In recent years, the Indonesian government has sought to improve the\ninvestment climate by reforming the business licensing system. One of\nthe most significant changes is the implementation of risk-based\nlicensing integrated digitally through the Online Single Submission\n(OSS) system. This platform is designed to enable business actors to\nobtain permits more quickly, transparently, and centrally without having\nto visit multiple agencies.<\/p>\n
This transformation was reinforced by the issuance of Government\nRegulation No.\u00a028 of 2025, which replaces the previous regulation. This\nregulation refines the risk-based licensing system previously governed\nby Government Regulation No.\u00a05 of 2021, which derived from the Job\nCreation Law. The government hopes this refinement will enhance legal\ncertainty whilst improving the quality of business licensing\nservices.<\/p>\n
According to Andre Abraham, Head of Legal Bureau at the Ministry of\nInvestment and Downstream Industries\/BKPM, the rule revision emerged\nfrom implementation experience over recent years. In practice, the\nprevious system still left various obstacles, ranging from processes\ndeemed overly complicated for business actors to loopholes exploited by\nsome parties to manipulate licensing regulations.<\/p>\n
Consequently, the government decided to undertake a comprehensive\noverhaul to make the licensing system simpler, more transparent, and\nprovide stronger legal certainty. The hope is that business actors can\nconduct their operations without being hindered by convoluted\nbureaucratic processes whilst remaining within clear and measurable\nregulatory frameworks.<\/p>\n
Conceptually, risk-based licensing is designed to simplify\nbureaucracy. Not all business activities are treated with the same\nprocedure. The government categorises businesses based on risk level.\nLow-risk activities receive simpler processes, whilst high-risk\nactivities must go through stricter verification stages before obtaining\noperational permits.<\/p>\n
Through OSS system integration, business actors essentially only need\nto access one portal to manage various licensing needs. On the same\nplatform, entrepreneurs can submit basic requirements such as spatial\nplanning compliance, environmental permits, and building permits. The\naim is to create a more efficient and accessible single-window licensing\nsystem.<\/p>\n
However, in practice, this digital system integration continues to\ndevelop. Some business actors still face technical obstacles when the\nOSS system must interact with data from other ministries or regional\ngovernments. Incomplete inter-agency integration processes sometimes\ncause licensing procedures not to proceed as quickly as expected.<\/p>\n
Another important change in the latest regulation is the placement of\nbasic requirements at the initial stage of the licensing process.\nWhereas previously business actors could first obtain a Business\nIdentification Number (NIB), now several basic requirements must be\nfulfilled before the NIB can be issued through the OSS system.<\/p>\n
These requirements include spatial planning activity compliance,\nenvironmental permits, and building approvals. From the regulator\u2019s\nperspective, this change aims to ensure that business activities\nestablished conform to spatial planning and environmental standards from\nthe outset of the licensing process.<\/p>\n
For some business actors, this change means the initial licensing\nstage could become longer. This is particularly felt in regions that\nhave not yet integrated their spatial planning systems or detailed\nspatial plans (RDTR) with OSS. Without such integration, verification\nprocesses often must be conducted manually by regional governments.<\/p>\n
At the central level, OSS is designed as a unified system connecting\nthe entire licensing process. However, the reality of Indonesia\u2019s\nregional administration means implementation is not always uniform. Some\nregions still maintain their own licensing systems or manual procedures\nnot fully integrated with OSS.<\/p>\n
As a result, business actors sometimes face two mechanisms\nsimultaneously. On one hand they have processed permits through the OSS\nsystem, but on the other they are still asked to complete additional\nprocedures by regional agencies. This situation frequently becomes a\nsource of confusion for business actors who hope licensing can be\nconducted entirely digitally.<\/p>\n
To overcome slow bureaucratic processes, the latest regulation\nintroduces a mechanism called \u201cfiktif positif\u201d (deemed approved). Under\nthis mechanism, if a licensing application is not processed within a\nspecified timeframe by the relevant agency, the system can automatically\ndeem the application approved.<\/p>\n
For example, for certain permit types such as spatial planning\ncompliance, the processing timeframe is set at approximately 25 days. If\nby that deadline there is no decision from the relevant agency, the OSS\nsystem can automatically issue approval as a form of certainty for the\nbusiness actor.<\/p>\n
Nevertheless, the government recognises this mechanism also carries\npotential risks. Permits issued before verification processes are fully\ncomplete could create problems later. Consequently, the fiktif positif\nmechanism is accompanied by a monitoring system through post-issuance\naudit processes.<\/p>\n
Through this post-audit mechanism, the government can still evaluate\nissued permits. If non-compliance or regulatory violations are found,\nthe relevant agency can request corrections or even impose sanctions on\nthe business actor in question.<\/p>\n
Beyond technical system obstacles, another common issue in licensing\nprocesses is error in selecting business activity codes (KBLI). Many\ncompanies list too many business activity codes in their licensing\ndocuments, even though the actual business activities conducted comprise\nonly a small portion of that list.<\/p>\n
This practice is typically done to maintain operational flexibility\nand hedge against potential future business developments. However,\nlisting excessive codes can complicate the initial licensing assessment\nand expose businesses to unexpected regulatory obligations beyond their\nactual operational scope.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/when-business-licensing-transitions-to-digital-system-1773445900", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }