shutterstock_1294423936.jpg

Licensing
in General

Business Licensing

As Law No. 11/2020 of Job Creation is the new reforming law and regulation on business licensing along with rapid development of investments in Indonesia, frameworks regarding the new law are currently being drafted by the government of Indonesia. One of the implementing regulations, specifically concerning business licensing procedures, is GR No. 6/2021.

According to Law No. 6/2021, Organization of Business at the Regional Level can be defined as business licensing activities carried out through an electronic management process from the application stage until the issuance of the document in an integrated manner of a one-stop service. Business licensing can also be described as legality given to business actors who are due to start and run their business and/or activities. The DPMPTSP is the regional apparatus of the provincial regional governments or the regency or city regional governments, which has the task and function of carrying out government affairs in the investment sector. Functions of One-Stop Services and Investment Services can be described in the graphic below:

Functions of One-Stop Services and Investment Services.png

Functions of One-Stop Services and Investment Services

Source: GR No. 6/2021.

Regarding business licensing, Article 6 GR No. 6/2021 states that the implementation of regional business licensing will improve the investment ecosystem and business activities. The enhancement of investment ecosystem and business activities shall include:

 

  1. risk-based business licensing;

  2. general requirements for business licensing; and

  3. sectoral business licensing and ease of investment requirements.

 

Risk-based business licensing can be defined as business licensing based on the risk level of business activities. Licensing for this type of business can be done by determining its business activities' risk level and rating. In addition, the process of risk-based business licensing is described in the graphic as follows:

Process of Risk-Based Business Licensing.png

Process of Risk-Based Business Licensing

Source: GR No. 6/2021.

Risk-based Approach for Business Licensing in Indonesia

According to the World Bank’s Doing Business Annual Comparation Business Regulation, Indonesia is ranked 73rd (seventy-third) among 190 (one hundred and ninety) economies in terms of ease of doing business in 2019 - 2020. To improve its ranking, Indonesia issued Law No. 11/2020, which regulates ease of doing business as one of its strategic policies. Law No. 11/2020 introduces a new business licensing approach, namely a risk-based approach, to improve the investment ecosystem and business activity. A risk-based approach on business licensing is carried out based on the determination of risk level and business scale rating of business activities that are then categorized into the following classifications:

  • low-risk business activity;

  • medium risk business activity,

  1. medium low-risk business activity; and​

  2. medium high-risk business activity;

  • high-risk business activity.

Based on the classifications, the business licensing requirements for each type of level can be seen in Table IX.1.

Classification on Risk-Based Approach on Business Licensing

Classification on Risk-Based Approach on Business Licensing

Source: Law No. 11/2020.

These classifications are obtained based on the assessment of hazard level and potential. The evaluation on hazard level is carried out based on the following aspects: health, safeness, environment, utilization and management of natural resources, and other elements. The assessment of hazard level is carried out by calculating the type, criteria, and location of business activity, limitation of resources, and volatility risk. The evaluation of potential hazards is divided into the following categories:

  • almost impossible to happen;

  • unlikely to happen;

  • likely to happen; and

  • most likely to happen.

A risk-based approach is elaborated further in GR No. 5/2021. According to Article 3 of GR No. 5/2021, the objective of a risk-based approach on business licensing is to improve the investment ecosystem and business activity through:

  • simplifying the implementation of business licensing issuance to make it more effective; and

  • providing business activity supervision that is transparent, structured, and accountable following the provision of the law.

Firstly, to start and/or conduct business in Indonesia, the entrepreneur shall satisfy basic requirements for business licensing and risk-based business licensing. Essential requirements for business licensing include conformity of spatial utilization activity, environmental approval, PBG, and SLF, which are regulated further in the laws on spatial planning, environment, and building. Therefore, the central government will determine the implementation of risk-based licensing.

Furthermore, risk-based business licensing is conducted to determine the risk level and business scale rating of business activity, including for UMKM and/or large companies. Risk-based business licensing is determined based on the result of risk analysis on business activity, namely:

  • business activity identification;

  • hazard determination and assessment;

  • assessment of potential hazard;

  • determination of risk level; and

  • decision on the classification of business licensing.

The implementation of risk-based business licensing covers the following sectors:

Sectors of Risk-Based Business Licensing.png

Sectors of Risk-Based Business Licensing

Source: GR No. 5/2021.

Risk-based business licensing in each sector includes:

  • KBLI code/reference, KBLI title, the scope of activity, risk parameter, risk level, business licensing, term, validity period, and the authority of business licensing;

  • requirements and/or obligations that arise from risk-based business licensing;

  • risk-based business licensing guideline; and

  • business activity and/or product standard.

Furthermore, the central government will develop norms, standards, procedures, and criteria for risk-based business licensing in each sector that will become a sole reference for implementing risk-based trade licensing in central and regional governments. The central government may delegate the implementation of norms, standards, procedures, and criteria to regional governments in the form of regional head regulation that consists of internal law for regional government officials on implementing risk-based business licensing.

As regulated under Article 10 (2) GR No. 6/2021, each regional government has an obligation to use the OSS system to provide business licensing services. The regional government is allowed to develop an internal system to verify business licensing through OSS, for instance, satisfying certain requirements or paying regional retribution according to standards set out by the central government. Furthermore, the governor, regent, or mayor – as the head of regional government – delegates the authority to administer business licensing to the head of provincial, regency, or city DPMTSP, where the head of provincial DPMTSP acts as the integrated supervisory coordinator for provincial authorities and the head of regent/city DPMTSP acts as the integrated supervisory coordinator for regent/city authorities. The authority to administer business licensing is divided based on the following criteria:

Sectors of Risk-Based Business Licensing

Sectors of Risk-Based Business Licensing

Source: GR No. 5/2021.

Risk-based OSS System

The implementation of risk-based business licensing is conducted through an integrated electronic system managed and organized by OSS Agency, namely the OSS system. The OSS system consists of the following sub-systems: 

  • information service;

  • business licensing; and

  • supervision.

To conduct risk-based business licensing, ministry/agency, regional government, KEK administrator, KPBPB entrepreneur, and the entrepreneurs shall use the OSS system.

Risk Based OSS System Overview.png

Risk Based OSS System Overview

Source: Indonesian Investment Coordinating Board.

The Information Sub-System

The information sub-system provides information to obtain risk-based business licensing and other information related to the implementation of risk-based business licensing. The information provided consists of:

  • KBLI based on risk-level;

  • spatial plan;

  • provisions on investment requirements;

  • the requirements and/or obligations of business licensing, term, implementation standard of business activities and supporting business activities and other conditions on norms, standards, procedures, and criteria of the business sectors, guidelines, and methods for submission of NIB, standard certificates, and permits;

  • primary requirements on the conformity of space utilization activities, PBG, and SLF;

  • provisions on investment incentives and facilities;

  • supervision on business licensing and reporting obligations;

  • simulation on business licensing services, guidance for OSS system users, OSS system dictionaries, and frequently asked questions;

  • public complaints service; and

  • other information as determined by OSS Agency.

The abovementioned information can be accessed publicly without the right to access.

The Risk-Based Business Licensing Sub-system

The issuance process of risk-based business licensing is conducted through a risk-based business licensing sub-system. The risk-based business licensing sub-system consists of the following stages of business permitting issuance:

  • account or right to access registration;

  • low-risk business licensing in the form of NIB;

  • medium risk business licensing, which consists of NIB and standard certificates;

  • high-risk business licensing, which consists of NIB and permits;

The business licensing sub-system is accessible using the right to access by the entrepreneurs, OSS Agency, ministry/agency, provincial DPMPTSP, DPMPTSP of city/regency, KEK administrator, and KPBPB entrepreneur. Additionally, OSS Agency may give limited right to access to other parties not mentioned above.

