New Era of Business Licensing in Indonesia: Government Regulation 28/2025 Overhauls Permit System
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). The 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 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 aligns 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 documentation, 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 the process is governed by centralised criteria that have been simplified under 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 other benefits; and Business Partnerships, both mandatory and voluntary, with monitoring features. The updated OSS enables real-time permit 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 parts of Indonesia.
Clearer Roles for Licensing Institutions
Business licence issuers have now been clearly delineated: the OSS system and ministries handle general permits; regional Investment and One-Stop Integrated Services offices (DPMPTSP) at provincial and district/city level manage regional permits; and Special Economic Zone (KEK) and Free Trade Zone authorities handle permits 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 according to risk level: low, medium or high, with licensing requirements tailored to each category.
PP 28/2025 introduces tiered administrative sanctions for violations, ranging from official warnings, temporary suspensions 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 positioning 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 aligns 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 documentation, 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 the process is governed by centralised criteria that have been simplified under 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 other benefits; and Business Partnerships, both mandatory and voluntary, with monitoring features. The updated OSS enables real-time permit 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 parts of Indonesia.
Clearer Roles for Licensing Institutions
Business licence issuers have now been clearly delineated: the OSS system and ministries handle general permits; regional Investment and One-Stop Integrated Services offices (DPMPTSP) at provincial and district/city level manage regional permits; and Special Economic Zone (KEK) and Free Trade Zone authorities handle permits 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 according to risk level: low, medium or high, with licensing requirements tailored to each category.
PP 28/2025 introduces tiered administrative sanctions for violations, ranging from official warnings, temporary suspensions 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 positioning itself as a competitive global investment destination. However, adapting to the new system demands a thorough understanding of regulatory nuances.