to Indonesian
a. that the fair and prosperous society based on Pancasila and Constituation of the Republic of Indonesia of 1945 should be manifest through the implementation of national economic development based on economic democrazy principles;
b. that to accelerate the economic development in certain areas which are strategic for the national economy development, and to maintain balance in the progress of a region within the national economy unity, it is necessary to develop Special Economic Zones;
c. that based on the provisions of Article 31 paragraph (3) of Law Number 25 of 2007 concerning Investment, the provisions on the Special Economic Zones shall be governed by Law;
d. that based on the considerations as intended in paragraphs a, b, and c, it is necessary to develop a Law concerning Special Economic Zones;
1. Article 5 paragraph (1), Article 20, Article 27 paragraph (2), and Article 33 of the Constitution of the Republic of Indonesia of 1945;
2. Law Number 25 of 2007 concerning Investment (Statute Book of the Republic of Indonesia Number 67 of 2007, Supplement to Statute Book of the Republic of Indonesia Number 4724);
By the joint approval of
THE HOUSE OF REPRESENTATIVES OF THE REPUBLIC OF INDONESIA
and
PRESIDENT OF THE REPUBLIC OF INDONESIA
LAW CONCERNING SPECIAL ECONOMIC ZONES
In this Law what is referred as:
1. Special Economic Zone, hereinafter called as KEK, is zone with certain boundaries within the territories of the Unitary State of the Republic of Indonesia, and designated to carry out the economic function and is granted certain facilitation.
2. Zone is area within KEK with certain boundaries and is utilized according to its designated roles.
3. The National Council is a council at the national level which is responsible to administer KEK.
4. The Zone Council is a council established at the provincial level to assist the National Council in KEK operation.
5. Administrator is part of the Zone Council which is established for each KEK to assist the Zone Council in KEK operation.
6. Business entity is legal company in the form of State Owned Enterprise, Regional Government Owned Enterprise, cooperative, private company and joint venture to manage KEK business activities.
7. Entrepreneur is legal company entities, without legal entity status or individual business who conducts business activities in KEK.
KEK is developed through preparing area having geo-economic and geo-strategic advantages and serving to accommodate industrial activities, export, import, and other economic activities with high economic value and international competitiveness.
(1) KEK consist of one or many Zones:
(2) Within KEK may be develop supporting facilities and housing for the employees.
(3) Within each KEK is prepared location for micro, small and medium business (UMKM), and cooperatives, as the Entrepreneur or as supporting for companies’ activities within the KEK.
The location is proposed become KEK should fulfill criteria of:
(1) Development of KEK is proposed to National Council by:
(2) In case of proposal is applied by Business entity as intended in paragraph (1)a, proposal is submitted to provincial government after get approval from district/municipality government.
(3) In case of proposal is applied by district/municipality government as intended in paragraph (1)b, proposal is submitted through provincial government.
(4) In case of proposal is applied by province government as intended in paragraph (1)c, proposal is submitted after get approval from district/municipality government.
(1) The proposal as intended in Article 5 paragraph (1) should fulfill criteria as intended in Article 4.
(2) Proposal as intended in paragraph (1) should be completed with following requirements:
(1) National Council may approve or reject proposal for development of KEK after conducts study on the proposal as intended in Article 5 paragraph (1).
(1) In case of National Council approve development of KEK, National Council may recommend development of KEK to the President.
(2) In case of National Council reject development of KEK, rejection is submitted to the applicant with the reasons of rejection.
(4) Establishment of KEK is determined by Government Regulation.
In certain cases, Government may determine an area as KEK without proposal process as intended in Article 5
Further provisions on the procedure to determination of KEK are governed by Government Regulation.
(1) Based on determination as intended in Article 7 paragraph (4), provincial government or district/municipality government stipulate Business Entity to develop KEK in accordance with provisions of regulations.
(2) Determination as intended in paragraph (1) is conducted by:
In case of proposal from Business Entity as intended in Article 5 paragraph (1)a, provincial government or district/municipality government directly appoints the Business Entity making proposal to develop KEK.