The Applicant of Business Licensing

Applicants who can conduct the application for business licensing through the OSS system are as follows:

  • individual, who is a citizen of the Republic of Indonesia and is capable of acting and performing legal acts;

  • the business entity, a legal entity that is incorporated in the Republic of Indonesia which conducts business activity in specific sectors including:

  1. limited liability company;​

  2. limited partnership (commanditaire vennootschap/cv);

  3. firm (venootschap onder firma);

  4. private partnership;

  5. cooperative;

  6. foundation;

  7. public enterprise;

  8. regional public enterprises;

  9. other legal entities which are owned by the state; and

  10. broadcasting agencies;

  • representative office, namely (i) individual, who is a citizen of the Republic of Indonesia; (ii) individual, who is a foreign citizen; or (iii) a business entity which acts as a representative for the foreign entrepreneur and which conducts activities classified as low-risk business activities;

  • the foreign business entity, established outside the Republic of Indonesia and conducts business and/or activities in specific sectors including:

  1. foreign franchise;​

  2. foreign futures trader;

  3. electronic system operator of private foreign scope; and

  4. permanent establishment/bentuk usaha tetap.

The Registration to Get the Right to Access

The right to access can be granted for (i) individuals; (ii) the director/person in charge of the entrepreneur; or (iii) the management of cooperative and/or foundation. By the assignment of ministry/agency, provincial DPMPTSP, DPMPTSP of city/regency, KEK administrator, and KPBPB entrepreneur, the right to access for institutions mentioned above are administrators for the right to access. The right to access administrator may provide a derived right to access based on authority and necessity. OSS Agency will evaluate the granting of the right to access and derived right to access.

The right to access for the entrepreneurs is granted for:

  • conducting the application for business licensing, including the alteration and revocation;

  • submitting a report on investment activities;

  • submitting complaint; and/or

  • executing an application for joint facilities.

Right to access for ministry/agency, provincial DPMPTSP, DPMPTSP of city/regency, KEK administrator, and KPBPB entrepreneur are granted for:

  • conducting technical verification and notification of fulfilment of risk-based business licensing requirements;

  • the implementation of supervision schedule; and

  • report on the result of supervision/minutes of the performance of business activities.

Furthermore, the application of the right to access is conducted by the following entrepreneurs:

  • individual, by submitting NIK;

  • the business entity, by submitting the validation number of the business entity;

  • public enterprises, regional public enterprises, other legal entities owned by the state, public broadcasting agency, and/or public service agency, by submitting legal basis for the incorporation;

  • limited partnership and/or private partnership, by offering a legal basis for the incorporation; and

  • representative office and/or foreign business entity, by submitting NIK of the head of usual office/person in charge for a citizen of the Republic of Indonesia or passport number of the head of the representative office/person in charge for a foreign citizen.

NIB

  1. NIB as Prerequisite for Risk-Based Business Licensing

Every entrepreneur shall have NIB, as a requirement for conducting business activity, issued by OSS Agency with specific numbers given with security and accompanied by E-Signature. NIB will also function as an identity and proof of registration for the entrepreneur to conduct business activity. Moreover, NIB will be used for:

  • API;

  • right to access custom and excise affairs;

  • registration for the entrepreneur membership for social security for health and employment; and

  • the mandatory employment report for the entrepreneur’s first period.

The entrepreneur that requires API may choose the following API:

  • general API for the import of traded goods; or

  • Manufacture API for the import of personal goods that are used as capital goods, raw materials, auxiliary materials, and/or materials used to support the production process.

The right to access custom and excise affairs will be used by (i) the entrepreneur that conducts export/import activities; or (ii) an individual entrepreneur who can conduct export activities. Furthermore, NIB consists of the following data:

  • profile;

  • business capital;

  • NPWP;

  • KBLI; and

  • business location.

To obtain NIB, the individual entrepreneur shall submit the abovementioned data through the OSS system. For the individual entrepreneur who does not have NPWP yet, they may conduct an application for NPWP through the OSS system. The entrepreneur in the form of a business entity will be required to submit the profile, business capital, NPWP, and KBLI based on the integration between the OSS system and ministerial system, which manages the government affairs in the human rights law sector. Additionally, NPWP will be validated by the OSS system based on the integration between the OSS system and the ministerial system, which manages the government affairs in the state financial sector. Moreover, business location will be validated by the OSS system based on the integration between the OSS system and the ministerial system, which manages the government affairs in the spatial sector.

Moreover, for the data as mentioned above, the OSS system will ensure conformity with the provisions of the business sector and other investment provisions, including:

  • a business sector that is classified as priority business sector;

  • business sector allocation for UMKM and cooperatives;

  • obligation to conduct partnership with UMKM and cooperatives; and

  • provisions on the specific business sector (single purpose).

Conformity with the other investment provisions mentioned above will determine the incentive and/or facility that the entrepreneurs will obtain. After submitting the data, the entrepreneurs also need to conduct business activities clarification on the following:

  • principal business activities, which are business activities as stated in the deed of incorporation, and have a commercial purpose, revenue sources, or generate profit for the entrepreneurs;

  • supporting business activities as follows:

  1. activities that support the main business activities;

  2. do not constitute an income source for the entrepreneurs; and

  3. can be done and completed before the implementation of the main business activities.

  • The administrative branch office, which is a part of its parent company, can be located in a different place and has an organizational function.

Furthermore, the entrepreneurs that have been submitting the data shall continue the process to obtain risk-based business licensing through the OSS system by presenting the data of main activity for each KBLI code that consists of 5 (five) digits and the location that at least contains:

  • type of product that is produced;

  • product capacity;

  • the number of workers; and

  • investment value plan.

The OSS system will examine the provisions on the investment value plan submitted by the entrepreneurs, including the minimum investment amount and conditions on capital for foreign investment. Thereafter, the issuance of NIB will be based on:

  • risk level;

  • examination of the business sector provisions;

  • analysis of the minimum investment provisions; and

  • analysis of the capital provisions.

The risk level will adhere to the norms, standards, procedures, and criteria that are automatically validated by the OSS system. NIB will remain valid as long as the entrepreneur is still conducting their business/activity under the provisions of the laws.

 2. NIB Revocation

However, NIB can be revoked if:

  • the entrepreneur is no longer conducting its business activity that is stated in the NIB;

  • the entrepreneur is violating the provisions of the laws that are related to the business licensing;

  • the application of NIB revocation by the entrepreneur is accepted;

  • dissolution of the entrepreneurs; or

  • revoked based on a legally binding court decision.

The Risk-Based Business Licensing Issuance

As elaborated above, the risk-based approach on business licensing classifies business activities into the following risk levels: (i) low-risk business activity; (ii) medium-risk business activity; and (iii) high-risk business activity. Each level has different requirements to conduct the issuance of business license.

1. Low-Risk Business Activity

If the business activities are classified as low-risk, NIB will be issued automatically by the OSS system after the entrepreneurs submit the data. NIB will function as legality to carry out business activities and function as SPPL.

2. Medium-Risk Business Activity

The medium-risk activity is divided into 2 (two) classifications as follows:

  • medium low-risk business activity; and

  • medium high-risk business activity.

