A New Era of Business Licensing in Indonesia: Key Changes Under Government Regulation 28/2025
The Indonesian government has introduced major updates to its business licensing system through the issuance of Government Regulation No. 28 of 2025 (PP 28/2025). This regulation replaces PP No. 5 of 2021, streamlining procedures whilst enhancing legal clarity and compliance. For both local and foreign businesses, understanding the new licensing system is essential for entering the Indonesian market and operating lawfully.
From PP 5/2021 to PP 28/2025: What Has Changed?
PP 28/2025 brings a major overhaul to the business licensing system. Whilst retaining the risk-based model, its scope has been expanded from 16 to 22 sectors, including metrology, the creative economy, geospatial information, cooperatives, investment, and electronic systems and transactions. These changes ensure that the business licensing process is aligned with Indonesia's economic and digital development.
Two-Phase Licensing Model
The business licensing system is now divided into two main phases. The first phase covers starting a business, including legal documentation, basic requirements such as spatial planning conformity and environmental permits, and licence applications through the Online Single Submission (OSS) system. The second phase covers running a business, encompassing land acquisition, recruitment, equipment procurement, and full operations including production, marketing and distribution. Each step in this process is governed by centralised criteria that have been simplified through the new regulation.
OSS Expansion and Digital Licensing Infrastructure
The government is committed to digital transformation, and PP 28/2025 reflects this. The OSS platform has been updated with new subsystems to handle licensing processes from start to finish. Key OSS subsystems include basic requirements providing access to spatial planning permits (KKPR), environmental permits and building permits; investment facilities including import duty exemptions, training incentives and others; and business partnerships, both mandatory and voluntary, with monitoring features. The updated OSS enables real-time licence tracking and direct compliance updates.
New NSPK and Regional Authority Limitations
PP 28/2025 strengthens the central government's role in establishing Norms, Standards, Procedures and Criteria (NSPK) for business licensing. Regional governments are prohibited from adding to or modifying centrally established requirements. This aims to reduce bureaucratic disparities between regions and ensure process clarity across all of Indonesia.
Clearer Roles for Licensing Institutions
Business licence issuers are now clearly delineated. OSS and ministries handle general licences, regional investment and one-stop services offices (DPMPTSP) at provincial and district/city levels handle regional licences, and Special Economic Zone (KEK) and Free Trade Zone authorities handle licences for designated areas. This clarity supports faster approval processes and better coordination, particularly for foreign investors.
Risk-Based Approach and Administrative Sanctions
Indonesia's business licensing reform remains grounded in risk assessment. Each sector is classified by risk level: low, medium or high, with licence requirements tailored to these risk categories.
PP 28/2025 introduces tiered administrative sanctions for violations, ranging from formal warnings, temporary suspension and administrative fines through to enforcement by state institutions, licence revocation and cancellation of basic legal requirements. All sanction processes are managed through the OSS platform to ensure transparency and accountability.
The new licensing system represents a step forward towards transparency, efficiency and economic growth. With simpler processes and stronger digital infrastructure, Indonesia is asserting itself as a competitive global investment destination. However, adapting to the new system demands a thorough understanding of regulatory nuances.
From PP 5/2021 to PP 28/2025: What Has Changed?
PP 28/2025 brings a major overhaul to the business licensing system. Whilst retaining the risk-based model, its scope has been expanded from 16 to 22 sectors, including metrology, the creative economy, geospatial information, cooperatives, investment, and electronic systems and transactions. These changes ensure that the business licensing process is aligned with Indonesia's economic and digital development.
Two-Phase Licensing Model
The business licensing system is now divided into two main phases. The first phase covers starting a business, including legal documentation, basic requirements such as spatial planning conformity and environmental permits, and licence applications through the Online Single Submission (OSS) system. The second phase covers running a business, encompassing land acquisition, recruitment, equipment procurement, and full operations including production, marketing and distribution. Each step in this process is governed by centralised criteria that have been simplified through the new regulation.
OSS Expansion and Digital Licensing Infrastructure
The government is committed to digital transformation, and PP 28/2025 reflects this. The OSS platform has been updated with new subsystems to handle licensing processes from start to finish. Key OSS subsystems include basic requirements providing access to spatial planning permits (KKPR), environmental permits and building permits; investment facilities including import duty exemptions, training incentives and others; and business partnerships, both mandatory and voluntary, with monitoring features. The updated OSS enables real-time licence tracking and direct compliance updates.
New NSPK and Regional Authority Limitations
PP 28/2025 strengthens the central government's role in establishing Norms, Standards, Procedures and Criteria (NSPK) for business licensing. Regional governments are prohibited from adding to or modifying centrally established requirements. This aims to reduce bureaucratic disparities between regions and ensure process clarity across all of Indonesia.
Clearer Roles for Licensing Institutions
Business licence issuers are now clearly delineated. OSS and ministries handle general licences, regional investment and one-stop services offices (DPMPTSP) at provincial and district/city levels handle regional licences, and Special Economic Zone (KEK) and Free Trade Zone authorities handle licences for designated areas. This clarity supports faster approval processes and better coordination, particularly for foreign investors.
Risk-Based Approach and Administrative Sanctions
Indonesia's business licensing reform remains grounded in risk assessment. Each sector is classified by risk level: low, medium or high, with licence requirements tailored to these risk categories.
PP 28/2025 introduces tiered administrative sanctions for violations, ranging from formal warnings, temporary suspension and administrative fines through to enforcement by state institutions, licence revocation and cancellation of basic legal requirements. All sanction processes are managed through the OSS platform to ensure transparency and accountability.
The new licensing system represents a step forward towards transparency, efficiency and economic growth. With simpler processes and stronger digital infrastructure, Indonesia is asserting itself as a competitive global investment destination. However, adapting to the new system demands a thorough understanding of regulatory nuances.