(1) KEK should be operated at the latest 3 (three) years after it is stipulated.
(2) Within the period of 3 (three) years as intended in paragraph (1), National Council makes annual evaluation.
(3) Evaluation result as intended in paragraph (2) is submitted to party that propose for further action.
(4) In case of after 3 (three) years as intended in paragraph (1), KEK is not ready to operate, the National Council shall:
(5) In case of the extension period as intended in paragraph (4) b, KEK is not yet ready to operate because of the negligence or due to force majeure, the National Council may grant another extension of time after obtaining considerations from the Zone Council.
(6) Further provisions on the extension of time as intended in paragraph (5) shall be regulated by the Government Regulation.
(1) The funding for the development and maintenance of infrastructure within KEK may come from:
(2) The National Council may stipulate policies in cooperation with Government, and regional government, and private companies in the development and maintenance of infrastructure in KEK.
(3) The management of assets resulting from cooperation between the Government, regional government, and private companies may be carried out in accordance with the economic and financial feasibility analysis.
(1) In the management of KEK, The National Council and Zone Council will be established.
(2) The National Council consists of ministers and head of non-ministerial government agencies.
(3) The Zone Council consists of Government representatives and regional government representatives.
(1) The National Council for KEK is established by a Presidential Decree.
(2) The National Council as intended in paragraph (1) has responsibility to the President.
(1) The National Council shall be led by the minister in charge of government affairs in the field of economics consisting of minister and head of non ministerial government agencies.
(2) In performing its duties, the National Council as intended in paragraph (1) establishes the National Council Secretariat.
(3) Provisions on the membership, working procedures, and secretary ship of the National Council shall be governed by a President Regulation.
The National Council has duties of:
In implementation of the duties as intended in Article 17, the National Council may:
(1) The Zone Council shall be established in each province of which part of its territory has been designated as KEK.
(2) The Zone Council as intended in paragraph (1) shall be proposed by the National Council to the President to be determined further by Presidential Decree.
(3) The Zone Council as intended in paragraph (1) has responsibility to the National Council.
(1) The Zone Council consists of head, namely the governor, deputy of head, namely the regents/mayors, and members, namely elements of the Government in the provinces, the provincial government elements, and district/municipality government elements.
(2) In carrying out its duties, the Zone Council as intended in paragraph (1) determines Zone Council Secretariat.
(3) The provisions on the membership, work procedures, and secretary ship of the Zone Council shall be regulated by a Presidential Regulation.
The Zone Council has duties of:
In carrying out the duties as intended in Article 21, the Zone Council may:
(1) KEK Administrator has duties for:
(2) The granting of permits or licenses as intended in paragraph (1) a shall be carried out through single window integrated services.
In carrying out the duties as intended in Article 23, the KEK Administrator:
(1) The National Council, the Zone Council, and the KEK Administrator shall obtain the funding from:
(2) Further provisions on the funding as intended in paragraph (1) shall be governed by the Government Regulation.
(1) The business activities management in KEK shall be conducted by Business Entity that has been determined as the KEK management.
(2) Business Entity as intended in paragraph (1) shall in the form of:
(1) The provisions on the bans or restrictions of imports and exports governed by the laws and regulations applicable in KEK.
(2) Goods subject to import and export restrictions may granted exception and/or given facilities in accordance with the provisions of regulations.
(3) The flow of goods from or to KEK subject to the provisions of regulations.
The provisions on the quarantine of humans, animals, fishes, and plants which are governed by regulations shall remain in effect in KEK.
(1) Rupiah currency shall be the legal payment means in KEK.
(2) The rupiah currency brought into or brought out to/from KEK and to/from overseas destinations shall be subject to the provisions regulations.
(3) Foreign currency may be traded at KEK through banks or foreign exchange traders owning the license in accordance with the provisions of regulations.
(4) All international trade transactions in foreign currencies in KEK shall conducted through the banks and may be carried out only by the authorized banks in accordance with the provisions of regulations.
(1) Each taxpayer who runs a business in KEK is granted Income Tax (PPh) incentive.