2. A. Medium Low-Risk Business Activity

For business activities classified as medium low risk, the entrepreneur shall submit a statement of ability to comply with the business activities’ standards through the OSS system after completing the data mentioned above. To obtain NIB and standard certificates, the entrepreneur must submit the SPPL form available in the OSS system.

Furthermore, the medium-low risk business activities are obliged to meet the UKL-UPL standard. In addition to the statement of ability to comply with the business standards, the entrepreneurs also need to submit the UKL-UPL form available in the OSS system to obtain NIB and standard certificates.

 

2. B. Medium High-Risk Business Activity

For business activities classified as medium high-risk, the entrepreneur shall submit a statement of ability to comply with the business activities’ standards through the OSS system after completing the data mentioned above. To obtain NIB and a standard certificate that lists unverified marks, the entrepreneur must submit the SPPL form available in the OSS system. 

Furthermore, the medium high-risk business activities are obliged to meet the UKL-UPL standard. In addition to the statement of ability to comply with the business standards, the entrepreneurs also need to submit the UKL-UPL form available in the OSS system to obtain NIB and standard certificate that lists unverified marks. The formal certificate that lists unverified signatures will be the basis for the business activities' preparation. 

After obtaining NIB and standard certificate that lists unverified marks, the entrepreneurs shall fulfill business activity standards by complying with the terms and based on norms, standards, procedures, and criteria through the OSS system. Subsequently, the OSS system will forward the fulfillment of business activities standards to the ministry/agency, provincial DPMPTSP, DPMPTSP of city/regency, KEK administrator, and KPBPB business entities following their respective authorities to conduct the verification. The verification is performed by the ministry/agency, regional apparatus, KEK administrator, or KPBPB entrepreneur following the terms and based on norms, standards, procedures, and criteria.

Based on the verification results, the ministry/agency, regional apparatus, KEK administrator, or KPBPB entrepreneur will convey a notification to the OSS system on whether the entrepreneurs have complied with the requirements. To conduct the verification, the KEK administrator or KPBPB entrepreneur may cooperate with the ministry/agency, regional apparatus, or other related agencies or professionals who are certified or accredited based on the laws.

Suppose the notification informs that the entrepreneurs have met the requirements, the OSS system will state that the standard certificate has been verified, and the entrepreneurs may print out the certificate standard. However, suppose the notification informs that the entrepreneurs have not fulfilled the requirements yet. In that case, the OSS system will notify the entrepreneurs to conduct the satisfaction of standard certificate’s needs according to the terms that have been set out in the norms, standards, procedures, and criteria. Subsequently, the entrepreneurs shall apply the OSS system to conduct the verification again. If the entrepreneurs still do not meet the requirements, the OSS system will revoke the unverified standard certificate.

Additionally, if the medium low-risk and the medium high-risk business activities need product standardization, the entrepreneurs shall conduct standard product compliance through the OSS system. The OSS system will forward product standards to the ministry/agency following the respective authorities' verification.

3. High-Risk Business Activity

Before conducting the high-risk business activity, the entrepreneurs shall have NIB issued by the OSS system. After obtaining NIB, the entrepreneurs shall satisfy the requirements for a permit following the norms, standards, procedures, and criteria before carrying out the operational and/or commercial activities. For certain business activities that are obliged to conduct AMDAL, the requirements include AMDAL. Subsequently, the OSS system will forward the completion of requirements to the ministry/agency, provincial DPMPTSP, DPMPTSP of city/regency, KEK administrator, or KPBPB entrepreneur following their respective authority to conduct the verification.

The ministry/agency, regional apparatus, KEK administrator, or KPBPB entrepreneur conducts the verification following the terms and based on norms, standards, procedures, and criteria. Based on the verification result, the ministry/agency, regional apparatus, KEK administrator, or KPBPB entrepreneur will notify the OSS system on whether the entrepreneurs have complied with the requirements. To conduct the verification, KEK administrator or KPBPB business may cooperate with the ministry/agency, regional apparatus, or other related agencies or professionals who are certified or accredited based on the laws.

If the notification informs that the entrepreneurs have met the requirements, the OSS system will issue the permit to the entrepreneur. However, suppose the report advises that the entrepreneurs have not satisfied the requirements yet. In that case, the OSS system will inform the entrepreneurs to meet the criteria again to obtain the permit through the OSS system.  If the ministry/agency, regional apparatus, KEK administrator, or KPBPB entrepreneur do not notify the verification result to the OSS system, the OSS system will issue the permit. 

Additionally, suppose the high-risk business activities are required to meet business activity and/or product standards. In that case, the entrepreneurs will convey business activity and/or product standards through the OSS system following the norms, standards, procedures, and criteria. Subsequently, the OSS system will forward the following:

  • fulfillment of business activity standards to the ministry/agency, provincial DPMPTSP, DPMPTSP of city/regency, KEK administrator, and KPBPB entrepreneur following their respective authorities to conduct the verification and notification; and

  • fulfillment of product standards to the ministry/agency to complete the confirmation and information.

 

The Business Licensing Issuance and Facilities for UMK

UMK may grant the facilities to conduct business licensing through single licensing. If UMK conducts low-risk business activity, the UMK entrepreneur will obtain NIB through the OSS system as a business identity and legality. The NIB obtained by UMK running low-risk business activity could be used as SNI and Halal Assurance Statement. For UMK that is conducting medium or high-risk business activity, in addition to NIB, UMK entrepreneurs shall have the required certificate standard and/or permit.

The OSS system will forward the application to the ministry/agency, regional government, KEK administrator, and KPBPB entrepreneur. The granting of a certificate and/or permit for UMK is equivalent to the risk-based business licensing as elaborated above.

The Supervision Sub-system

The Supervision of Risk-Based Business Licensing Sub-system is carried out in an integrated and coordinated manner among ministries/agencies, provincial governments, district/city governments, KEK administrators and/or KPBPB concession agencies through the Supervision subsystem of the OSS System. Supervision subsystem as referred to in Article 7 (1) BKPM Reg. No. 5/2021 is used as a means to carry out supervision of:

  • standards and/or obligations for the implementation of business activities; and

  • development of investment realization as well as providing facilities, incentives and facilities for investment, and/or partnership obligations.

As one of the OSS systems, the Supervision Sub-system is used as a medium to implement Risk-Based Business Licensing supervision. Supervision Sub-system contains at least:

  • annual field inspection planning;

  • periodic reports from entrepreneurs and data on the development of business activities;

  • supervisory work unit;

  • assessment of compliance with the implementation of business licensing;

  • complaints towards entrepreneurs and supervisors and the follow-up of those complaints; and

  • development and sanctions.

This Sub-system can be accessed and carried out by:

  • the entrepreneurs;

  • OSS agency;

  • ministry/agency;

  • provincial DPMPTSP;

  • DPMPTSP of city/regency;

  • KEK administrator; and

  • Free trade and free port Zone Agency.

The OSS Agency

The OSS system is an integrated electronic system managed and administered by the OSS Agency to implement risk-based business licensing. The OSS system is governed by the OSS Agency, namely the government agency that administers government affairs in investment coordination. 

OSS Agency has the authority to issue NIB and to revoke NIB for low to high-risk business activities. OSS Agency can give unverified business activities standard certificates for business activities with medium high-risk levels. Business licensing, issued by the OSS Agency, shall follow the norms, standards, procedures, and criteria set by the central government. The issuance of business licensing shall be carried out by:

  • The OSS Agency;

  • The OSS Agency on behalf of ministers/heads of governor;

  • The head of a provincial DPMPTSP on behalf of a governor;

  • The head of a regency/city DPMPTSP on behalf of a regent/mayor;

  • KEK administrators; and

  • The head of a KPBPB Concession Board.

