Thursday, March 23, 2023

Get-to know transfer of technology policies, regulation in Indonesia

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The dependence of developing countries on technology from developed countries is a fact that cannot be denied. Developing countries really need the help of developed countries to carry out technology transfer. Indonesia as a developing country has not optimally encouraged the development of technology towards the improvement of the mastery and utilization of technology. It can be seen from the 2020 Global Innovation Index report, Indonesia is ranked 14th out of 17 countries in Southeast Asia, East Asia and Oceania (SEAO) and ranked 87th out of 132 countries, which rank decreased compared to the previous year.

Governing laws and regulation 

  • Law No. 13/2016 concerning Patent as amended by Law No. 11/2020 concerning Job Creation
  • Law No. 13/2003 concerning Manpower as amended by Law No. 11/2020 concerning Job Creation
  • Law No. 2/2017 concerning Construction Services  
  • Law No. 11/2019 concerning National System of Science and Technology as amended by Law No. 11/2020 concerning Job Creation
  • Government Regulation (PP) No. 20/2005 concerning Transfer of Intellectual Property Technology and Results of Research and Development Activities by Universities and Research and Development Institutes


The United Nations Conference on Trade and Development (UNTAD) Draft Code of Conduct on Transfer of Technology defines technology transfer as the transfer of systematic knowledge for the manufacturer of a product, for the application of process or of the rendering of service and doesn’t extend to the transaction involving a mere sale of goods. Law No. 11/2019 also mentioned transfer of technology term that is defined as transfer of ability to utilize and control Science and Technology between institutions, agencies, or people, both within the domestic environment and those from abroad to within the country or vice versa.

Transfer of technology obligations in patent

In Law No. 13/2016, the Patent Holder is required to manufacture a product or use a process in Indonesia. The manufacture of the product or the use of the process must support the transfer of technology, absorption of investment and/or the provision of employment. If the patent holder violates this provision, based on a court decision, the patent may be abolished. A lawsuit for deletion is filed by the prosecutor or other party representing the national interest against the Patent Holder or the recipient of the Compulsory License to the Commercial Court.

Transfer of technology obligations in science and technology

In the education field, universities and R&D institutions are obliged to seek the transfer of intellectual property technology and the results of research and development activities, which are wholly or partly financed by the government and/or regional administrations to companies, the government, or the public as long as they do not conflict with public order and regulations. 

Technology Transfer can be done commercially or non-commercially by meet the requirement which are:

  1. The recipient of Technology Transfer is prioritized who resides in the territory of Indonesia
  2. The recipient of the Technology Transfer is able to utilize and master Science and Technology for the benefit of the community, nation and state
  3. Intellectual Property and the results of Research and Development activities transferred to technology are not declared as confidential in accordance with the provisions of laws and regulations
  4. The technology transfer does not conflict with public order and the provisions of laws and regulations.

Stakeholders can carry out technology transfer through licenses, cooperation, Science and Technology services, and/or the implementation of Technology Transfer which is carried out without conflicting with public order and the provisions of laws and regulations. Procurement of goods resulting from Technology Transfer must be carried out through Technology Clearing and Technology Audit.

Transfer of technology obligations in between foreign and domestic worker

In Law No. 25/2007, investment companies in meeting the needs of the workforce must prioritize Indonesian citizens. Investment companies that use foreign national experts are required to organize training and transfer technology to Indonesian citizens in accordance with the provisions of the legislation.

Law No. 3/2013 also explains that employers of foreign workers are obliged to appoint Indonesian citizens as assistants for foreign workers who are employed for technology transfer and transfer of expertise from foreign workers. The accompanying foreign worker does not automatically replace or occupy the position of the foreign worker who is accompanied by him. However, the assistance is more focused on technology transfer and skill transfer so that the accompanying workforce can have the ability so that in time it is hoped that they will be able to replace the foreign workers they accompany.

Transfer of technology obligations in construction sector

In the field of Construction Services, Law No. 2/2017 explains that Construction Contracts executed with foreign parties must include the obligation to transfer technology. Foreign construction workers in expert positions are obliged to carry out knowledge transfer and technology transfer to accompanying workers in accordance with the provisions of the legislation.

Every foreign construction worker in an expert position who does not carry out the obligation to transfer knowledge and transfer technology is subject to administrative sanctions in the form of written warnings, administrative fines, dismissal from work, and/or inclusion in a black list.

Furthermore, a foreign Construction Services business entity or a foreign Construction Services individual business that will conduct a Construction Services business in the territory of Indonesia in the form of a representative office is required to carry out the technology transfer process. Violating representative offices may be subject to administrative sanctions in the form of written warnings, administrative fines, temporary suspension of construction service activities, blacklisting, suspension of permits and/or revocation of permits.

Transfer of technology reward in investment

In Law No. 25/2007, the government also provides “reward” in the form of facilities to investors who are either in the context of business expansion or new investment, one of which is technology transfer. The form of facilities provided is in accordance with the provisions in the field of taxation.

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