(2) In addition to PPh facilitation as intended in paragraph (1), additional tax incentives may be granted according to the characteristics of the Zone.
(3) The facilities and incentives as intended in paragraph (1) and paragraph (2) are given in accordance with the provisions of regulations.
(4) Further provisions on the granting PPh facilitation as intended in paragraph (2) and paragraph (3) shall be governed by Government Regulation.
Tax facilitation may also be granted within certain periods to investors comprising Land and Building Tax reduction in accordance with regulations.
(1) Importation of goods into KEK may enjoy facilities such as:
(2) The delivery of taxable goods from other places within customs territory to KEK may enjoy PPN and PPnBM based on the provisions of regulations.
(3) The delivery of taxable goods from other places within customs territory to KEK as long the goods are not intended for the parties enjoying PPN facilities, are levied PPN or PPnBM in compliance to the provisions of regulations.
(4) Further provisions on the facilities granting as intended in paragraph (1), paragraph (2), and paragraph (3) shall be governed by Government Regulation.
(1) Imported goods released from KEK to be used, as long as the goods are not intended for the parties enjoying tax exempt or suspension of import duty, excise or tax in the framework of import:
a. shall be collected import duties;
b. their excise must be paid for the excisable goods, and
c. subject to PPN, or PPN and PPnBM based on the provisions of regulations.
(2) The goods as intended in paragraph (1) shall be subject to import provisions based on provisions of regulations.
Goods released from KEK for export purposes shall be subject to export provisions based on provisions of regulations.
Part Two
Local Taxes and Regional Retributions
(1) Each taxpayer who runs a business in KEK shall enjoy incentives comprising exempt or reduction of local tax and regional retributions in accordance with the provisions regulations.
(2) In addition to local tax and regional retribution incentives as intended in paragraph (1), the regional government may grant other incentives.
Part Three
Land Affairs, Licensing, Immigration, and Investment
In KEK, facilities are given to acquire land rights in compliance to the provisions of regulations.
Business entities who have acquired land plots in the sites already designated as KEK based on Government Regulation may be granted the land rights.
(1) In KEK, facilities and cost reduction to procure permits or licenses to run businesses, carry out business activities, trade, seaport administration, and immigration for foreign Entrepreneurs, as well as security facilities are given.
(2) The facilities and incentives as intended in paragraph (1) shall be determined in accordance with the provisions of regulations.
In KEK, provisions that regulate open business sectors with some investment prerequisite shall not apply, unless those applicable for UMKM and cooperatives.
Part Four
Facilities and Other Incentives
(1) In addition to the facilities and incentives as regulated in Article 30 through Article 39, the areas within KEK may be granted facilities and other incentives.
(2) The provisions concerning facilities and other incentives as intended in paragraph (1) shall be regulated by the relevant agencies in accordance with the provisions of regulations.
Part Five
Employment
The permission to employ foreign employees (TKA) as directors or commissioners shall be issued only once and shall be valid as long as they occupy the positions as directors or commissioners.
The use of manpower in KEK shall prioritize Indonesian citizens in accordance with the provisions of regulations.
(1) In KEK, Special Tripartite Cooperative Institution shall established by the Governor with the following duties:
a. conducts communication and consultation on various employment issues;
b. conducts early detection of possible emergence of manpower problems; and
c. provides suggestions and considerations on the problem solving steps.
(2) Membership of the institution as intended in paragraph (1) shall consist of elements of the Government, regional government, employee unions/labor union’s elements, and entrepreneur’s association’s elements.
(3) In carrying outs its duties and functions, the institutions as intended in paragraph (1) shall coordinate with other agencies.
(1) In KEK, Remuneration Council shall be established by the Governor with the following duties and functions:
a. provide inputs and suggestions to determine remuneration, and
b. discuss remuneration issues.
(2) The membership of the Council as intended in paragraph (1) shall consist of elements of the Government, regional government, employee unions/labor unions elements, entrepreneurs associations elements, experts, and colleges.
