In an effort to boost domestic and foreign direct investment, the Indonesian government launched the online single submission (OSS) licensing system on Monday (09/07). The system, which is based on (1) Presidential Regulation No. 91/2017 on the Acceleration of Business Implementation and (2) Government Regulation No. 24/2018 on the Electronically Integrated Business Licensing Service, was designed to cut lengthy bureaucratic procedures (red tape), thus attract more direct investment.
The OSS licensing system should make business registration in Indonesia easier as several key permits – the location permit, environmental permit and building permit – can be obtained within one hour of submitting all required data. After these permits are completed, then the business permit as well as the operational/commercial permit will be activated. This allows investors to immediately start preparations to run their business in Indonesia while awaiting formal documents.
The integrated OSS licensing system is supported by systems from various Indonesian ministries and other government agencies that have the authority to issue licenses, including the Indonesia National Single Window (INSW) system, the General Law Administration System at the Ministry of Justice and Human Rights, and the Information System of Population Administration at the Ministry of Home Affairs.
Indonesia’s Coordinating Minister for Economic Affairs Darmin Nasution said the mining and financial sectors are not included in the OSS licensing system as these sectors do not fall under the authority of the Investment Coordinating Board (BKPM). While the mining sector remains under the authority of the Energy and Mineral Resources Ministry, the financial sector remains under the authority of Bank Indonesia and the Financial Services Authority (OJK).
Since his inauguration Indonesian President Joko Widodo has been eager to cut red tape in Indonesia (deregulation) in a bid to encourage investment. Considering the 2000s commodities boom ended a long time ago (thus resulting in the country’s weaker export performance), while household consumption is not as strong as it was several years ago Widodo regards direct investment a great source for economic growth. Widodo’s deregulation measures allowed Indonesia to rise in the ranks of the World Bank’s Ease of Doing Business Index from 109th in 2016 to 72nd in 2018. However, Southeast Asia’s largest economy still lags behind some of its peers such as Singapore, Malaysia, Thailand and Vietnam.
Whether this system can indeed smoothen investment realization in Indonesia remains to be seen. For example, the website oss.go.id is only available in the Indonesian language, implying most foreign investors will still need to rely on local business consultancies or agents to submit the data and obtain the necessary permits. Moreover, through the OSS licensing system not all permits are delivered. Only a few that are related to business registration can be obtained through the system. To obtain all other required permits it may continue to be a struggle, especially when it involves permits at the local level (in the regions). There have been many examples of weak coordination and cooperation between the center and regions in Indonesia.