New Business Licensing Regime

under Indonesian Omnibus Law

and its Newly Enacted
Implementing Regulations
ZICO Training

Josua Septian
18 March 2021 ASEAN INSIDERS
by origin and passion
TOPICS
• What is Omnibus Law?
• Risk-Based Business Classifications
• Changes in Business Lines
Restrictions
What is Omnibus Law?
The Concept of Omnibus Law

Law No. 11 of 2011 on Job Creation ("Job Creation Law") was promulgated on 2
November 2020, which revise 76 regulations and revoke 2 regulations.
Omnibus Law is a law-making concept in which a new regulation is drafted to
amend several regulations at once. This concept is also known as the omnibus
bill which is often used in countries with common law system, e.g., United
States.
Scope of the Job Creation Law
a. enhancing the investment ecosystem and business activities;
b. employment;
c. easement, protection, and empowerment of cooperatives and Micro,
Small, and Medium Enterprises (“MSMEs”);
d. ease of doing business;
e. research and innovation support;
f. land acquisition;
g. economic area;
h. Central Government investment and acceleration of national strategic
projects;
i. implementation of government administration; and
j. imposition of sanctions.
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New Business Licensing Regime
The Job Creation Law emerges a new business-licensing regime that employs a risk-based approach. This new
concept of business licensing is mainly regulated under the Job Creation Law and Government Regulation No.
5 of 2021 regarding Risk-Based Business Licensing (“GR 5/2021”).
The risk levels will be determined based on an evaluation of the health, safety, environment, resources
utilization and management, and volatility of the business. Based on the risk assessments, the risk level of a
business can be categorized into four categories: low, medium-low, medium-high, and high. Each of the
respective business categories will have different business licensing document requirements.

Positive Investment List

The Job Creation Law simplifies general investment requirements for various business sectors. As part of the
implementation of the Job Creation Law, the Indonesian government has also issued Presidential Regulation
No. 10 of 2021 regarding Investment Business Sectors (“PR 10/2021”) which provides broader foreign direct
investment opportunities by reducing number of business sectors that are closed to foreign direct investment.
The list contained in the PR 10/2021 is a replacement of the Negative Investment List.
According to PR 10/2021, all business fields are open for investment (domestic or foreign investment) unless
they are declared closed by the government or classified as activities that are reserved for the central
government.

