Presidential Regulation to Cut Red Tape, Fast-Track Business Licensing

Tabita Diela
August 31, 2017 | 1:43 pm
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Jakarta. President Joko "Jokowi" Widodo issued a new regulation on Thursday (31/08) to simplify and integrate business licensing processes.

The regulation's goal is to create by March an integrated application system for investors and make them able to obtain all licences required at one place. The system would slash the time it takes to process investment applications, which can take from one day to up to five years, depending on the industry.

"Now we have gained good momentum, we must take advantage of it as effectively as possible, we don't want to be left out with nothing," the president said.

Since September 2015, the government has released a series of policy packages, which seem to have improved the perception of Indonesia as an investment destination.

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As a home to more than 260 million, the Southeast Asia's biggest economy has long been known as a big market for global corporations. However, it is just recently that Indonesia became more business-friendly and received investment grades from three major global rating agencies.

Coordinating Economic Affairs Minister Darmin Nasution said the latest policy package will change the way government officers process investment permits, making it efficient, easier, integrated and more transparent.

"In 2018, we want to be on par with the most advanced countries in license processing," Darmin said.

The Investment Coordinating Board (BKPM) targets direct foreign and local investment to reach Rp 678.8 trillion ($51 billion) this year and Rp 795 trillion next year. Indonesia collected Rp 612.8 trillion in direct investment in 2016, 103 percent of the target.

Past Unsuccessful Launches

In January 2015, months after he became the president, Jokowi launched a similar move, setting up what he called "one-stop service" for investment licensing at BKPM and instructed his ministers to cut the number of business permits required.

Despite that, Darmin said, it still took up to five years to start a business in some sectors, also since BKPM could only process nine out of about 150 permits needed.

"We now know that we can't just tweak the rules," Darmin said. "We have to change things; a licensor is not the ruler, he is there to serve."

This year, Jokowi's administration aims to cut the time needed to get a full investment license from between three and five years to months.

Reform Timeline

According to Darmin, cutting the red tape will be done in stages. By November, all ministries and regional administrations will have to harmonize their regulations regarding business licensing and get rid of overlapping rules.

By December, a data-sharing system between ministries and administrations will be launched for businesses to submit paperwork only once for all permits they require.

The government will also produce a check list with requirements for businesses seeking to invest in the special economic zones, or industrial and tourist areas. Once the requirements are fulfilled, a business will immediately receive the permits it needs to start.

Early in January, the government will begin to try the new application system, which will allow every stakeholder to access the needed data in real time.

By the end of January, the government will designate a building for prospective investors to be able to obtain all permits — from the most basic business permit to the more obscure ones, including a permit to install lighting in front an establishment — in one place.

With additional reporting by Lona Olavia and Reuters

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