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Expediting business licenses
The permit liberalization, however, does not mean complete freedom without a built-in control mechanism.
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(BPMI Setpres/Lukas)
I
t took almost seven years for President Joko “Jokowi” Widodo to fully integrate the business licensing process into the Investment Coordinating Board (BKPM), something even former authoritarian president Soeharto failed to accomplish during his 30-year rule.
Jokowi, formerly a furniture businessman, made a surprise visit to the BKPM only a few days after his inauguration in late October 2014 to get first-hand information on the byzantine complexity of bureaucratic processes businesspeople had to go through to obtain business/investment licenses. He immediately declared his strong commitment to expedite investment licensing to only a few days from several months or even over a year.
He launched on Aug 9 the risk-based Online Single Submission (OSS) system, a web-based, integrated business licensing system at the BKPM, which links businesspeople and investors with ministries, agencies, local governments and administrators of special economic zones (KEK), free ports and free trade zones.
The new system, which is based on the 2020 Job Creation Law, provides a service standard for all levels of government that issue permits at the central and regional levels and defines clearer responsibilities of the licensee.
The risk-based OSS system administers a more streamlined and efficient business licensing process and in some instances, even removing the licensing requirement for certain businesses that do not cause social and environmental risks.
Earlier in April, the President strengthened the authority of the BKPM by appointing its head a Cabinet minister and expanding its mandate to process licenses for all businesses, except those in the financial service industry.
Government Regulation No. 5/2021, which stipulates the technical details for the implementation of the risk-based business licensing, describes four risk levels based on the potential impact of its business activity on health, safety, environment, and natural resources utilization, as well as other hazard factors.
The permit liberalization, however, does not mean complete freedom without a built-in control mechanism. The regulation requires an annual field inspection as part of the routine monitoring of business players/investors. The inspection, which may include administrative and physical examinations and testing, is conducted by the relevant government.
It is too early to judge whether the new integrated licensing system will be effective this time. There will understandably be some start-up problems because the licensing mechanism has been notorious for corruption. The OSS system actually was introduced in 2018, but there was strong resistance from vested interest groups who wanted to maintain the rents that had built up in the old system.
Jokowi has from the outset made expediting business licenses and basic infrastructure development his top priority programs. Physical connectivity between the major islands and between provinces and regencies within the islands has indeed been much better.
But the institutional connectivity between the various ministries and regional administrations within the process of business licensing is not as seamless as businesspeople expect.
It is understandable nevertheless. It is much easier to build physical infrastructure than to reform the bureaucracy as the latter work requires a drastic change in the mindset of officials from being providers of permits or services to being the servants of the public.