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Other Newly Enacted Implementing Regulations
1. Government Regulation Number 5 of 2021 on
Implementation of Risk-Based Business Licensing;
2. Government Regulation Number 6 of 2021 on the
Implementation of Business Licensing in Regions;
3. Government Regulation Number 7 of 2021 on Ease,
Protection and Empowerment of Cooperatives and
Micro, Small and Medium Enterprises;
4. Government Regulation Number 8 of 2021 on
Authorized Capital of Companies and Registration of
Establishment, Amendment and Disbanding of
Companies that Meet the Criteria for Micro and
Small Businesses;
5. Government Regulation Number 9 of 2021 on Tax
Treatment to Support Ease of Doing Business;
6. Government Regulation Number 10 of 2021 on
Regional Taxes and Regional Retributions in the
context of Supporting Ease of Doing Business and
Regional Services;
7. Government Regulation Number 11 of 2021 on
Village-Owned Enterprises;
8. Government Regulation Number 12 of 2021 on
Amendments to Government Regulation Number 14
of 2016 concerning Implementation of Housing and
Settlement Areas;
9. Government Regulation Number 13 of 2021 on the
Implementation of Flats;
10. Government Regulation Number 14 of 2021 on
Amendments to Government Regulation Number 22
of 2020 concerning Implementation Regulations of
Law Number 2 of 2017 concerning Construction
Services;
11. Government Regulation Number 15 of 2021 on
Implementation Regulations of Law Number 6 of
2017 concerning Architects;
12. Government Regulation Number 16 of 2021 on
Implementing Regulations of Law Number 28 of
2002 concerning Buildings;
13. Government Regulation Number 17 of 2021 on the
Fourth Amendment to Government Regulation
Number 15 of 2005 concerning Toll Roads;
14. Government Regulation Number 18 of 2021 on
Management Rights, Land Rights, Apartment Units,
and Land Registration;
15. Government Regulation Number 19 of 2021 on
Implementation of Land Acquisition for
Development for Public Interest;
16. Government Regulation Number 20 of 2021 on
Control of Land Areas and Abandoned Lands;
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Other Newly Enacted Implementing Regulations (contd.)
17. Government Regulation Number 21 of 2021 on the
Implementation of Spatial Planning;
18. Government Regulation No. 22/2021 on the
Implementation of Environmental Protection and
Management;
19. Government Regulation Number 23 of 2021 on
Forestry Implementation;
20. Government Regulation Number 24 of 2021 on
Procedures for Imposing Administrative Sanctions
and Procedures for Non-Tax State Revenues
originating from Administrative Fines in the Forestry
Sector;
21. Government Regulation Number 25 of 2021 on the
Implementation of the Sector of Energy and Mineral
Resources;
22. Government Regulation Number 26 of 2021 on the
Implementation of the Agricultural Sector;
23. Government Regulation Number 27 of 2021 on the
Implementation of the Marine and Fisheries Sector;
24. Government Regulation Number 28 of 2021 on the
Implementation of the Industrial Sector;
25. Government Regulation Number 29 of 2021 on the
Implementation of the Trade Sector;
26. Government Regulation Number 30 of 2021 on the
Implementation of the Road Traffic and
Transportation Sector;
27. Government Regulation Number 31 of 2021 on the
Implementation of the Shipping Sector;
28. Government Regulation Number 32 of 2021 on the
Implementation of the Aviation Sector;
29. Government Regulation Number 33 of 2021 on the
Implementation of the Railway Sector;
30. Government Regulation Number 34 of 2021 on the
Use of Foreign Workers;
31. Government Regulation Number 35 of 2021 on
Specific Time Work Agreements, Transfer of
Resources, Working Hours, Working Relationships
and Rest Periods, and Termination of Employment;
32. Government Regulation Number 36 of 2021 on
Wages;
33. Government Regulation Number 37 of 2021 on the
Implementation of the Job Loss Guarantee Program;
34. Government Regulation Number 38 of 2021 on
Accompanying Accounts for Umrah Pilgrimage Travel
Expenses;
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Other Newly Enacted Implementing Regulations (contd.)
35. Government Regulation Number 39 Year 2021 on
Implementation of the Halal Product Guarantee
Sector;
36. Government Regulation Number 40 of 2021 on the
Implementation of Special Economic Zones;
37. Government Regulation Number 41 of 2021 on the
Implementation of Free Trade Zones and Free Ports;
38. Government Regulation Number 42 of 2021 on the
Ease of National Strategic Projects;
39. Government Regulation Number 43 of 2021 on
Settlement of Inconsistencies in Spatial Planning,
Forest Areas, Permits and / or Land Rights
40. Government Regulation Number 44 of 2021 on
Implementation of the Prohibition of Monopolistic
Practices and Unfair Business Competition;
41. Government Regulation Number 45 of 2021 on the
Implementation of Geospatial Information;
42. Government Regulation Number 46 of 2021 on Post,
Telecommunication and Broadcasting;
43. Government Regulation Number 47 of 2021 on the
Implementation of Hospitalization;
44. Government Regulation Number 48 of 2021 on Third
Amendment to Government Regulation Number 31
of 2013 on Implementation Regulations of Law
Number 6 of 2011 concerning Immigration;
45. Government Regulation Number 49 of 2021 on
Taxation Treatment of Transactions Involving
Investment Management Institutions and / or the
Entities They Own;
46. Presidential Regulation Number 9 of 2021 on the
Agency for the Acceleration of Housing
Management;
47. Presidential Regulation Number 10 of 2021 on the
Investment Business Field;
48. Presidential Regulation Number 11 of 2021 on
Cooperation between the Central Government and
State-Owned Enterprises in the Implementation of
Basic Geospatial Information;
49. Presidential Regulation Number 12 of 2021 on
Amendments to Presidential Regulation Number 16
of 2018 concerning Government Procurement of
Goods / Services
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Risk-Based Business
Classifications
The New Business Licensing Regime

The Job Creation Law has created a new regime of business license using the
risk-based approach. The objective of this new regime is to simplify the
licensing process while still using the Online Single Submission (“OSS”) system.
Risk-based business licensing basically changes the concept of licensing that is
ex-ante (requirements are met at the beginning) with the concept of ex-post
licensing (verification is carried out afterward).