The business licensing format is standardized based on the OSS System and is available for each business licensing publisher according to their authority. Business licensing that will expire can be extended by applying for an extension of the business licensing through the OSS system no later than 1 (one) month before the end of the business licensing period.

Risk-based business licensing is implemented electronically and integrated through the OSS system. The OSS system consists of an information service sub-system, business licensing sub-system, and supervision sub-system. In particular, the OSS system must be used by:

  • ministries or agencies;

  • provincial government;

  • district or city government;

  • special economic zone administrator;

  • free trade zone and free port exploitation agency; and

  • entrepreneur.

Every entrepreneur may be subject to administrative sanctions for violations of the following obligations:

  • report every replacement of construction worker;

  • meet the minimum requirements for the number of the leading equipment for each sub-classification;

  • own and extend a construction business entity certificate for a construction service business entity;

  • have and develop the Construction Work Competency Certificate for construction workers;

  • submit annual business activity reports through the integrated construction business application system;

  • record the experience of individual business entities and businesses; and/or

  • comply with the requirements for representative offices of foreign construction service business entities and foreign investment construction service business entities.

Correlation between BKPM, Central PTSP, and DPMPTSP

Based on the information in the previous sections, it can be concluded that BKPM, Central PTSP, and DPMPTSP have important responsibilities in conducting business licensing, and the roles of each institution are related to one another. The correlation between the three institutions is illustrated in the graphic below:

Correlation between BKPM, Central PTSP, and DPMPTSP.png

Correlation between BKPM, Central PTSP, and DPMPTSP

Source: GR No. 6/2021 jo. BKPM Regulation No. 9/2015 jo. BKPM Regulation No. 4/2021.

Referring to BKPM Regulation No. 4/2021, Central PTSP is an investment related service, authorized by central government and organized in an integrated process, starting from application phase until completion phase of product through a one-stop service at BKPM. DPMPTSP can be defined as an organization which is authorized by provincial or regency/city government and is responsible for carrying out government affairs in investment sectors.

Therefore, these institutions are investment-related unit with different authorizations. Both Central PTSP and DPMPTSP have a role in providing services for business actors to submit risk-based business licensing applications offline, if the OSS services are not yet available.

Land

One of the critical changes of Law No. 11/2020 is the simplification of the business licensing process. Today, as an effort to simplify the licensing process, Law No. 11/2020 replaced the location permit with a document known as Kesesuaian Kegiatan Pemanfaatan Ruang (KKPR), which appears to be a document that verifies whether planned operations are compatible with RDTR.

Law No. 11/2020 also transfers authority from the regional government, which previously approves and grants the location permit, to the central government. Such confirmation will be given via the OSS system. If a business is located in coastal area and jurisdiction, it is mandatory to obtain approval for the marine KKPR. For a business located in forest area, it is mandatory to obtain approval document known as Persetujuan Penggunaan Kawasan Hutan (P2KH). As part of this change, Law No. 11/2020 specifies that each regional government should upload a comprehensive RDTR to the OSS system. Another simplification regarding location permit is as follows:

Simplification of Location Permit.png

Simplification of Location Permit

Source: Law No. 11/2020.

As the implementing regulations on this subject have not yet been released, this chapter will discuss the matter based on the existing method. However, investors should become familiar with the new settings to avoid incurring risks in this field.

Land Titles

With the emergence of investments and business activities in Indonesia, many investors need buildings or land for their businesses. Therefore, investors should become familiar with various types of land rights that are recognized and acquired in Indonesia.

Freehold Title

Freehold title is the right to use the land for any interest with an indefinite time of validity. Only Indonesian citizens and certain Indonesian legal entities, whose requirements are determined by the Indonesian government, are granted the freehold title.

Freehold title can be transferred to other parties. Freehold title is the most extensive type of land rights in Indonesia that can be owned. Therefore, the highest land rights available in Indonesia is freehold title.

Right to Build

HGB is the right to build and own buildings on land that is not one’s property for a maximum of 30 (thirty) years and can be extended for another 20 (twenty) years. Those who may possess HGB are Indonesian citizens and legal entities incorporated under Indonesian law and domiciled in Indonesia. Thus, PT PMA can acquire an HGB.

HGB can be granted over (i) the state’s lands; (ii) lands with HPL; and (iii) lands with freehold title. For HGB over the state’s lands and lands with HPL, it can be renewed for a maximum of 30 (thirty) years. While HGB over lands with freehold title can be continued indefinitely with a deed of granting HGB on freehold title.

HGB over the state’s lands and the lands with HPL shall be granted with the issuance of a grant of rights decree by the MoASP. For HGB over the lands with HPL, the MoASP decree is issued with the approval from HPL holders. HGB over the lands with freehold title occurs through the holder granting the rights with a deed made by PPAT.

Right to Cultivate

HGU is the right to cultivate lands directly controlled by the state, including farming, fishing, or livestock. The period of HGU applies for 25 (twenty-five) years for individuals and 35 (thirty-five) years for legal entities. However, HGU may be extended for another 25 (twenty-five) years and renewed for a maximum of 35 (thirty-five) years. HGU can be obtained by Indonesian citizens and legal entities incorporated under Indonesian law and domiciled in Indonesia, including PT PMA. 

HGU can be granted over: (i) the state’s lands; and (ii) lands with HPL. HGU over the state’s lands and the lands with HPL shall be granted with the issuance of a grant of rights decree by the MoASP. For HGU over the lands with HPL, the MoASP regulation shall be provided with approval from the HPL holders.

Right to Use

HP is the right to use and/or collect products from land directly controlled by the state or land owned by other persons who give the rights and obligations stipulated in the decision upon granting the right by the authorized official or in an agreement with the owner of the land. HP is classified into:

 

  • HP with a period

Lands that can be granted for HP with a period are (i) the state’s lands; (ii) lands with freehold title; and (iii) lands with the HPL. HP period over the state’s lands and lands with HPL can be granted for a maximum of 30 (thirty) years which can be extended for another 20 (twenty) years and renewed for a maximum of 30 (thirty) years. HP period over lands with freehold title can be granted for 30 (thirty) years and can be renewed with a deed of giving HP on freehold title. It should be noted that HP with a period, maybe granted to (i) Indonesian citizens; (ii) legal entities incorporated under Indonesian law and domiciled in Indonesia; (iii) foreign legal entities that have representatives in Indonesia; (iv) social and religious organizations; and (v) foreign citizens.

  • HP (as long as it is used)

Lands that can be granted for HP (as long as it is used) are (i) the state’s lands and (ii) lands with HPL. HP’s period is granted for an unspecified time as long as it is used. Those who may possess HP for as long as it is used are (i) central government institutions; (ii) regional governments; (iii) rural governments; and (iv) representatives of foreign states and international organizations.

HP over the state’s lands and the lands with HPL shall be granted with the issuance of a grant of rights decree by the MoASP. For HP over the lands with HPL, the MoASP ordinance shall be provided with HPL holders' approval. HP over the land with freehold title occurs through the holder's granting of rights with a deed made by the PPAT.

