Indonesia Launches New Economic Policy Package

Legal Updates | Indonesia Launches New Economic Policy Package

On August 31st 2017, Indonesian President Joko Widodo, commonly known as Jokowi, enacted the 16th economic reform package aimed at improving the ease of doing business in the country (“16th Reform Package”). This new economic policy package contains measures to accelerate the issuance of business licenses and permits at the central and regional levels.

Background

This is the 16th package of economic reforms issued by Jokowi since he took office in October 2014. These packages are a series of regulations issued by the government to expedite the process of doing business in various sectors. Previous packages included those designed to accelerate nationally strategic projects, implement tax incentives, ease the investment process and establish road maps for future development of certain business sectors.

The 16th Reform Package deals exclusively with the general licensing process for business activities. It was enacted with the view that Indonesia’s lengthy, sequential and unintegrated licensing process has discouraged potential investors. The 16th Reform Package was enacted in the form of a Presidential Regulation and will be realised in two phases.

First Phase of the Reform Package

The first phase of the new economic policy package revolves around streamlining and expediting the current licensing system. This phase includes the following actions:

Establishment of a Special Task Force

The government will establish a task force to resolve hindrances in the licensing process for businesses at the national level (“National Task Force”). Task forces will also be set up in ministries/institutions, provinces and regencies/cities (“Regional Task Forces”). The National Task Force will establish several smaller units that will serve as help desks for the public to address licensing obstacles in different sectors, and it will also serve as the main coordinator for the Regional Task Forces. The Regional Task Forces will assist in expediting the licensing process at different institutions, acting as a kind of licensing help desk.

Each Regional Task Force will be divided into a Leading Sector Task Force and a Supporting Task Force. The Leading Sector Task Force will monitor and attempt to resolve licensing obstacles, and attempt to improve licensing services in different sectors. The Supporting Task Force will provide support as necessary and may act as the Leading Sector Task Force in special sectors or in instances where the authority to issue a license lies with the governor or regent/mayor.

Implementation of a License Checklist for Particular Licenses

A license checklist will be introduced in Special Economic Areas, Free Trade Zones, Industrial Areas and Tourism Areas. This checklist will be provided through the One-Door Integrated Service (“PTSP”) in the respective areas and will contain a list of licenses that must be obtained by business actors.

A business actor will select its business location after it obtains an Indicative Investment Certificate (Pendaftaran Penanaman Modal). The business actor will then go through PTSP to obtain a deed of establishment and incorporation, taxpayer registration number, company registration certificate, foreign labor utilisation plan, foreign labour employment permit, import identification number and customs access. The business actor will also sign the license checklist.

The license checklist will be deemed a temporary license comprising an environmental license (UKL-UPL), land certificate, building technical licenses/building construction license and business license. With the signed checklist, PTSP will process the granting of tax, and customs and excise facilities for the business. The checklist will also accelerate the licensing process related to labor, immigration and land affairs. Business actors may begin land clearance and construction after signing the checklist.

Implementation of Data Sharing System

Outside of Special Economic Areas, Free Trade Zones, Industrial Areas and Tourism Areas, where the licensing checklist will not be implemented, PTSP and related institutions will try to expedite the licensing process through a data sharing system. This will allow business actors to obtain several licenses by submitting the required documents only one time to PTSP. The documents will then be used to complete the location permit/stipulation of location, environmental license, nuisance license, traffic impact analysis, building technical plan approval/building construction license and industrial sector licenses, as well as for requesting tax, customs and excise, and other facilities.

Second Phase of the Reform Package

The second phase of the 16th Reform Package concerns the improvement of the current licensing system to create a better, more integrated licensing process. This phase includes:

Reforming Licensing Regulations

Government ministers, heads of relevant institutions, governors and regents/mayors will be required to evaluate the legal basis underlying the licenses relevant to their institutions, including licenses for small and medium enterprises. Using the results of these evaluations, each institution will attempt to simplify the licensing process by enacting new regulations, including at the regional level, that provide clear provisions on standard timelines, procedures and costs for license applications, as well as the service standards and obligations of PTSP in processing license applications.

Implementation of Integrated Single Submission Licensing System

Future license applications will be harmonised and standardised along national/international standards, and processed through an Integrated Single Submission System. The submitted data will be synchronised between institutions and the system will be integrated with various services in Indonesia, including citizenship registration, business entity registration and export-import registration through the Indonesia National Single Window, and other systems from relevant ministries and institutions. The government will be tasked with ensuring the security and confidentiality of the data submitted to the Integrated Single Submission System.

Timeline for Implementation of New Reform Package

The first phase began with the enactment of the Presidential Regulation. The National Task Force and the Leading Sector Task Forces are expected to begin work this year and will continue their work for an indefinite period. Supporting Task Forces will only be operational in 2017, after which their function will be taken over by the Integrated Single Submission System. During the first phase, preparations for the second phase will also take place. The target for completing licensing regulation reforms is the end of November 2017, while the trial run for the Integrated Single Submission System is expected to begin on 1st January 2018. If the trial run is a success, the Integrated Single Submission System is expected to be implemented gradually through March 2018. The Integrated Single Submission System will be located in the same buildings as PTSP.

SSEK - 20th September 2017

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Indonesia Snapshot

Capital: Jakarta
Population: 259 million (2016)
Currency: Indonesian Rupiah
Nominal GDP: $936 billion USD (IMF, 2016)
GDP Per Capita: $3,620 USD at Current Prices (IMF, 2016)
GDP Growth: 5.0% (2016)
External Debt: 36.80% of GDP (BI, Q2 2016)
Ease of Doing Business: 91/190 (WB, 2017)
Corruption Index: 90/176 (TI, 2016)