some flexibility to add job titles but that to do so, it would need a recommendation from the relevant agency. As a slight concession, the MOMT indicated that if a specific job title was non-extendable, the expatriate could be rehired by the Indonesian company under a different job title. 

Discussion on this topic was concluded by the MOMT emphasizing that it was ultimately at their discretion as to the duration of the work permit or the extendability of an approved job position. For example, when determining whether a specific expatriate can fill a marketing manager position, the MOMT will take into consideration factors such as the individual’s age, their work experience and educational background. If it does not feel that the individual is qualified, a different job title with a shorter, perhaps non-extendable, duration may be granted. It is understood that additional written regulations on such policies will soon be developed by the MOMT.

Overall, it was clear from the discussion on approved job titles that the MOMT is focused on protecting the local workforce, developing skills sets and securing quality jobs for local Indonesians.

Increased focus on immigration enforcement and audits

The DGI’s contribution to the panel discussion stressed four principles:

• Legality;
• Service orientation;
• Law enforcement and state security; and
• Facilitation of processes.

The DGI indicated that it is working toward building a comprehensive immigration database of all foreign nationals in Indonesia which could be used for identification purposes when accidents occur and to monitor the presence of illegal aliens. 

In terms of enforcement, and by way of illustration, the DGI cited the almost 12,000 immigration violations recorded in 2013. This figure rose to over 14,000 violations in 2014 and currently stands at almost 5,000 violations as of April 2015, with an overall increase on 2014 figures predicted.

As such, the DGI is understandably focused on enforcement, although it acknowledges that differences between the MOMT and DGI do occur. The DGI highlighted that it acts immediately on tip-offs and it is not uncommon for inspections to take place at residences, even after work hours. The DGI also acknowledged that systems and practices at different airports in Indonesia were inconsistent and that these would need to be streamlined to ensure enforcement becomes more effective.

Other topics discussed

When pushed on the issue of obtaining a recommendation from other government agencies such as the Financial Services Authority (OJK) or the Department of Oil & Gas (MIGAS) for the work permit process, the MOMT emphasized that it is those government agencies that are actually requiring their recommendation before the work permit process could proceed. If the relevant agency does not in fact require their recommendation, it need only send the MOMT a formal letter indicating this is so. The MOMT requires formal written documentation as there have been instances where a work permit has been issued, only to be questioned by the relevant agency as to why such a permit was granted.

The ratio of expatriates to local Indonesian workers was also a topic of interest, with the MOMT indicating that there must be a 1:1 ratio of expatriates to co-laborers (which is a long-standing rule). It also indicated that there may be an upcoming regulation which will impose a ratio of 10 Indonesian workers to every expatriate, although this is still very much under discussion.

The MOMT also indicated that an Indonesian employee from one entity may be assigned to act as a co-laborer for another entity, as long as both entities fall under the same umbrella group of companies. However, it remains crucial that the Indonesian co-laborer should be performing a similar job function as the expatriate.

The issue of sudden, unplanned mobilizations, especially for engineering companies, was also raised by one Seminar attendee, who stated it is often difficult to find a suitable Indonesian employee with the right skill set needed at short notice. The MOMT reiterated that a work permit would still be required for the foreign employee, but acknowledged the difficulties in timing. To offer assistance in this regard, the MOMT emphasized its policy of giving priority to urgent applications submitted in person by a company representative, as opposed to applications submitted by a third-party agent.

Recently imposed quotas on Telex-VITAS applications by the DGI also attracted the panel’s interest. The DGI indicated that the quota had been implemented to alleviate the heavy burden of applications and the stress this imposed on the limited resources of the DGI. From the ensuing discussion it did not appear that the quota would be relaxed, with the DGI pointing out that it must also ensure it had sufficient resources to handle the volume of applications. 

However, the DGI indicated that it is working on additional streamlining measures, including further automation aimed at limiting human error and contact, as well as eliminating the handling of money and direct payment by DGI officers. It is also continuing to improve its new online system, with the DGI hopeful of bringing the new system back online by the end of July 2015.