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Ease of
Doing Business
Ease of Doing Business in Indonesia
Indonesia stands as the world's largest archipelago, comprising more than 17,500 (seventeen thousand five hundred) islands. This archipelago stretches between the Pacific and Indian Oceans, serving as a bridge between 2 (two) continents, namely Asia and Australia/Oceania. This strategic position profoundly influences the country's culture, social and political life, as well as its economy.
Moreover, Indonesia has a population of 286,717,433 (two hundred eighty-six million seven hundred seventeen thousand four hundred thirty five) people as of 9 December 2025. Today, Indonesia is 4th (fourth) most populous nation and Southeast Asia’s largest economy also ranks 16th (sixteenth) globally.
Regarding poverty reduction, the percentage of individuals living below the poverty line in March 2025 stood at 8.47% (eight point forty seven percent), representing a decrease of 0.10% (zero point one zero percent) from September 2024 and 0.56% (zero point five six percent) from March 2024.
In terms of labor market conditions, data from BPS indicate that the total labor force in Indonesia reached 154.00 (one hundred fifty four point zero) million people in August 2025, reflecting an increase of 1.89 (one point eight nine) million compared to August 2024. This trend suggests a continued recovery in labor force participation and employment, although concerns regarding job quality remain. The labor force participation rate stood at 70.6% (seventy point six percent), while the unemployment rate declined to 4.8% (four point eight percent) in August 2025, down 0.06% (zero point zero six percent) year-on-year.
Indonesia’s economic performance also remained resilient, with economic growth reaching approximately 5% (five percent) year-on-year through the third quarter of 2025 (3Q 2025).
Regarding investment performance, both domestic and foreign investment continued to expand across various sectors. According to data from BKPM, realized investment in Q3 2025 reached IDR 491.4 trillion, representing a 13.9% (thirteen-point nine percent) year-on-year increase and accounting for 25.8% of the annual national investment target. Furthermore, the top 5 (five) countries of origin for foreign investment in Indonesia during Q3 2025 were as follows:
Graphic I.1. Foreign Investment by Nation of Origin in Indonesia from January to September 2025
Source: Indonesian Investment Coordinating Board.
In this context, assessing the overall business and investment climate becomes increasingly important. Accordingly, the World Bank introduced the Business Ready (B-READY) report in 2024 as a replacement for the previous Ease of Doing Business 2020 report, providing a more comprehensive assessment of the investment environment.
B-READY assesses not only the regulatory burden on businesses but also the quality of regulations, the provision of related public services, the ease of compliance with the regulatory framework, and the effective use of public services directly relevant to firms. Indonesia’s performance in the B-READY 2024 report reflects its ongoing efforts to improve its business environment, particularly in areas such as public services and regulatory efficiency.
B-READY is structured under 3 (three) pillars: (i) Regulatory Framework, (ii) Public Services, and (iii) Operational Efficiency. These pillars collectively measure the ease of doing business by evaluating regulations, the delivery of public services, and the efficiency of operations within an economy. Each pillar is assessed on a five-tier system, where the first tier represents the highest level of performance, and the fifth tier represents the lowest.
According to the B-READY 2024 report, Indonesia is classified as follows:
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Pillar I: Regulatory Framework – Fourth tier;
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Pillar II: Public Services – Second tier; and
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Pilar III: Operational Efficiency – Fourth tier.
These classifications indicate that while Indonesia demonstrates relative strength in Public Services, ranking in the second tier, its placement in the fourth tier for both the Regulatory Framework and Operational Efficiency highlights areas requiring substantial improvement. Strengthening these aspects is critical to enhancing the country's overall business climate and supporting its long-term development goals.
The challenges reflected in the B-READY 2024 report align with long-standing issues in Indonesia’s business and investment environment, particularly the complexity of licensing procedures. Many of these challenges were already identified in earlier assessments, such as the Ease of Doing Business 2020 report, which highlighted bureaucratic inefficiencies stemming from the involvement of multiple parties authorized to issue permits. This complexity lead to prolonged licensing processes, extended application processing times, and elevated licensing fees, which hindered the EoDB.
Recognizing these barriers, the government enacted Law 11/2020 in direct response to the structural impediments noted in the Ease of Doing Business 2020 report. The primary legislative intent was to dismantle bureaucratic complexities by simplifying licensing procedures and enhancing administrative efficiency. The scope of Law 11/2020 extends beyond mere licensing reform; it is designed to foster a more favorable environment for investment, expedite the implementation of National Strategic Projects, and guarantee superior safeguards and welfare for the labour force. Crucially, the legislation also focuses on improving the ease of operation, providing enhanced protection, and promoting the capacity building of cooperatives and UMKM.
Despite its ambitious goals, Law 11/2020 was marked by considerable opposition and reservations from diverse organizations and private citizens. These challenges led to the formal application for judicial review before the Constitutional Court of the Republic of Indonesia. In November 2021, the highly anticipated Constitutional Court decision regarding Law 11/2020 was issued, known as Decision 91/2020.
The Constitutional Court outlined 5 (five) points in its verdict regarding the constitutionality of Law 11/2020, summarized as follows:
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declared that the creation of Law 11/2020 is contrary to the 1945 Constitution and is deemed conditionally unconstitutional, lacking binding force unless procedurally corrected within the specified period of 2 (two) years from the date of the verdict;
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stated that Law 11/2020 will remain in force until the procedural correction is completed within the specified period;
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instructed legislators to complete the correction within the specified period. Failure to do so will render Law 11/2020 permanently unconstitutional;
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declared that if the procedural correction is not completed within the specified period, the laws or provisions revoked or amended by Law 11/2020 shall re-enter into force;
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suspended all actions or decisions of a strategic and extensive nature, as well as the issuance of implementing regulations related to Law 11/2020, until the correction is made.
