Implementation of Risk-Based Licensing in Indonesia


Indonesia’s goal is to be one of the top 10 largest economies of the world. To reach this goal, the government has worked hard to gain investments to keep the country’s economy running and growing. Luckily, they have been able to maintain a stable investment climate due to the fact that Indonesia is a country with so much potential.

The Indonesian government is committed to making licensing arrangements simple and efficient. Thus, when potential investors want to invest, they no longer have to worry about difficulties in obtaining permits. One of the government’s innovations is the release of an electronically integrated licensing system.

Not only for potential investors, the business licensing system also makes it easy for MSMEs to start their business. Getting the legality to do business is very easy. Now, in a matter of minutes, business permits can be obtained quickly and simply.

Efficient Licensing for Investors

One of the strategies that the Indonesian government has implemented to attract investors is by implementing the Job Creation Law and accelerating Indonesia’s digitalization in the 4.0 era. The investment process in Indonesia is experiencing transformation and reformation to make the licensing process even more efficient.

The transformation and reformation have been done by establishing the Job Creation Law or UU Cipta Kerja. The Job Creation Law allows investors to obtain a license through the Online Single Submission (OSS) system online. The OSS system allows investors to obtain a license by eliminating the need to go to multiple ministries or government institutions. The government has simplified and accelerated the licensing process with the latest technology, making investing in Indonesia simpler and more efficient.

Introducing Risk-Based Approach Licensing

OSS has gone through many development processes. Now, it is able to issue a risk-based licence. The difference between this system and the previous system is quite simple. In the previous system, the licensing system was based on a business license for each business activity. Whereas the risk-based licensing categorizes companies based on the level of risk from these business activities. The level of risk in the system is divided into low, medium low, medium high, and high.

Risk-Based Business Licensing is issued by OSS based on several factors, such as risk level, business activity scale rating, hazard level, potential for the occurrence of any hazard, as well as land area as stated in the government regulations regarding the implementation of risk-based licensing.

The Business Licensing required by MSMEs is made very simple thanks to the risk-based licensing. MSMEs now only need a Business Identification Number (NIB). NIB is a single form of licensing for all business activities. Getting this NIB is also very easy and can be done online via the OSS web.

When applying for a risk-based license, one must choose whether the business is a Micro and Small Enterprises (MSEs) or a Non-Micro and Small Enterprises (Non-MSEs). To put it simply, MSEs are businesses owned by Indonesian citizens, both individuals and business entities, with a maximum business capital of IDR 5 billion (excluding land and buildings for business premises). Meanwhile, Non-MSEs are divided into three categories, namely Medium Enterprises, Large Enterprises, Representative Offices, and Foreign Business Entities. Please select the option that suits your business.

The OSS risk-based licensing is a new framework that is expected to help the Indonesian government, investors, as well as small businesses in creating an investment friendly ecosystem. Compared to the previous licensing framework, the risk-based licensing is simpler and more efficient.

By implementing such positive steps, it is expected that Indonesia will receive major boosts in investments as investors no longer need to see one ministry after another just to obtain a license. This new comprehensive arrangement makes navigating the business licensing process easier.