From PP 5/2021 to PP 28/2025: Indonesia's New Business Licensing System Explained
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, simplifying procedures whilst enhancing legal clarity and compliance. For both local and foreign businesses, understanding the new licensing system is essential for market entry and legal operations in Indonesia.
**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-Stage Licensing Model**
The business licensing system is now divided into two main phases. The first phase, "Starting a Business," covers legal documents, basic requirements such as spatial planning compliance and environmental permits, and licence applications through the Online Single Submission (OSS) system. The second phase, "Running a Business," encompasses 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 Indonesian government is committed to digital transformation, and PP 28/2025 reflects this. The OSS platform has been updated with new subsystems to handle the licensing process 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 Limits on Regional Authority**
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 altering centrally established requirements. This aims to reduce bureaucratic disparities between regions and ensure process clarity across all of Indonesia.
**Clearer Roles for Licensing Bodies**
Business licence issuers have now been clearly delineated: OSS and ministries handle general licences; regional DPMPTSP offices (provincial and district/city level) handle regional licences; and Special Economic Zone (KEK) and Free Trade Zone authorities handle special 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 based on risk assessment. Each sector is classified by risk level: low, medium or high, with licence requirements adjusted according to these risk categories.
PP 28/2025 introduces tiered administrative sanctions for violations, ranging from official warnings, temporary suspension, administrative fines, enforcement by state institutions, licence revocation, to cancellation of basic legal requirements. All sanction processes are managed through the OSS platform to ensure transparency and accountability.
**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-Stage Licensing Model**
The business licensing system is now divided into two main phases. The first phase, "Starting a Business," covers legal documents, basic requirements such as spatial planning compliance and environmental permits, and licence applications through the Online Single Submission (OSS) system. The second phase, "Running a Business," encompasses 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 Indonesian government is committed to digital transformation, and PP 28/2025 reflects this. The OSS platform has been updated with new subsystems to handle the licensing process 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 Limits on Regional Authority**
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 altering centrally established requirements. This aims to reduce bureaucratic disparities between regions and ensure process clarity across all of Indonesia.
**Clearer Roles for Licensing Bodies**
Business licence issuers have now been clearly delineated: OSS and ministries handle general licences; regional DPMPTSP offices (provincial and district/city level) handle regional licences; and Special Economic Zone (KEK) and Free Trade Zone authorities handle special 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 based on risk assessment. Each sector is classified by risk level: low, medium or high, with licence requirements adjusted according to these risk categories.
PP 28/2025 introduces tiered administrative sanctions for violations, ranging from official warnings, temporary suspension, administrative fines, enforcement by state institutions, licence revocation, to cancellation of basic legal requirements. All sanction processes are managed through the OSS platform to ensure transparency and accountability.