New Industrial-Business Scale Classifications

The Minister of Industry(“Minister”)has finally issued Regulation No. 64/M-IND/PER/7/2016 on Total Employee Numbers and Investment Values for the Classification of Industrial  Scale (“2016 Regulation”). [1] In essence, the 2016 Regulation is an implementation of Article 102 (4) of Law No. 3 of 2014 on Industries (“Industrial Law”), [2] which requires further provisions on total employee numbers and investment values in order to determine the classification of small-, medium-, and large-scale industrial businesses. [3] The 2016 Regulation is of relevance to all businesses which are working within the industrial sector, as well as to investors who are looking to invest in the industrial sector.Industrial-Business ScalesIn general, the Industrial Law mandates that every industrial business should acquire an industrial license from the Minister, or from the relevant governor or regent/mayor. This license is to be granted based on business classification, namely: small, medium or large. [4] The above-mentioned classifications are to be further determined based on total employee numbers and investment values, as follows: [5] Specific for small-scale industrial businesses, the 2016 Regulation requires that any owners of such businesses run their business activities from the same location that they live in. [6] As additional information, the Industrial Law also reserves certain types of industrial-business activities for Indonesian citizens only, namely: i) Small-scale industrial businesses; ii) Unique industrial business which are considered integral to the country’s national heritage; and iii) Certain medium-scale industrial businesses. The businesses set out in points (i) and (ii) are to be determined by the President. [7] It should be noted however the classifications above must not be confused with the classifications for small-scale and medium-scale enterprises, as set out under Law No. 20 of 2008 on Micro-, Small-, and Medium-Scale Enterprises (“MSME Law”), and as outlined in the following table: [8] The various classifications set out under MSME Law apply to enterprises which are working in non-industrial sectors, while the classifications set out under the 2016 Regulation apply to businesses which are working in industrial sectors.Industrial-Business Scales for Certain IndustriesPrior to the issuance of the 2016 Regulation, the Ministry had also determined various classifications for certain industrial businesses, as described under Ministry Regulation No. 20/M-IND/PER/3/2016 as the Third Amendment to Ministry Regulation No. 11/M-IND/PER/3/2014 on the Restructuring Program for Machines and/or Equipment for Small-Scale Industry and Medium-Scale Industry (collectively referred to as “11/2014 Regulation”).In essence, the 11/2014 sets out a restructuring program for machines and/or equipment for small-scale and medium-scale industrial businesses and specifies different business-scale criteria from the 2016 Regulation, as can be seen in the table below: [9] However, the various classifications which are set out under the 11/2014 Regulation only apply to certain industrial sectors, as listed under the Appendix to the 11/2014 Regulation, for example: [10]