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Assessing the Potential and Obstacles of Foreign Worker Utilization in IKN: Highlights of Regulation Of The Head Of The Authority Of Nusantara Capital City 2/2024

Foreign Worker Utilization in IKN

In March 2024, the Head of Ibu Kota Nusantara (“IKN”) Authority enacted Regulation Of The Head Of The Authority Of Nusantara Capital City Number 2 of 2024 concerning the Administration of Licensing Services in the Nusantara Capital City (“Head of IKN Authority Regulation 2/2024“). One of the key points in this regulation focuses on the deployment and management of foreign workers in the development of IKN, complementing the earlier Government Regulation Number 12 of 2023 on the Granting of Business Licensing, Facilitation of Business, and Investment Facilities for Business Actors in the Nusantara Capital City (“GR 12/2023“). Overall, these regulations underscore the essential role of foreign expertise in advancing the IKN development initiatives.

This article aims to explore the implications of Head of IKN Authority Regulation 2/2024 on employment dynamics in the IKN and examine the potential contributions of foreign workers to the development of IKN while also addressing the obstacles associated with integrating foreign workers during the implementation phase.

Foreign Worker Utilization in IKN

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Role and Contribution of Foreign Workers in IKN Projects

The development of IKN requires various specialized skills, which are not always readily available domestically. Foreign workers play a crucial role in filling these gaps by bringing essential competencies across sectors such as construction, technology, and transportation.

In the construction sector, foreign workers often possess expertise in advanced construction technologies and modern methods that enhance project efficiency and quality. Foreign workers may possess specialized knowledge in areas such as high-tech construction materials, innovative building techniques, and sophisticated project management practices. Their proficiency allows them to implement more efficient construction processes, enhance project timelines, and ensure higher standards of workmanship. Moreover, their experience in managing complex infrastructure projects, such as bridges, high-rise buildings, and large-scale developments, brings a wealth of practical knowledge to local teams. 1

In the technology sector, foreign workers bring indispensable expertise that drives the advancement of smart city management solutions and green technologies, which are critical to driving sustainability in IKN. Their specialized knowledge in areas such as data analytics and artificial intelligence facilitates the development of innovative solutions to enhance urban infrastructure efficiency and environmental sustainability. For instance, they contribute to the implementation of smart grids, intelligent traffic management systems, and eco-friendly waste management solutions, all of which are essential components for a modern, sustainable city like IKN.

Similarly, in the transportation sector, foreign workers may arguably play a crucial role in spearheading the development of sophisticated, integrated transportation systems, which are critical for ensuring seamless mobility within the new capital e.g., high-speed railways, advanced metro networks, and intelligent transportation hubs. Foreign expertise in transportation planning, logistics optimization, and public transit operations enhances the efficiency, safety, and reliability of transportation services in IKN. By leveraging their experience with cutting-edge technologies and global best practices, foreign workers contribute to creating a comprehensive and sustainable transportation infrastructure that meets the growing demands of a dynamic urban environment.

New Provisions: Extended RPTKA Validity for IKN Projects

The Head of IKN Authority Regulation 2/2024 introduces detailed guidelines that expand upon and clarify provisions of GR 12/2023 concerning the employment of foreign workers in IKN projects. These regulations aim to create a stable and supportive environment for businesses involved in long-term projects in IKN.

A significant update under these regulations is the extension of the Foreign Manpower Utilization Plan (Rencana Penggunaan Tenaga Kerja Asing,RPTKA”), which can now remain valid for up to ten years, with the possibility of extension. This marks a substantial change from previous rules under GR 34/2021.

Furthermore, businesses engaged in strategic projects in IKN are now exempt from paying the foreign worker compensation fund (Dana Kompensasi Penggunaan Tenaga Kerja Asing, “DKPTKA”) until 2035. This exemption significantly reduces financial burdens and encourages the integration of foreign expertise in the region’s development. Post-2035, compensation guidelines will be set through a decree from the Head of the IKN Authority, ensuring continued support for long-term projects.

The extension of the RPTKA validity period and the DKPTKA exemption represent substantial advancements aligned with IKN’s development objectives. They streamline the process of employing foreign workers, provide stability for businesses undertaking long-term projects, and offer significant financial relief by eliminating DKPTKA payments until 2035. This regulatory framework enhances IKN’s attractiveness to businesses seeking to leverage foreign expertise.

Foreign Worker Utilization in IKN

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Implementation Challenges

While GR 12/2023 and Head of IKN Authority Regulation 2/2024 offer numerous benefits to businesses, addressing implementation challenges remains crucial.

For instance, businesses must adhere to government-set licensing requirements and procedures, particularly concerning applications for RPTKA approval. Lengthy and intricate licensing processes can create significant obstacles if not efficiently managed.

Furthermore, we also believe in the importance of cultivating strong synergy between foreign and local workers to mitigate social tensions and ensure project sustainability. Effective integration not only supports IKN development but also enhances the capabilities and competencies of local workers.

For comprehensive insight and expert guidance in navigating employment practices in Indonesia, ADCO Law is prepared to provide the necessary assistance. Stay informed and ensure compliance to uphold equitable treatment and support for your workforce in Indonesia.

For further details regarding the employment of foreign workers in Indonesia, please don’t hesitate to contact our firm.

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Disclaimer: This article has been prepared for scientific reading and marketing purposes only from ADCO Law. Accordingly, all the writings contained herein do not constitute the formal legal opinion of ADCO Law. Therefore, ADCO Law should be held harmless of and/or cannot be held responsible for anything performed by entities who use this writing outside the purposes of ADCO Law.