Indonesia’s Omnibus Law
On November 2, 2020, President Joko Widodo of the Indonesian government passed Indonesia’s Omnibus Law on job creation. Essentially, the Indonesian omnibus law amended many Peraturan Pemerintah (PP), or government regulations, to strengthen the economy by increasing competitiveness, creating jobs, and making it easier to do business in Indonesia.
Its main goal is to stimulate domestic and foreign investment to transform Indonesia’s economic sphere. With that, the omnibus law has brought many more opportunities for multinationals operating in or considering investing in Southeast Asia’s largest economy.
Indonesia’s omnibus law clearly shows the government’s commitment to minimizing red tape in virtually every area of business to woo foreign investors. As such, foreign investors should consider the many changes and how best to go forward with this new law. Despite the many controversies surrounding the omnibus law, Indonesia’s government is confident that this change will also help the country tide through Covid-19.
The omnibus law has amended up to 76 existing laws. In addition, eliminating central and regional government regulations of about 5000 and 16,000 respectively.
Simplified business licensing
In the past, any business in Indonesia required one or more licenses to operate, which must be extended after a certain period. It was also the responsibility of many government institutions and regional governments to issue these business licenses. This process was across the various state, local, and central agencies, making it a multi-layered system. Therefore, it was difficult for an investor to know what business permits and licenses to obtain, where to get them, and in what order they should be applied for.
With the omnibus law, the process to obtain your business license is a lot easier now.
It simplifies Indonesia’s existing regulations by combining or scraping many business licenses. This has affected almost all business sectors, including maritime and fisheries, energy and mineral resources, electricity, infrastructure, and transportation.
The role of the national Investment Coordinating Board (BKPM) is strengthened and plays a pivotal role in streamlining the issuing of all business licenses. Under the omnibus law, a foreign investor will be able to obtain a business license through an Online Single Submission (OSS) system, eliminating the need to go through multiple ministries or other government institutions. The omnibus law will also introduce a risk-based approach system, dividing businesses into categories of low, middle, and high risk.
- Low-risk businesses only need a registration number
- Medium-risk businesses will need a standard certification
- Only High-risk businesses will still need a full business license