(3) In carrying outs its duties and functions, the Council as intended in paragraph (1) shall coordinate with other agencies.
(1) The determination and application of minimum wages shall be regulated by the governor.
(2) The determination of the minimum wages shall take into account at least:
a. minimum wages as the safety net;
b. capabilities of UMKM and cooperatives; and
c. decent living needs (KHL).
(1) For a company with more than 1 (one) employee unions/labor unions, may determined 1 (one) employee union/labor union forum.
(2) The provisions on the establishment of employee union/labor union forum as intended in paragraph (1) shall be governed by Regulation of the Minister in charge of manpower affairs.
(1) A company that has formed an employee union/labor union must enter into a collective labor agreement (PKB) between the employee union/labor union and the employer.
(2) In the PKB, the following is agreed:
a. types of work that may be sub contracted to other companies, and
b. type of working relationship based on the employment agreement for specified an unspecified times.
(3) In case the company performs works pertaining to new products, new activities, or additional products under experimental or trial stage, such may be carried out with the employment agreement for specified an unspecified times for a period maximum 2 (two) years and may be extended for one time, for 1 (one) year at the most.
(4) Employment agreement with specified time as intended in paragraph (3) cannot be extended.
CHAPTER VII
CLOSING PROVISIONS
(1) When this Law comes into effect, the Free Trade Zones and Free Ports, namely Batam, Bintan and Karimun, which have been set up based on Law Number 36 of 2000 concerning the Determination of Government Regulation in Lieu of Law Number 1 of 2000 concerning Free Trade Zones and Free Ports becomes Law (Statute Book of the Republic of Indonesia Number 251 of 2000, Supplement to Statute Book of the Republic of Indonesia Number 4053) as amended by Law Number 44 of 2007 concerning the Stipulation of Government Regulation in Lieu of Law Number 1 of 2007 concerning Amendment to Law Number 36 of 2000 concerning Stipulation of Government Regulation in Lieu of Law Number 1 of 2000 concerning Free Trade Zones and Free Ports become Law (Statute Book of the Republic of Indonesia Number 130 of 2007, Supplement to Statute Book of the Republic of Indonesia Number 4775), before or after a the expiry of defined time period, may be proposed as KEK in accordance with the provisions of this Law and the provisions of other regulations.
(2) In case of the Free Trade Zones and Free Ports as intended in paragraph (1) are not proposed to become KEK, the Free Trade Zones and Free Ports shall expire in accordance with a predetermined period.
Upon the change of the status of Free Trade Zones and Free Ports as intended in Article 48 paragraph (1) or the expiry of the predetermined period as intended in Article 48 paragraph (2), Law Number 36 of 2000 concerning Stipulation of Government Regulation in Lieu of Law Number 1 of 2000 concerning Free Trade Zones and Free Ports become Law (Statute Book of the Republic of Indonesia Number 251 of 2000, Supplement to Statute Book of the Republic of Indonesia Number 4053) as amended by Law Number 44 of 2007 concerning Stipulation of Government Regulation in Lieu of Law Number 1 of 2007 concerning the Amendment of Law Number 36 of 2000 concerning Stipulation of Government Regulation in Lieu of Law Number 1 of 2000 concerning Free Trade Zones and Free Ports become Law (Statute Book of the Republic of Indonesia Number 130 of 2007, Supplement to Statute Book of the Republic of Indonesia Number 4775), is revoked and declared null and void.
This Law shall come into force on the date of promulgation.
For public cognizance, this Law shall be promulgated by placing it in the State Gazette of the Republic of Indonesia.
Stipulated in Jakarta
on October 14, 2009
PRESIDENT OF THE REPUBLIC OF INDONESIA
signed,
DR. H. SUSILO BAMBANG YUDHOYONO
Promulgated in Jakarta
on October 14, 2009
MINISTER OF JUSTICE AND HUMAN RIGHTS OF THE REPUBLIC OF INDONESIA,
signed,
ANDI MATTALATTA
STATE GAZETTE OF THE REPUBLIC OF INDONESIA NO. 147 OF 2009