23 November 2020
(23 November 2020) Indonesian President Joko Widodo recently signed Law No. 11 of 2020 on Jobs Creation (the “Omnibus Law”). The stated aim of the Omnibus Law is to bolster investment and create jobs by streamlining regulations and simplifying the licensing process to improve the ease of doing business in Indonesia.
The Omnibus Law revises various provisions in laws across numerous sectors, including more than 60 articles in Law No. 17 of 2008 regarding Shipping (the “Shipping Law”). The main changes concern easing the licensing process in the shipping sector and allowing the use of foreign vessels for certain activities in Indonesian waters.
Foreign Vessels in Indonesia
The Omnibus Law adds a provision to the Shipping Law that if Indonesian-flagged vessels are unavailable, foreign-flagged vessels may be used to conduct special activities in Indonesian waters other than carrying passengers and/or goods. The Omnibus Law specifies in its elucidation that “unavailable” in this case refers to when Indonesian-flagged vessels are not available or are not available in sufficient numbers.
This change appears to have been made to make the Shipping Law consistent with regulations enacted by the Minister of Transportation (“MOT”), namely MOT Regulation No. PM 92 of 2018 regarding Procedures and Requirements for the Granting of Foreign Vessel Utilization Approval for Activities Other than Domestic Carriage of Passengers and/or Goods, as amended.
It is worth noting that under the Omnibus Law further provisions regarding the use of foreign-flagged vessels are to be further governed under a Government Regulation rather than a ministerial regulation, as is the case at the moment.
Currently, the ministerial regulation issued by the MOT provides an exhaustive list of the types of activities for which foreign vessels may be used, namely: oil and gas survey, drilling, offshore construction, offshore operational support, dredging, salvage and underwater works, floating power plant, and terminal construction vessel. It is not clear whether the Government Regulation to be issued will provide a similar exhaustive list.
Centralization of Licensing and Certification
A significant portion of the changes to the Shipping Law involve centralizing licensing and certification authority with the Central Government. Previously, licenses/approvals related to the carriage of goods and port activities were issued by the MOT, and vessels operating in Indonesia were required to obtain various certifications related to safety, security and seaworthiness from multiple institutions, including but not limited to the Sub-Directorate of Vessel Pollution Prevention and Safety Management (under the Directorate of Sea Transportation of the MOT), local port authorities and a classification agency appointed by the MOT. Under the Omnibus Law, these licenses and certifications are now issued by the Central Government (or an institution appointed by the Central Government for certain certifications).
Presently, licensing and some certification is already centralized through the Online Single Submission (OSS) system, pursuant to Government Regulation No. 24 of 2018 regarding Electronically Integrated Business Licensing Service (GR 24/2018). However, the centralization is only regulated under a Government Regulation and various ministerial regulations, in the case of shipping, through MOT Regulation No. PM 89 of 2018 regarding Norms, Standards, Procedures and Criteria for Electronically Integrated Business Licensing Service in the Sea Transportation Sector.
It appears that the Omnibus Law intends to amend the Shipping Law to conform with the already existing regulations on the centralization of licensing services. However, it is not clear which institution shall be appointed by the Central Government to deal with certification issues
Centralization of licensing means investors can minimize licensing costs (e.g. time and money spent for applications, meetings with officials, facilitation/application fees, renewals or extensions) and engagements with different institutions.
Looking Forward
For the shipping sector, the amendments made to the Shipping Law by the Omnibus Law involve adjustments to conform with government regulations and ministerial regulations already in place to ease investment, including by allowing the use of foreign-flagged vessels and easing the licensing/certification process. However, additional government regulations to be enacted in the future as implementing regulations for the Omnibus Law may provide further details not specified in the Omnibus Law.
For further information, please contact:
Dyah Soewito, Partner, Soewito Suhardiman Eddymurthy Kardono
dyahsoewito@ssek.com