Right to Manage

HPL is the rights of control of the state whose implementing authority is partly delegated to management rights holders. HPL can come from state land and customary land. HPL over state land is granted as long as the main duties and functions are directly related to land management. HPL holders are given the authority to prepare a plan for the designation, use and utilize all or parts of the land in accordance with the spatial layout plan, alone or in cooperation with other parties, and determine the annual compulsory rate and/or money of the other party in accordance with the agreement.

HPL originating from state land or customary land is stipulated by a ministerial decree. HPL must be registered at the land office. HPL comes into effect when it is registered by the land office. HPL holders are given a certificate as proof of ownership of HPL. HPL cannot be used as debt collateral and are burdened with mortgage rights. HPL cannot be transferred to other parties. Release of HPL is made by and in front of the competent official and reported to the MoASP.

Land titles over HPL that are cooperated with other parties can be encumbered with security rights, transferred, or released. In the event that the land titles above the HPL will be relinquished, the relinquishment shall be made by and in front of the competent official and be reported to the MoASP.

Right to Lease

A person or a legal entity has HS over lands if the person is entitled to use other person's land for building purposes by paying the owner a sum of money as rent. This land lease agreement may not be accompanied by terms that contain elements of extortion. Payment of rent can be made once or at certain times or before or after the land is used. The state cannot lease land because the state is not the owner of the land. Those who can become holders of HS are:

  • Indonesian citizens;

  • foreigners domiciled in Indonesia;

  • a legal entity incorporated under Indonesian laws and is domiciled in Indonesia; and

  • foreign legal entities that have representatives in Indonesia.

Land Ownership by Foreigners

In case foreigners intend to conduct business in Indonesia and are required to incorporate a company in the form of PT PMA incorporated under Indonesian law and domiciled in Indonesia, the land titles that can be possessed by foreigners include:

  • HP, which can be given to foreign legal entities that have representatives in Indonesia and foreigners; and

  • right of ownership over stacked units/hak milik atas satuan rumah susun, which are granted to foreigners who have permits in accordance with the provisions of laws and regulations, foreign legal entities that have representatives in Indonesia, or representatives of foreign countries and international institutions that are located or have representatives in Indonesia.

Foreigners who can own a house to live or occupy shall have immigration documents in accordance with the provisions of laws and regulations. In the event that a foreigner dies, the house or residence can be inherited by their heir. If the heir is a foreigner, the heir will be required to obtain immigration documents according to the provisions of laws and regulations.

Residential houses that can be owned by foreigners are:

  1. house tread on land:

  • HP; or

  • HP on property rights, which are controlled by virtue of an agreement granting usufructuary rights over a property track with the deed of the land containing official and management rights, based on land utilization agreements with the holders of management rights.

  2. flats built on a plot of land:

  • HP or right to build on state land;

  • HP or building use rights over land management rights; or

  • HP or right to build on freehold land.

Ownership of residential houses for foreigners is granted with the following limitations: (i) minimum price; (ii) land area; (iii) number of land parcels or apartment units; and (iv) designation for residential. 

PT PMA who is a property developer may also buy a land in Indonesia to develop the property. The status of the land is the right of building which will be split into small lots. The buyer of the property could later apply to change the status of the land lots to the right of ownership, which is only allowed for Indonesian citizens. 

The foreigner can also purchase a property in Indonesia, depending on the type of property:

  • for a landed building (house, office, factory), a foreigner or PT PMA are allowed to own it and the status of the land is the right of building or HP. Regarding the ownership of landed houses, the Government of Indonesia has revealed a new regulation which allows foreigners to buy a landed house under the HP category for a period of up to 80 years (an initial period of 30 years which can be extended twice by 20 years and a further 30 years).

  • for a condominium or apartment and office space, the foreigner or PT PMA can own it as long as it isn’t part of a government-subsidized housing development and the status of the building is under the HP.

Registration of Land Titles

The purpose of land registration is to provide legal certainty and legal protection to holders of rights over a land parcel, rights of ownership over stacked units, and other registered rights so that they can easily prove themselves as holders of the rights concerned. In order to provide legal certainty and protection to the right holder concerned, a land title certificate is issued.

First Time Land Registration Scheme.png

First Time Land Registration Scheme

Source: GR No. 24/1997.

The administration and implementation of land registration can be done electronically. The results of operation and implementation of electronic land registration are in the form of data, electronic information, and/or electronic documents. Electronic data and information and/or printouts thereof constitute valid legal evidence and constitute an extension of valid evidence in accordance with the applicable procedural law in Indonesia. The application of electronic land registration is carried out in stages by considering the readiness of the electronic system built by the MoASP. All data and/or documents related to land registration activities are gradually stored and presented in the form of electronic documents by utilizing information and communication technology.

Official land deeds can be produced electronically. In order to accelerate land registration, the systematic implementation of land registration must be followed by land parcel owners. In the event that the owner of the land parcel does not participate in systematic land registration, the owner of the land parcel is obliged to register his land sporadically.

Announcement of the results of physical data collection and juridical data:

  • in systematic land registration, for 14 (fourteen) calendar days;

  • in sporadic land registration, for 30 (thirty) calendar days. The announcement can be made on the website provided by the MoASP.

The Conformity of Space Utilization Activities

Law No. 11/2020 simplifies the basic requirements of business licensing. One of them is by KKPR which is defined as the conformity of planned activities and/or business locations with RTR. 

Regional governments are required to compile and provide RDTR in digital form so that it can be easily accessed by the public to obtain information regarding the conformity of their planned activities and/or business locations with RDTR. Furthermore, the central government is required to integrate RDTR in digital form in the electronic business licensing system. The implementation of KKPR shall be held by:

  • Confirmation of KKPR

Confirmation of KKPR is a document which states the conformity of the planned space utilization activities with RDTR. In case the entrepreneurs have obtained the information on the location plan for their business activity in accordance with RDTR, the entrepreneurs shall apply for KKPR for their business activity through the electronic business licensing system.

  • Approval of KKPR

If the regional governments have not prepared and provided RDTR, the entrepreneur shall apply for approval of KKPR for their business activities from the central government through an electronic business licensing system. Approval of KKPR is a document that states the conformity of a planned space utilization activity with RTR besides RDTR.

The implementation of KKPR consists of (i) KKPR for business activities; (ii) KKPR for non-business activities; and (iii) KKPR for national strategic activities. It is important to note that the KKPR period is valid for 3 (three) years from the time it was issued.

KKPR for Business Activities

The implementation of the KKPR for business activities is obtained through OSS system. After the entrepreneur obtains KKPR, the entrepreneur can apply for business licensing and subsequently carry out space utilization activities. Confirmation of KKPR for business activities shall be applied through the OSS system in the following stages:

Issuance of Confirmation of KKPR for Business Activities Procedures.png

Issuance of Confirmation of KKPR for Business Activities Procedures

Source: GR No. 21/2021.

Approval of KKPR for business activities is given if the RDTR is not yet available at the location of the planned space utilization activity. Additionally, approval of KKPR for business activities is also provided for space utilization in the forest areas that have changed in purposes and functions and have not been included in RDTR. Approval of KKPR for business activities shall be applied through the OSS system in the following stages:

Issuance of Approval of KKPR for Business Activities Procedures.png

Issuance of Approval of KKPR for Business Activities Procedures

Source: GR No. 21/2021.

Subjects are exempted from the above-mentioned assessment stage if the applications for KKPR are in (i) industrial and tourism areas that already have business licensing; and (ii) KEK. Moreover, in the event that the MoASP, governors, or regents/mayors in accordance with their respective authorities does not issue an approval of KKPR for business activities within 20 (twenty) days, the OSS agency shall issue such approval.