Regulatory Framework
Article 7 – 11 of the Job Creation Law
Implementing Regulation : Government Regulation No. 5 of 2021 concerning
The Implementation of Risk-Based Business Licensing (“GR No. 5 of 2021”)

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Carry Out Business in Indonesia

To carry out business in Indonesia, business actors need to comply with basic
requirements for business licensing and/or risk-based business licensing.
Basic requirements for business licensing are as follows:
• suitability of space utilization
• environmental approval
• building approval
• certificate of eligibility to function

Risk-Based Business Licensing

Risk-based business licensing is determined based on the risk level of the initial
business activity obtained from the risk Analysis. The determination of the risk
level will result into 4 (four) classifications of risk-based business classification,
as follows:
1. Low risk business
2. Medium-low risk busines
3. Medium-high risk business
4. High risk business
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Risk Analysis Mechanism
In order to classify certain business activities into low, medium, or high-risk
business, the governments need to conduct a risk analysis with the following Health
procedure:

1. Identification of Business Activities

The scale
It is the first process of risk analysis by referring to the business activities listed Safet Enviro
of hazard nment
in the five-digit Industrial Standard Classification/Klasifikasi Baku Lapangan y variables
Indonesia (“KBLI”).

2. Determination and Assessment of Risk Natural

resources
utilization and
management

a. The Scale of Hazard

The scale of hazards is determined by the aspect of health, safety,
environment, and the utilisation and management of natural resources.
Unlikely to happen
While also considering the type, criteria, location of the business, any
limitations on natural resources, and business volatility risks.
Probable to happen
b. The Scale of Potential Hazard Scale of Potential
Classified into four category: unlikely, probable, possible, and likely. Hazard
Possible to happen

3. Determination of Risk Level

Likely happen
Risk level is obtained based on the multiplication of the scale of hazard and the
scale of potential hazard.
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Business Licensing Requirements
As the business licensing mechanism employs risk-based approach, the higher business
risk, the more complex the business requirements will be.

Risk Level Business Licensing Requirements

High Risk Business NIB + Permits/Izin The higher business
Medium risk, the more complex
Medium High NIB + Standards Certification the business licensing
Risk requirements will be
Business Medium NIB + Statement on the Fulfillment of
Low the Business Standards The lower business
risk, the less complex
Business Identification the business licensing
Low Risk Business Number/Nomor Induk Berusaha requirements will be
(“NIB”)

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Low Risk Business
For low-risk business, the business actor will only be
required to obtain NIB, which will apply as the business
identity and the legality to carry out the business.
High Risk Business
For high-risk business, the business actor will be
required to obtain NIB and Permits. Permits are the
legality of a business in the form of a government
approval to a business actor to carry out operational and
commercial business activities. Government approval is
issued after the business actor has fulfilled all the
requirements for the implementation of the said
business activity.
If business activities with a high-risk level are required to
implement standards verification, the Central
Government or Regional Governments in accordance
with their respective authorities issue Standard
Certificates based on the results of verification of
compliance with business activity implementation
standards. The implementation of verification by the
government can cooperate with third parties who have
been accredited by the government.
Medium Risk Business
For medium-risk business, the business actor will be required
to obtain NIB and Standard Certification. Standard Certificate is
the legality to carry out business activities in the form of a
Business Actor's statement to meet business standards.
Medium Low
• Standard certificate published by the OSS system after submitting a
statement on the fulfillment of the business standards
• NIB and Standard certificate is used as the legality to implement
business starting from the preparation, operational and/or
commercial business activities.
• There will be supervision on compliance with the said standards in
order to monitor the level of compliance of business actors.
Medium High
• Standard certificate published by the OSS system after submitting a
statement on the fulfillment of the business standards
• NIB and Standard certificate is used as the legality to implement
business limited to the preparation process
• Before performing operational and commercial activity, the authority
will conduct a verification to fulfill the standard certification.
• There will be supervision on compliance with the said standards in
order to monitor the level of compliance of business actors.
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Business Licensing to Support Business Activities
In the stage of operational and/or commercial business activity, beside the aforementioned business license,
Business Licensing to Support Business Activities (Perizinan Berusaha untuk Menunjang Kegiatan Usaha) is still
required for business actors whose purpose are to support business activities at the operational and/or
commercial stages.
The requirements of Business Licensing to Support Business Activities are determined based on each business
sectors, which are:
1. Marine and fisheries
2. Agriculture
3. Environmental and forestry
4. Energy and Mineral Resources
5. Nuclear power
6. Trade
7. Industry
8. Public works and public housing
9. Transportation
10. Health, medicine and food
11. Education and culture
12. Tourism
13. Religious
14. Post, telecommunications, broadcasting and electronic transaction systems
15. Defence and security
16. Employment