In response to the issuance of Decision 91/2020, the Parliament enacted Law 13/2022 which amends Law 12/2011. The underlying objective of this amending legislation is to establish a statutory framework characterized by comprehensive planning, integrated coherence, and long-term sustainability. The attainment of legislation possessing these requisite attributes necessitates systematic revision and enhancement of the legislative process itself. This improved mechanism spans the entire lifecycle of law-making, encompassing the phases of planning, drafting, deliberation, validation, stipulation, and ultimately, the promulgation of statutes. Several matters governed under this law include:
Lawmaking Methods Amended by Law No. 13/2022
Source: Law No. 13/2022.
Following to the enactment of Law No. 13/2022, on 30 December 2022 the Government of Indonesia issued GRLL No. 2/2022 revoking Law No. 11/2022. Subsequently, GRLL No. 2/2022 needs to be enacted as a Law. Therefore, on 31 March 2023, GRLL No. 2/2022 was officially promulgated as Law No. 6/2023. The establishment of GRLL 2/2022 by President Joko Widodo is an implementation of Constitutional Court Decision No. 91/PUU-XVIII/2020. The operative clause of the Constitutional Court's decision instructs the legislative body to rectify the Omnibus Law on Law No. 11/2020 a maximum period of 2 years from the pronouncement of the Constitutional Court decision. If the rectification is not carried out within this timeframe, Law No. 11/2020 will be deemed permanently unconstitutional.
In pursuit of the implementation of the Constitutional Court's decision, the following measures have been undertaken:
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the enactment of Law No. 13/2022 which regulates and outlines the omnibus method in the drafting of laws and clarifies meaningful participation in the formation of legislation.
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the enhancement of meaningful participation, where the Government has established the Job Creation Law Socialization Acceleration Task Force (Satgas UU Cipta Kerja) with the function of conducting the socialization process for the Job Creation Law.
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the completion of research, scrutiny, and re-examination of technical errors in Law No. 11/2020 encompassing issues such as incomplete letters, inaccurate references to articles or paragraphs, typographical errors, and discrepancies in titles or numbering of chapters, sections, paragraphs, articles, clauses, or points that are non-substantial in nature.
In its entirety, GRLL No. 2/2022 comprises 186 articles addressing topics closely aligned with those of Law No. 11/2020, covering issues of considerable significance such as business licensing, risk-based approach, and employment. Although GRLL No. 2/2022 replaces Law No. 11/2020, it maintains the validity of several matters:
The Measures Maintained by the GRLL No. 2/2022
Source: GRLL No. 2/2022
The implementation of licensing in the regions comply with the following conditions:
Implementation of Business Licensing in Regions
Source: Indonesian Investment Coordinating Board.
An overview of Law No. 11/2020 is as follows:
The Gist of the GRLL No. 2/2022
Source: the GRLL No. 2/2022.
The comparison between Law No. 11/2020 and GRLL No. 2/2022 reveals that a substantial portion of the changes presented in the GRLL No. 2/2022 framework pertains to terminology, references to articles, and the restructuring of various sentences. However, several substantial changes are introduced in GRLL No. 2/2022. For instance, references to articles related to the obligation of hazardous and toxic waste ("B3") management have been eliminated from provisions governing the imposition of administrative sanctions. This adjustment could potentially be interpreted as implying that no sanctions are imposed on parties failing to manage their B3 waste. Furthermore, the term "permit" has been replaced with "approval for spatial utilization compliance”. Additionally, GRLL No. 2/2022 explicitly emphasizes that, aside from business licensing, relevant parties must comply with the suitability of marine spatial utilization activities. There is also an inclusion of the term "building approval."
In alignment with the National Medium-Term Development Plan (RPJMN) 2020-2024, Indonesia aims to improve its EoDB ranking to 40th (fortieth) by 2024 from its current position at 73rd (seventy-third). Therefore, it is imperative for Indonesia to enhance its economy during the in the period of 2020-2024 period by increasing investments in the country measured by the formation of gross fixed capital, with a target growth rate of by 6,6% (six-point six percent) to 7,0% (seven percent) annually. To achieve this objective, both foreign and domestic private investments are encouraged through the deregulation of investment procedures, as well as the synchronization, and harmonization of licensing regulations.
Incentives for Investors
According to Article 21 Law 25/2007, facilities or conveniences provided to investors include:
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land titles facilities;
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immigration service facilities; and
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import licensing facilities.
These facilities are specifically granted to investors who are expanding their businesses or making new investments. However, to be eligible for these facilities, investments must meet 1 (one) or more of the criteria outlined in Article 18 (3) Law 25/2007, including:
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absorbing considerable number of workers;
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being categorized as a high-priority;
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contributing to infrastructure development;
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transferring technology;
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establishing pioneer industries;
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operating in remote, underdeveloped, and border areas, or other areas deemed necessary;
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preserving the environment;
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conducting research, development, and innovation;
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partnering with UMKM or cooperatives;
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utilizing domestically produced capital goods or machinery/equipment; and/or
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participating in tourism development.
