Restrictions on Expatriates in Mining Sector

Since the issuance of the Labor Law (Law No. 13 of 2003), the Minister of Manpower (the “MOM”, formerly the Minister of Manpower and Transmigration—the “MOMT”) has issued 12 regulations regulating or re-regulating positions that are open for expatriates in 12 specific business sectors and one regulation on restricted positions in all business sectors, as set out in MOMT Decree No. 40 of 2012 on Certain Positions Restricted for Expatriates (“MOMT Decree No. 40/2012”).

Positions restricted under MOMT Decree No. 40/2012 are as follows:

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* Under the Manpower Law, expatriates are not permitted to occupy positions “in charge of personnel.” MEMR has on at least one occasion interpreted this restriction to mean that all companies must have at least one Indonesian Director, because if not, an expatriate director will be indirectly in charge of personnel issues. We are of the view that this is an overly broad interpretation, which does not reflect the position of the MOM itself. In practice, as long as human resources functions are properly delegated to an Indonesian HR Manager, this should be sufficient to satisfy the manpower requirements.

**The reference to “Chief executive officer” created confusion for employers because many of them in practice use the term “Chief executive officer” to describe positions like President Director or similar top management in their organizations.  Although the MOMT never issued any official clarification or circular letter on this, the Minister at the time went on record stating that as long as a chief executive officer did not perform personnel or other restricted functions, the position could be occupied by an expatriate.

Specifically for the mining sector, there have been no new regulations on positions for expatriates since MOMT Decree No. KEP-61/MEN/1983 on Limitation of Expatriate Usage in Mining and Energy Sector, Sub Sector of General Mining (“MOMT Decree No. 61/1983”), which remains in effect pending proposed amendments that we learned about in November 2014.

The following table sets out the positions that are open or closed to expatriates under MOMT Decree No. 61/1983:

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We understand that there is a plan that the MOM will issue a new regulation on positions that are restricted and open for expatriates in the mining sector as follows:

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Until the new regulation is issued, positions for expatriates in mining shall still refer to MOMT Decree No. 61/1983 and MOMT Decree No. 40/2012.

In accordance with Government Regulation No. 57 of 2014 on Development, Management, and Protection of Language and Literature as well as Increasing the Function of Indonesian Language, expatriates will be required to be able to communicate in Indonesian prior to being employed in Indonesia.  In practice we understand that this requirement has not yet been implemented.

February 11, 2015

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