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Division of Authority
to Issue Business
Based on GR 5/2021, the authorities who issue business licenses are
License
as follows:
• DPMPTSP does not
OSS Institution
authorize to the license
• OSS institution by the name of minister or head of institution issuance of the foreign
investment business or
• head of Province's One Stop Services and Investment Investments using foreign
Service/Dinas Penanaman Modal dan Pelayanan Terpadu Satu capital based on
Pintu (“DPMPTSP”) on behalf of the governor agreements made by the
• head of regency/city's DPMPTSP on behalf of regent/major Central Government and
governments of other
• Special Economic Zone Administrators/Administrator Kawasan countries.
Ekonomi Khusus → In the case where the business activity is
conducted in the Special Economic Zone
• Free Trade Zone and Free Port Exploitation Agency/Badan
Pengusahaan Kawasan Perdagangan Bebas dan Pelabuhan Bebas
(“KPBPB Agency”) → In the event where the business activity is
conducted in Free Trade and Free Port Zone

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Supervision of Risk-Based Business License Implementation
Under the risk-based Approach, the government shall conduct a supervision to make sure that the business
actors have complied with the necessary business standard in implementing their business. The government
also collects data, evidence and/or reports of hazards to safety, health, environment (K2Ll, and/or other
hazards that may arise from the implementation of business activities.
The supervision intensity is based on the risk level of the business and the compliance level of the business
actors.

The higher level of risk, The higher level of

the more frequent compliance, the more
supervision is carried frequent supervision is
out. carried out.

The lower level of risk, The lower level of

the less frequent compliance, the less
supervision is carried frequent supervision is
out. carried out.

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Types of Supervision
Routine
Supervision
• Done periodically by the
authority
• Through business actors
report and field inspection
Incidental
Supervision
• Done in a certain time
• Carried out based on public
complaints
• Through field inspection &
virtual inspection
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Investment Facilities and Incentives under the New Regime

To obtain NIB business actors must submit
several data in the OSS system, which are:
a. profile
b. business capital
From those data, the OSS system will examine the
conformity with the provisions of the business
sector and other Investment provisions which will
further be the basis of granting an investment
facilities and incentives, that include:

c. tax ID number a. business that is classified as priority business

fields
d. KBLI b. allocation of business sectors for MSMEs and
cooperatives
e. business location.
c. partnership obligations with MSMEs and
cooperatives
d. provisions for special business fields (single
purpose)

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Investment Facilities and Incentives under the New Regime
Investors that invest their capital in the priority
business field may be given incentives, which
consist of fiscal incentives and non-fiscal
incentives.
Priority Business field are businesses that align
with the following criteria:
• National strategic program/project
• capital intensive (Padat Modal)
• Labor intensive (Padat Karya)
• High Technology
• A pioneer industry
• Export orientation
• Orientation in research, development and
innovation activities.
Fiscal Incentives
• Tax Incentives: Tax allowance, Tax holiday,
Investment allowance
• Customs Incentives
Non-Fiscal Incentives
• ease of business licensing
• provision of supporting infrastructure
• guaranteed energy availability
• guaranteed availability of raw materials
• immigration
• employment, and
• other conveniences in accordance with the
provisions of laws and regulations.

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Transitional and Closing Provisions

• Business actors who have obtained their business license effectively before the enactment of the
GR No. 5 of 2021, applies the requirements that have been fulfilled before, expect if the provisions
in GR No. 5 of 2021 is more beneficial to the business actors
• Business actors who have obtained a business license but have not applied effectively before the
enactment of the GR No. 5 of 2021, then the business license is processed in accordance with the
provisions in this government regulation.
• By the enactment of GR No. 5 of 2021, the Government Regulation No. 24 of 2018 on Electronically
Integrated Business Licensing Services is revoked and declared invalid.
• Every law and regulation governing the business licensing services remain valid as long as it does
not conflict with the provision in GR No. 5 of 2021.
• Implementing regulations of this Government Regulation must be stipulated no later than 2 April
2021.
• Implementation of Risk-Based Business Licensing through the OSS System will be effective on early
June 2021.

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Change of Business Lines
Restrictions
The Replacement of Negative Investment List

Following the issuance of the Job Creation Law, Presidential Regulation No. 10 of 2021 on
Investment Business Fields (“PR 10/2021”) was issued on 2 February 2021.

PR 10/2021 contains Positive Investment List in replacement of the 2016 Negative

Investment List.

Under PR 10/2021, more business fields are open to capital investment. Previously 20,
there are now only 6 business fields closed to investment listed under Article 12 of Law No.
25 of 2007 on Investment as amended by Job Creation Law, which are listed as follows:

a. the cultivation and trading of class I narcotics;

b. all forms of gambling and/or casino activities;
c. fishing for species listed in Appendix I to the Convention on International Trading in
Endangered Species of Wild Fauna and Flora (CITES)
d. utilizing or taking coral and reef from nature to be used as building
materials/lime/calcium, in aquariums, or to make souvenirs/jewellery, as well as
live corals or dead corals from nature;
e. the chemical weapons manufacturing industry; and
f. the industrial chemical industry and any harmful to the ozone layer materials
industry.

