The Indonesian Government is currently drafting a bill on Industrial Zones that would establish a more comprehensive framework for investment, spatial planning, licensing, incentives, infrastructure, manpower, and other aspects of Industrial Zone development.
One of the proposed measures concerns incentives and facilities for companies operating within Industrial Zones, including proposed immigration facilitation for foreign workers and investors operating in, or connected to, companies located in these zones.
The proposed immigration facilitation is intended to simplify certain administrative processes, including visa and stay permit services for eligible foreign nationals. However, the bill has not yet been enacted into law. Its provisions remain subject to the legislative process and may still change before final passage.
Immigration Facilitation as a Proposed Non-Fiscal Incentive
The draft bill proposes various incentives and facilities for Industrial Zone Companies and companies operating within Industrial Zones.
These incentives consist of both fiscal and non-fiscal measures and are intended to support investment, production, employment, and the development of Industrial Zones.
The proposed immigration-related facility is set out in Article 47 paragraph (2) letter j of the draft bill. The provision includes ease of business licensing, port services, manpower, and immigration matters for foreign nationals, as well as security facilities.
It is important to distinguish this proposal from the establishment of a separate immigration regime for foreign nationals working or investing in Industrial Zones.
The proposed immigration facilitation is instead positioned as one form of non-fiscal incentive within the broader administrative framework applicable to Industrial Zones.
The Proposed Incentives Extend Beyond Immigration
The scope of the proposed incentives is broader than immigration matters.
Article 47 paragraph (2) also covers proposed facilities relating to land or site provision, training for Industrial Workers, professional competency certification, Industrial Infrastructure development, spatial-planning adjustments, renewable energy development, and procedures for acquiring land rights.
In addition, Article 47 paragraph (1) provides for fiscal incentives in the form of tax and customs reductions, with further provisions to be regulated through ministerial regulations in the field of state finance.
The proposed framework therefore addresses several regulatory and operational aspects of Industrial Zone development rather than focusing solely on immigration.
The draft bill also proposes additional incentives for Industrial Zone companies located within designated industrial growth centers.
Under Article 49, the Government may grant incentives to Industrial Zone companies located in industrial growth centers, subject to certain requirements.
These include:
- Being located in border or underdeveloped regions;
- Optimizing the use of domestic goods and services;
- Developing Industrial Workers;
- Contributing to export performance and domestic value-added;
- Providing space for micro and small businesses; and
- Implementing environmental initiatives, including Green Industry and Halal Industry programs.
The incentives would be granted for a specified period depending on the type and characteristics of the business activity. Any extension would depend on an evaluation of the company’s performance against the applicable requirements.
The draft bill also allows the Government to suspend or revoke incentives, or require partial or full repayment of incentives already received, if the recipient no longer satisfies the relevant requirements.
Incentives Would Be Subject to Specific Requirements
The proposed incentives and facilities would not automatically apply to every company operating within an Industrial Zone.
Article 46 paragraph (3) provides that the granting of incentives would take into account several factors, including:
- The type and scale of the business activity;
- The positive impact of the business activity on the national economy;
- The alignment of the business activity with national industrial development plans;
- The state’s financial capacity; and
- Applicable laws and regulations.
Accordingly, the proposed immigration facilitation should not be interpreted as an automatic entitlement for all foreign workers, expatriates, or investors connected to an Industrial Zone.
Eligibility, scope, procedures, and implementation would depend on the requirements established under the final legal framework and any implementing regulations.
Foreign Worker Utilization and Development of Indonesian Workers
The proposed benefits relating to foreign workers are accompanied by obligations concerning the development of Indonesian Industrial Workers.
Article 22 provides that Industrial Companies and/or Industrial Zone Companies employing foreign workers would be required to provide work-related education for Industrial Workers in accordance with the qualifications of the positions held by the foreign workers.
Article 25 contains a similar requirement for Industrial Companies employing foreign workers, requiring them to provide job training for Industrial Workers in accordance with the qualifications of the positions held by the foreign workers.
