When Business Licensing Transitions to Digital System
In recent years, the Indonesian government has sought to improve the investment climate by reforming the business licensing system. One of the most significant changes is the implementation of risk-based licensing integrated digitally through the Online Single Submission (OSS) system. This platform is designed to enable business actors to obtain permits more quickly, transparently, and centrally without having to visit multiple agencies.
This transformation was reinforced by the issuance of Government Regulation No. 28 of 2025, which replaces the previous regulation. This regulation refines the risk-based licensing system previously governed by Government Regulation No. 5 of 2021, which derived from the Job Creation Law. The government hopes this refinement will enhance legal certainty whilst improving the quality of business licensing services.
According to Andre Abraham, Head of Legal Bureau at the Ministry of Investment and Downstream Industries/BKPM, the rule revision emerged from implementation experience over recent years. In practice, the previous system still left various obstacles, ranging from processes deemed overly complicated for business actors to loopholes exploited by some parties to manipulate licensing regulations.
Consequently, the government decided to undertake a comprehensive overhaul to make the licensing system simpler, more transparent, and provide stronger legal certainty. The hope is that business actors can conduct their operations without being hindered by convoluted bureaucratic processes whilst remaining within clear and measurable regulatory frameworks.
Conceptually, risk-based licensing is designed to simplify bureaucracy. Not all business activities are treated with the same procedure. The government categorises businesses based on risk level. Low-risk activities receive simpler processes, whilst high-risk activities must go through stricter verification stages before obtaining operational permits.
Through OSS system integration, business actors essentially only need to access one portal to manage various licensing needs. On the same platform, entrepreneurs can submit basic requirements such as spatial planning compliance, environmental permits, and building permits. The aim is to create a more efficient and accessible single-window licensing system.
However, in practice, this digital system integration continues to develop. Some business actors still face technical obstacles when the OSS system must interact with data from other ministries or regional governments. Incomplete inter-agency integration processes sometimes cause licensing procedures not to proceed as quickly as expected.
Another important change in the latest regulation is the placement of basic requirements at the initial stage of the licensing process. Whereas previously business actors could first obtain a Business Identification Number (NIB), now several basic requirements must be fulfilled before the NIB can be issued through the OSS system.
These requirements include spatial planning activity compliance, environmental permits, and building approvals. From the regulator’s perspective, this change aims to ensure that business activities established conform to spatial planning and environmental standards from the outset of the licensing process.
For some business actors, this change means the initial licensing stage could become longer. This is particularly felt in regions that have not yet integrated their spatial planning systems or detailed spatial plans (RDTR) with OSS. Without such integration, verification processes often must be conducted manually by regional governments.
At the central level, OSS is designed as a unified system connecting the entire licensing process. However, the reality of Indonesia’s regional administration means implementation is not always uniform. Some regions still maintain their own licensing systems or manual procedures not fully integrated with OSS.
As a result, business actors sometimes face two mechanisms simultaneously. On one hand they have processed permits through the OSS system, but on the other they are still asked to complete additional procedures by regional agencies. This situation frequently becomes a source of confusion for business actors who hope licensing can be conducted entirely digitally.
To overcome slow bureaucratic processes, the latest regulation introduces a mechanism called “fiktif positif” (deemed approved). Under this mechanism, if a licensing application is not processed within a specified timeframe by the relevant agency, the system can automatically deem the application approved.
For example, for certain permit types such as spatial planning compliance, the processing timeframe is set at approximately 25 days. If by that deadline there is no decision from the relevant agency, the OSS system can automatically issue approval as a form of certainty for the business actor.
Nevertheless, the government recognises this mechanism also carries potential risks. Permits issued before verification processes are fully complete could create problems later. Consequently, the fiktif positif mechanism is accompanied by a monitoring system through post-issuance audit processes.
Through this post-audit mechanism, the government can still evaluate issued permits. If non-compliance or regulatory violations are found, the relevant agency can request corrections or even impose sanctions on the business actor in question.
Beyond technical system obstacles, another common issue in licensing processes is error in selecting business activity codes (KBLI). Many companies list too many business activity codes in their licensing documents, even though the actual business activities conducted comprise only a small portion of that list.
This practice is typically done to maintain operational flexibility and hedge against potential future business developments. However, listing excessive codes can complicate the initial licensing assessment and expose businesses to unexpected regulatory obligations beyond their actual operational scope.