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Comparison of the Negative and Positive Investment List

Negative Investment List Positive Investment List

Business lines which are closed
to both foreign and domestic 20 6
investors
Foreign ownership with certain
limitations or conditions 350 46

Business lines allocated for or

which require partnership with 103 112
cooperatives and MSMEs
Business lines which require
local partnership 55 51

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Newly Opened Strategic Sectors

Business Line Negative Investment List Positive Investment List

Wholesale distributors that is Maximum 67% foreign No restrictions or conditions
not affiliated with production ownership

Various telecommunications,
media, and technology
business, including cellular Maximum 67% foreign No restrictions or conditions
ownership
operators and internet service
providers

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Categories of Business Fields under PR 10/2021
PR 10/2021 now divides business fields open to investment into the following categories:

a. prioritized business fields;

b. business fields allocated for or which require partnership with cooperatives and MSMEs;
c. business fields open to investment with certain requirements; and
d. business fields not categorized as a, b, or c, and therefore are open to all investors.

Prioritized Business Fields

According to Article 4 Paragraph (1) of PR 10/2021, prioritized business fields are those which meet
the following criteria:

a. included in national strategic programs/projects;

b. capital intensive;
c. labour intensive;
d. utilize advanced technology;
e. categorized as pioneering industries;
f. oriented towards exports; and/or
g. oriented towards research, development and innovative activities. 

Prioritized business fields are listed in Attachment I to PR 10/2021, totaling 245 business fields.

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Business Fields Allocated for or Which Require Partnership with Cooperatives and MSMEs
The business fields that are allocated for cooperatives and MSMEs are determined based on the
following criteria set forth in Article 5 Paragraph (2) of PR 10/2021:

a. do not use technology or that use simple technology; 

b. involve specific process, are labor intensive, and have a special cultural heritage and are
hereditary; and/or 

c. require less capital than IDR10 billion excluding the value of the land and buildings used.

The 89 business fields that are allocated for or which require partnership with cooperatives or
MSMEs are listed in Attachment II to PR 10/2021. Note that Foreign investors and domestic large-
scale enterprises are prohibited from engaging in sectors and business activities reserved for MSMEs.

Business Fields Open to Investment with Certain Requirements

Business fields open to investment with certain requirements as stated above are the lines of
business which all investors (both local and foreign) may engage in, namely those that fulfil:

a. investment requirements for local investors;

b. investment requirements with restrictions on foreign capital ownership; or
c. investment requirements with special permits.

PR 10/2021 significantly reduces the number of lines of business in various sectors in which foreign
shareholding was limited under the 2016 Negative Investment List. The 46 business lines are listed in
Attachment III to PR 10/2021.
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The “Grandfathering” Clause
PR 10/2021 contains a clause in Article 6 (4) under which the foreign shareholding limits do not apply
to:

a. capital investment approved for a certain line of business before the issuance of PR 10/2021, as
stated in the business license, unless the provisions of PR 10/2021 are more beneficial for that
investment; and

b. capital investment for which special rights have been obtained under an agreement between
Indonesia and the investor’s home country, unless the provisions of PR 10/2021 are more
beneficial for that investment.

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Foreign Investment Value
Foreign investments must satisfy the following requirements:

a. The total investment value must be over IDR10 billion, excluding land and buildings per KBLI and
per project location unless otherwise stipulated by laws and regulations;

i. For large scale trading business activities, the minimum investment value is IDR10 billion
excluding land and buildings, per 4 (four) initial digits of KBLI;
ii. For food and beverage service business activities, the minimum investment value is IDR 10
billion excluding land and buildings in a regency/city, per 2 (two) initial digits of KBLI per 1
(one) location;
iii. For construction business activities, the minimum investment value is IDR 10 billion excluding
land and buildings in one activity, per 4 (four) initial digits of KBLI; or
iv. For industrial business activities that produce types of products with different 5 (five) digits of
KBLI in 1 (one) production line, the minimum investment value is IDR10 billion excluding land
and buildings.

b. The value of issued capital must be the same as the paid-up capital, at least IDR2.5 billion;

c. The percentage of share ownership is calculated based on the number of shares held per
shareholder; and

d. The nominal value of shares per shareholder must be at least IDR 10million.

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 THANK YOU
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