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Legal Updates | Proposal to Revoke Five Business Permits in Indonesia

On 16th March 2016, Indonesian President Joko Widodo announced a plan to simplify business licensing in Indonesia by revoking five existing business permits issued at the regional level.

These five business permits are:

  1. Hinder Ordonantie (Izin Gangguan): A permit for the establishment of a business/place of activity whose operation has the potential to disrupt the surrounding community or harm environmental sustainability. This license is currently regulated under Law Number 28 of 2009 regarding Regional Tax and Retribution.
  2. Building Location Permit (Surat Izin Tempat Usaha): A permit for individuals and legal entities to establish a place of business that is in accord with the required spatial layout in the framework of capital investment. This permit is currently regulated by each region through regional regulations.
  3. Principle License for Small and Medium Enterprises: This is a permit to establish small and medium enterprises (usaha kecil dan menengah or “UKM”). It is issued by the relevant city/regency, regional or provincial government.
  4. Location Permit (Izin Lokasi). A permit for a company to obtain the required land for its capital investment. This permit is currently regulated under Minister of Agrarian Affairs and Spatial Layout/Head of the National Land Agency Regulation Number 5 of 2015 regarding Location Permit.
  5. Environmental Impact Analysis (Analisis Dampak Lingkungan or “AMDAL”). This is an analysis report on the environmental impact of a company’s business or activities required for the operation of its business. This analysis is currently regulated under Law Number 32 of 2009 regarding the Protection and Management of the Environment.

According to reports, a regulation was to be issued within a week of the President’s announcement revoking the five business permits. However, this regulation has yet to be issued and it is unclear when the business licenses will be revoked.

SSEK - 5th April 2016

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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)