Complicated Licensing Procedures: Deputy Minister of Investment Admits Indonesia's Business Climate Lags Behind Vietnam
Bisnis.com, JAKARTA — The government acknowledges that the complexity of bureaucratic licensing services is a structural obstacle that makes Indonesia’s investment climate lag behind Vietnam.
Deputy Minister of Investment and Downstreaming/Deputy Head of the Investment Coordinating Board (BKPM) Todotua Pasaribu revealed that Vietnam is currently a benchmark and a major competitor for Indonesia in attracting foreign investment in the Southeast Asian region.
According to him, Vietnam’s economic growth, which is projected to reach 8% in 2025, is inseparable from significant investment contributions. Meanwhile, Indonesia’s economic growth is still constrained at around 5%.
Todotua highlighted that one of the main differences between Indonesia and Vietnam lies in the investment cycle.
In Vietnam, he continued, the investment cycle is practically limited to the physical construction phase; while in Indonesia, the time span from commitment to execution can be very time-consuming.
“In our country, to be honest, this investment cycle is still relatively around 4 to 5 years. One of the contributing factors is the licensing services that make it impossible to execute investment quickly,” he said at the Socialization of the Adjustment of Government Regulation 28/2025 at the BKPM Office, Jakarta, Thursday (February 26, 2026).
The slow licensing services are clearly visible in the data from the Online Single Submission (OSS) system. Todotua noted that at the beginning of his tenure at the Ministry, there was a pile of unrealized investment worth almost IDR 1,500 trillion.
These companies already have a Business Identification Number (NIB), are registered in the Indonesian Standard Industrial Classification (KBLI), and have clear investment commitments. However, their realization reports are nil because they cannot be executed in the field due to licensing issues.
“The Ministry of Investment and Downstreaming fully understands that this is a very important context for us to improve. This is not a taboo for us to discuss, but we are thinking about how we can provide solutions to these problems,” said Todotua.
Reform through Government Regulation 28/2025
As a solution, the government issued Government Regulation (PP) No. 28/2025. This regulation is claimed to be a form of comprehensive licensing reform that will provide business certainty for investors.
Todotua explained that the main breakthrough in PP 28/2025 is the implementation of a Service Level Agreement (SLA) which is bound by a ‘positive fiction’ mechanism. Through this scheme, if the relevant agency does not issue a permit within the specified SLA timeframe, then the permit is legally deemed to have been issued and approved.
Of the total 372 permits covering approximately 1,700 KBLI, the government has mapped more than 180 permits that now fall into the positive fiction ecosystem with strict SLAs.
“One of the easiest examples is the hospitality licensing service. Within 28 days, we can provide certainty that the permit will be issued and business actors can realize their investment,” explained Todotua.
He emphasized that this certainty of time is very crucial. After all, he continued, the business world demands speed so that business momentum is not lost over time.
“There are types of businesses that have short cycles. It could be that business trends have changed, but the permits have not been issued. This often happens,” concluded Todotua.