Space utilization activities carried out by UMK entrepreneurs are exempted from the process of KKPR issuance. The UMK entrepreneurs only need to make an independent statement which states that their business activities are in accordance with the RTR. 

KKPR for Non-Business Activities

The implementation of KKR for non-business activities is obtained through an electronic system organized by the MoASP. The applicants can carry out space utilization activities after they obtain the KKPR. Confirmation of KKPR for non-business activities shall be applied through an electronic system organized by the MoASP in the following stages:

Issuance of Confirmation of KKPR for Non-Business Activities Procedures.png

Issuance of Confirmation of KKPR for Non-Business Activities Procedures

Source: GR No. 21/2021.

In the event that the RDTR is not yet available at the location of the planned space utilization activity, approval of KKPR for non-business activities shall be given. Approval of KKPR for non-business activities is also provided for space utilization in the forest areas that have changed in purposes and functions and have not been included in RDTR. Approval of KKPR for non-business activities shall be applied through an electronic system organized by the MoASP in the following stages:

Issuance of Approval of KKPR for Non-Business Activities Procedures.png

Issuance of Approval of KKPR for Non-Business Activities Procedures

Source: GR No. 21/2021.

In the event that the MoASP, governors, or regents/mayors in accordance with their respective authorities does not issue an approval of KKPR for non-business activities within a period of 20 (twenty) days, such approval shall be issued by the electronic system organized by the MoASP.

KKPR for National Strategic Activities

The implementation of KKPR for national strategic activities is given for space utilization activities plan that are included or not included in the RTR, RZ KAW, or RZ KSNT. It should be noted that laws and regulations stipulate the relevant national strategic activities. KKPR for national strategic activities shall be applied by the minister, head of agencies, governors, regents, or mayors.

 

KKPR for space utilization activities plan included in the RTR, RZ KAW, or RZ KSNT shall be implemented through the confirmation of KKPR and the approval of KPPR. The following graphic explains the procedures to obtain confirmation of KKPR for national strategic activities and approval of KKPR for national strategic activities.

Issuance of Confirmation of KKPR for National Strategic Activities Procedures.png

Issuance of Confirmation of KKPR for National Strategic Activities Procedures

Source: GR No. 21/2021.

Issuance of Approval of KKPR for National Strategic Activities Procedures.png

Issuance of Approval of KKPR for National Strategic Activities Procedures

Source: GR No. 21/2021.

Furthermore, KKPR for space utilization activities plan that are not included in the RTR, RZ KAW, or RZ KSNT shall be implemented through a recommendation of KKPR. Besides the plan mentioned above, it could be in the form of (i) space utilization activities plan on the bank’s land; and/or (ii) space utilization plan in area/on land that will be granted HPL for national strategic activities. Recommendation of KKPR for national strategic activities is also given for space utilization in the forest areas that have changed in purposes and functions and have not been included in RTR.

The applicant can carry out space utilization activities after obtaining a recommendation of KPPR for national strategic activities which will be issued with the following procedures:

Issuance of Recommendation of KKPR for National Strategic Activities Procedures.png

Issuance of Recommendation of KKPR for National Strategic Activities Procedures

Source: GR No. 21/2021.

Please note that besides the KKPR as elucidated before, KPPR in coastal waters, waters, and jurisdictions areas are issued by the MoMAF. Such KPPR is valid until the end of business licensing and non-business licensing. However, if the business licensing and non-business licensing have not been issued, such KPPR is valid for 2 (two) years from the time it was issued by the MoMAF.

KPPR in coastal waters, waters, and jurisdictions areas for (i) business activities; (ii) non-business activities; and (iii) national strategic activities that are not included in the RTR, RZ KAW, or RZ KSNT are implemented by way of approval of KKPRL. The applicant shall apply for approval of KKPRL with the following procedures:

Issuance of Approval of KKPRL Procedures.png

Issuance of Approval of KKPRL Procedures

Source: GR No. 21/2021.

The application for the approval of KKPRL for business activities shall be submitted through OSS system. If the MoMAF does not issue approval of KKPRL for business activities within 20 (twenty) days, such approval shall be issued by the OSS agency.  

The application for the approval of KKPRL for non-business activities shall be submitted through an electronic system organized by the MoMAF. If the MoMAF does not issue such approval within 20 (twenty) days, it will be issued by the electronic system organized by the MoMAF. 

Furthermore, approval of KKPRL cannot be granted for an area in the core zone of marine protected areas. Approval of KKPRL also cannot be given for areas inside and outside the core zone of marine protected areas for open mining, dumping, and reclamation activities. If such activities are not technically possible to be moved from the marine protected areas, the approval of KKPRL can only be granted for national strategic activities and/or the interest of marine protected areas management. Approval of KKPRL may be granted in customary law communities' territory after obtaining approval from the relevant customary law communities. 

Moreover, utilization of sea space for non-business activities that are not included in national strategic policies and implemented by central government and/or regional governments may be permitted through a confirmation of sea space conformity. Such central government and/or regional government activities are financed by APBN and/or APBD. The confirmation of sea space conformity shall be applied through an electronic system organized by the MoMAF with the following procedures:

Issuance of Confirmation of Sea Space Conformity Procedures.png

Issuance of Confirmation of Sea Space Conformity Procedures

Source: GR No. 21/2021.

The MoMAF may delegate its authority regarding the issuance of confirmation of sea space conformity to the governor. If such confirmation is not issued within 14 (fourteen) days, the MoMAF or the governor shall be deemed to have given the confirmation of sea space conformity. 

In addition to the KKPR mentioned previously, there is also P2KH, namely the approval of the use of part of the forest area for development purposes outside of forestry activities without changing the function and designation of the forest area.  The issuance of P2KH is done by the MoEF through an application.  The Minister can delegate the authority to grant P2KH with a certain area to the governor for the construction of public facilities of a non-commercial nature and community mining. 

The use of forest areas for development purposes other than forestry activities can only be carried out for activities that have an inevitable strategic objective. Development purposes outside forestry activities include:

 

  • religion;

  • mining;

  • electricity generation, transmission and distribution installations, as well as new and renewable energy technologies;

  • construction of telecommunication networks, radio transmitting stations, television relay stations, and space observation earth stations;

  • public roads, toll roads and railways;

  • a transportation that is not categorized as a means of public transportation for the purpose of transporting production products;

  • reservoirs, dams, weirs, irrigation, drinking water channels, sewerage and sanitation, and other irrigation structures;

  • public facilities;

  • industries other than forest product processing;

  • defence and security;

  • public safety supporting infrastructure;

  • shelter for victims of natural disasters and their business land which is temporary in nature or certain agriculture in the context of food security and energy security; and

  • waste final processing site, waste treatment facility, or environmental restoration activities.