The draft bill also places broader emphasis on developing a competent and competitive industrial workforce through education, training, and apprenticeship programs.
Companies operating in Industrial Zones are expected to prioritize and engage local workers residing in and around the Industrial Zone, provided that they meet the required competencies, qualifications, and other applicable criteria.
Where local workers do not yet meet these requirements, the proposed framework provides for education and training programs to improve their qualifications and competencies.
Accordingly, the proposed framework does not only address the facilitation of foreign worker utilization. It also seeks to connect the use of foreign expertise with the development of skills and capacity among Indonesia’s local industrial workforce.
Incentives as Part of the Proposed Industrial Development Framework
The proposed incentives and facilities form part of the broader objectives of the draft Industrial Zone legislation.
Article 3 provides that the regulation of Industrial Zones under the proposed bill is intended to:
- Increase investment contributions in Industrial Zones;
- Strengthen the capacity of a competent industrial workforce;
- Create employment opportunities;
- Improve investment competitiveness; and
- Foster a conducive investment climate.
The bill’s elucidation also refers to the Government’s economic growth target of 8% driven by the industrial sector. The proposed regulatory framework is intended to support this objective through investment, exports, household consumption, and industrial-sector development.
In this context, the proposed immigration facility represents only one component of a broader policy framework addressing investment, industrial capacity, employment, infrastructure, and domestic value-added.
The Draft Bill Remains Subject to the Legislative Process
For companies, investors, and foreign nationals potentially affected by the proposed framework, it is important to note that the provisions remain in draft form.
The bill and its provisions may still be amended during the legislative process. The draft also contemplates the issuance of implementing regulations after the law is enacted.
Article 83 provides that implementing regulations for the proposed law must be issued no later than one year after the law is enacted.
The institutional structure contemplated under the draft is also not yet final. The draft materials present several possible forms for the proposed National Industrial Zone body, including a cross-ministerial coordination structure led by the President, an agency under a Minister, or an independent agency reporting to the President.
For this reason, the provisions currently contained in the draft should be understood as an indication of potential regulatory direction rather than as rights or facilities that are currently available.
If the bill is enacted with substantially similar provisions, it could establish a more integrated framework for companies operating within Indonesia’s Industrial Zones. However, companies and foreign business actors would still be required to comply with applicable requirements concerning incentives, business licensing, land, spatial planning, manpower, immigration, and other regulatory matters.
Conclusion
Indonesia’s draft Industrial Zone Law proposes a broader framework for the development and regulation of Industrial Zones, including investment, licensing, infrastructure, manpower, and immigration-related matters.
One of the proposed measures is the provision of non-fiscal incentives relating to business licensing, port services, manpower, and immigration for foreign nationals connected to companies operating within Industrial Zones.
However, the proposed framework does not establish an unconditional entitlement to these incentives. Their availability would depend on various factors, including the type and scale of the business activity, its economic impact, alignment with national industrial development plans, and compliance with applicable laws and regulations.
The proposed framework also links the utilization of foreign workers with obligations to provide education and training for Indonesian Industrial Workers. This reflects the broader objective of developing domestic industrial capabilities alongside investment and employment.
As the bill remains under discussion, the details concerning immigration facilities, eligibility requirements, application procedures, and implementation mechanisms have not yet been finalized.
Companies and foreign business actors should therefore distinguish between the provisions currently in force and those proposed under the draft legislation. The development of the bill and any subsequent implementing regulations will be relevant in determining the scope and practical application of the proposed incentives.
This article is based on the draft Industrial Zone Bill (Rancangan Undang-Undang tentang Kawasan Industri) and is intended for general informational purposes. The bill remains subject to the legislative process, and its provisions may change before enactment. The applicable legal position should be assessed based on the legislation and implementing regulations in force at the relevant time.
For further information or consultation, please contact:
Rifki Hermawan – Partner – rifki@cptp.law
Raditya Alif Fahreza – Paralegal