In addition, to activities for development purposes outside Forestry activities as referred to in Article 91 (2) GR No. 23/2021, the use of forest areas can be carried out for other activities that can directly or indirectly support forest management through a cooperative mechanism. Furthermore, P2KH is valid as an approval for the use of wood, as well as an approval for the entry and use of equipment. The use of forest areas for development purposes other than forestry activities for the public interest, especially priority projects of the Central Government, is carried out under the following conditions: 

  • in the case of land acquisition carried out by government agencies, through the mechanism of releasing forest areas; or

  • in the event that land acquisition is carried out by subjects that are not  government agencies, with conditions that:

  1. is permanent, with the mechanism of releasing forest area; or

  2. is not permanent or to avoid fragmentation of the forest area and can become part of forest management, with a forest area use approval mechanism;

Furthermore, the provisions for submitting an P2KH application are as follows:

The Provisions for Submitting an P2KH Application.png

The Provisions for Submitting an P2KH Application

Source: GR No.23/2021

Environmental Approval

Environmental Approval as one of the Main Requirements for Business Licensing

Prior to the enactment of Law No. 11/2020, Law No. 32/2009 regulates that business entities that conduct business in Indonesia are obliged to have environmental permits. However, since the issuance of Law No. 11/2020, environmental permits are no longer required. 

Another main requirement of business licensing that is simplified by Law No. 11/2020 is environmental approval.  Environmental approval is a decree of environmental feasibility or statement of capability in environmental management that has obtained approval from central government or regional government.  In other words, the environmental permit is replaced by environmental approval pursuant to Law No. 11/2020.

Specifically, the amendment to regulation of licensing in environment sector made by Law No. 11/2020 is as follows:

Comparison of Environmental License Regulation between Law No. 32/2009 and Law No. 11/2020

Comparison of Environmental License Regulation between Law No. 32/2009 and Law No. 11/2020

Source: Law No. 32/2009 and Law No. 11/2020.

Provisions regarding environmental approval are further regulated in GR No. 22/2021. Environmental approval based on GR No. 22/2021 is an environmental feasibility decree/keputusan kelayakan lingkungan hidup (KKLH) or statement of environmental management capability/pernyataan kesanggupan pengelolaan lingkungan hidup (PKPLH) that has received approval from the central government or regional governments. Environmental approval must be owned by every business and/or activity that has significant or insignificant impacts on the environment. Environmental approval is a prerequisite for issuing business permits or government approvals. Environmental approval is carried out through:

  • AMDAL preparation and AMDAL due diligence; or

  • preparation of the UKL-UPL Form and examination of the UKL-UPL Form.

 

Every business and/or activity plan that impacts on the environment must have AMDAL, UKL-UPL, or SPPL. AMDAL must be obtained for every business plan and/or activity that significantly impacts the environment. Business and/or activity plans that are required to have AMDAL includes: (i) type of business plan and/or activity whose size/scale is obligatory for AMDAL; and/or (ii) types of business and/or activity plans where the business and/or activity location is carried out within and/or directly adjacent to a protected area.

 

Criteria for business and/or activities with important impact for the environment that must have AMDAL consists of:

 

  • land conversion and landscape conversion;

  • exploitation of natural resources, both renewable and non-renewable;

  • processes and activities that could potentially cause Environmental Pollution and/or Environmental Damage as well as waste and degradation of natural resources in their utilization;

  • processes and activities whose results can affect the natural environment, the artificial environment, and the social and cultural environment;

  • processes and activities whose results will affect the preservation of natural resource conservation areas and/or protection of cultural heritage;

  • introduction of types of plants, animals, and bodies miniscule;

  • manufacture and use of biological and non-biological materials;

  • activities that have high-risk and/or affect national defense; and/or

  • application of technology which is estimated to have great potential to affect the environment.

UKL-UPL must be owned by businesses and/or activities that do not have significant impacts on the environment. Business and/or activity plans that are required to have UKL-UPL include:

 

  1. types of business plans and/or activities that do not have significant impacts;

  2. type of business plans and/or activities whose business location and/or activity is carried out outside and/or not directly adjacent to a protected area; and

  3. types of business plans and/or activities that are exempted from compulsory AMDAL.

 

SPPL must be owned by businesses and/or activities that do not have a significant impact on the environment and are not included in the compulsory UKL-UPL criteria. Business and/or activity plans that must have SPPL includes:

 

  1. types of business plans and/or activities that do not have significant impact and are not required to obtain UKL-UPL;

  2. micro and small business and/or business activity which has no significant impact on the environment; and/or

  3. types of business plans and/or activities that are exempted from being UKL-UPL compulsory.

 

Provisions regarding the Issuance of AMDAL and/or UKL-UPL as Prerequisites

 

AMDAL or UKL-UPL are prerequisites for environmental approval. AMDAL is a study regarding the significant impact on the environment of a planned business and/or activity to be used as a prerequisite for decision making on the implementation of business and/or activity, as well as consisting in business licensing, or the approval of the central government or regional government.

 

UKL-UPL is a series of environmental management and monitoring processes set forth in the form of a standard to be used as a prerequisite for decision making on the implementation of business and/or activity, as well as consisting in business licensing, or the approval of the central government or regional government.

 

Every business and/or activity which has substantial impact on the environment is required to have AMDAL. Furthermore, the substantial impact shall be stipulated based on the following criteria:

 

  • quantity of population to be affected by the business and/or activity plan;

  • size of distribution area of impact;

  • intensity and duration of impact;

  • environmental components to be affected;

  • cumulative characteristic of impacts;

  • whether the impacts reverts or not; and/or

  • other criteria in accordance with the development of science and technology.

 

However, it should be noted that there is no obligation for low-risk business activity to comply with the provision of AMDAL and/or UKL-UPL. Instead, entrepeneurs conducting low-risk business activity will be required to make SPPL that will be integrated to the NIB.

 

Business and/or activity plans that are not obligatory AMDAL and/or mandatory UKL-UPL or SPPL can be determined as a type of business plan and/or activity that is required to have an AMDAL by the MoEF. Business and/or activity plans are proposed in writing to MoEF by:

 

  • ministers and/or heads of non-ministerial government agencies;

  • governor;

  • regent/mayor; and/or

  • public.

 

The MoEF will evaluate the written proposal and provide either of the following evaluation results

  • the proposal can be accepted, officials in charge of AMDAL, UKL-UPL, and SPPL issue recommendations for stipulating business plans and/or activities that are not required to have AMDAL to become a business plan and/or activity that is required to have AMDAL, to the MoEF; or

  • the proposal cannot be accepted, officials in charge of AMDAL, UKL-UPL, and SPPL issue a recommendation that a business plan and/or activity is not required to have an AMDAL becomes a business and/or activity plan that is required to have AMDAL, to the MoEF.

The results of the evaluation are used as material for the MoEF's consideration to:

  • stipulate a decision on a business plan and/or activity that is not required to have an AMDAL, so it is mandatory to have an AMDAL; or

  • reject the proposal to stipulate a business plan and/or activity that is not required to have an AMDAL, so it is mandatory to have an AMDAL.

The period of time for implementing the evaluation and stipulation or rejection of the stipulation of a business plan and/or activity that is not obliged to have an AMDAL to be required to have an AMDAL is no later than 30 (thirty) working days after the application is declared complete.

 

To determine a business and/or activity plan that is required to have an AMDAL, UKL-UPL, or SPPL, the person in charge of business and/or activities carries out an independent screening process. If the person in charge of a business and/or activity is unable to carry out screening independently, the person in charge of the business and/or activity shall submit a screening determination from the central environmental agency, the regional apparatus organization in charge of the provincial environment, or the regional apparatus organization in charge of the regency environment/city according to their authority.

 

The Preparation of AMDAL

 

AMDAL is prepared by the person in charge of a business and/or activity at the planning stage of a business and/or activity. In preparing an AMDAL, the person in charge of a business and/or activity uses a study approach: 

 

Single

 

The single study approach is carried out if the person in charge of a business and/or activity is planning to carry out 1 (one) type of business and/or activity whose development and/or supervision authority is under 1 (one) ministry, non-ministerial government agency, provincial regional apparatus organization, or regency/regional/city apparatus organization.

 

Integrated

 

The integrated study approach is carried out if the person in charge of a business and/or activity plans to carry out more than 1 (one) type of business and/or activity whose planning and management are interrelated in a single ecosystem stretch and their development and/or supervision is under more than 1 (one) ministerial staff, non-ministerial government agencies, provincial regional apparatus organizations, or district/city regional apparatus organizations.

 

Area

 

The area study approach is carried out by the area manager as the person in charge of a business and/or activity planning to carry out more than 1 (one) business and/or activity that will be carried out by entrepreneurs in the area, located in a single zone development plan area, which has obtained a zoning and area management in accordance with the provisions of laws and regulations.

 

The person in charge of the business and/or activity in the preparation of the AMDAL can do it alone or appoint another party if he is unable to do it. AMDAL drafting must be done by compilers who have a certificate of competence. State civil apparatus working for the central environmental agency, regional apparatus organizations in charge of the provincial environment, or regional apparatus organizations in charge of district / municipal environment are prohibited from compiling AMDAL.

AMDAL preparation begins with the provision of the following data and information:

  • the results of the AMDAL assessment authority screening;

  • description of the business plan and/or activity;

  • initial environmental baseline in and around the location of the planned business and/or activity; and

  • results of announcements and public consultations.

 

AMDAL is prepared through the following stages:

  • implementation of community involvement in the business and/or activity plan;

  • filling out submissions, examining, and issuing minutes of agreement on the terms of reference form;

  • preparation and submission of AMDAL and RKL-RPL; and

  • AMDAL assessment and RKL-RPL.

 

The person in charge of the business and/or activity in preparing an AMDAL must involve the directly affected communities through the announcement of business plans and/or activities and public consultation. Communities who are directly affected have the right to submit suggestions, opinions, and responses to the planned business and/or activity within a period of 10 (ten) working days from the announcement. Communities that are directly affected by being involved in the preparation of the AMDAL are within the boundary of the AMDAL study area who will be directly impacted either positively and/or negatively by the existence of a planned business and/or activity.

The Preparation of UKL-UPL

 

The UKL-UPL form is filled in by the person in charge of the business and/or activity at the business and/or activity planning stage. The preparation of the UKL-UPL form begins with the provision of data and information in the form of description of the business plan and/or activity and/or technical approval. 1 (one) UKL-UPL form can be used for a business and/or activity that is planned for more than 1 (one) business and/or activity whose planning and management are interrelated and located within a single ecosystem stretch.

 

The UKL-UPL form is prepared in the form of a standard for environmental management and monitoring. The person in charge of business and/or activity fills in a specific standard UKL-UPL form available in the environmental document information system. A specific standard UKL-UPL form or a standard UKL-UPL form that has been filled in is accompanied by a declaration of environmental management capability.

The person in charge of business and/or activities applies for examination of a specific standard UKL-UPL Form or a standard UKL-UPL Form that has been filled in to the:

 

  • minister, for businesses and/or activities that:

  1. business licensing or government approval issued by the government;

  2. located across provinces; and/or

  3. is located in a sea area of more than 12 (twelve) nautical miles measured from the coastline to the open sea;

  • governor, for businesses and/or activities that:

    1. business license or government approval issued by the provincial government;

    2. located across districts/cities within 1 (one) province; and/or

    3. located in a sea area no more than 12 (twelve) miles from the coastline to the open sea and/or to archipelagic waters;

 

  • regent/mayor for businesses and/or activities whose business license or government approval is issued by the district/city government.

Submission of a request for examination of a specific standard UKL-UPL Form or a standard UKL-UPL Form that has been filled in is done through:

 

  • business licensing system integrated electronically, if the person in charge of a business and/or activity is an entrepreneur; or

  • environmental document information system, if the person in charge of a business and/or activity is a government agency.

 

SPPL Filling

 

SPPL for businesses conducted by entrepreneurs are integrated into the business registration number. SPPL for activities carried out by government agencies shall be carried out through filling out a form which becomes the basis for issuing government approval. The integration of SPPL into the registration number is conducted through the business licensing system integrated electronically. The SPPL form contains:

 

  1. the person in charge’s ability of the business and/or activities to comply with laws and regulations in the sector of environmental protection and management;

  2. the location of the business and/or activity plan that has a confirmation on the suitability of space utilization activities or a recommendation on the suitability of space utilization activities in accordance with the provisions of laws and regulations; and

  3. basic obligations of environmental management.

Building Construction and Utilization

 

In general, building is regulated under Law No. 28/2002. This law regulates the functions, requirements, and operation of buildings, including the rights and obligations of building owners and users at each stage of building operation, provisions regarding community roles and guidance by the government, as well as sanctions.

 

Building requirements are required to be fulfilled prior to building operations. Building operation is a development activity that includes technical planning and construction implementation, as well as utilization, preservation, and demolition activities. Building operators consist of building owners, construction service providers, professional experts, supervisors, technical reviewers, and building users.

 

Building utilization can be carried out after obtaining SLF. Thus, in building operations, the building owner is obligated to have PBG. PBG is requested through an electronic system administered by the central government, namely the Building Management Information System for non-business buildings, and the Integrated Business Licensing service for business buildings.

 

Business licensing is the legality given to an entrepreneur to start and run the entrepreneur's business and/or activity. To start and carry out business activities, entrepreneurs must comply with:

 

  1. basic requirements for a business licensing; and/or

  2. risk-based business licensing.

 

The basic requirements for business licensing include suitability for space use activities, environmental approval, PBG, and SLF. Therefore, PBG and SLF are required to issue business licensing.

Pre-requisite for Obtaining Business Licensing.png

Pre-requisite for Obtaining Business Licensing

Source: GR No. 5/2021.

Building Construction

 

As previously explained, building construction is a stage in building operations. Building construction is carried out through the planning, implementation, and supervision stages, which will be described below.

Planning

 

Planning must be carried out by the construction planning service provider with reference to building technical standards.  Building technical standards are references that contain provisions, criteria, quality, methods and/or procedures that must be met in the building operations process in accordance with the function and classification of the building. Furthermore, the results of the planning must be consulted with the central government and regional governments in accordance with their respective authorities to obtain a fulfilment statement of building technical standards.

Implementation

 

If the building has fulfilled the building technical standards, the building owners can apply for PBG from the central government or regional government through an electronic system operated by the central government. PBG is a permit given to building owners to build new, change, expand, reduce, and/or maintain buildings in accordance with building technical standards. Construction can be carried out after PBG has been obtained.

 

Supervision

 

Supervision of building construction is carried out by a supervisory service provider or management of construction who is responsible for reporting each stage of work. The central government or regional governments carry out inspections at each stage to supervise and determine whether the construction continues to the next stage.

 

Building Utilization

 

Building utilization is the activity of utilizing the building according to its predetermined function, including periodic maintenance, maintenance, and inspection activities. After the last stage of inspection stating that the building meets the building technical standards, the supervisory service provider or management of construction submits a statement of feasibility to the central government or regional government through an electronic system operated by the central government. Based on the said statement of feasibility, a SLF is issued by the central government or regional governments according to their respective authority. Based on the certificate of eligibility for function, the building owner and/or users can use the building.

Stages in Obtaining Business Licensing.png

Stages in Obtaining Business Licensing

Source: Law No. 28/2002 and GR No. 5/2021