The government will introduce a new business licensing regime in the omnibus bill on job creation to boost competitiveness and bolster investment as Indonesia's ranking in the World Bank’s Ease of Doing Business (EODB) index stagnates at 73rd.

The draft omnibus bill obtained by The Jakarta Post introduces the new “business licensing” mechanism issued by the central government, streamlined through the Investment Coordinating Board (BKPM), according to the bill’s draft and Presidential Instruction (Inpres) No. 7/2019 on the acceleration of ease of doing business.

BKPM head Bahlil Lahadalia said on Monday that the board had started to handle all licensing issuance as of Jan. 31. The new system will cut licensing hurdles as issuance was previously spread across government institutions and regional administrations, causing uncertainty to both investors and businesses.

“This is meant to provide certainty: Investors will start and finalize their investment through BKPM and this will prevent a ping pong [of investors] from one ministry to another,” Bahlil said during a discussion with European businesspeople in Jakarta on Monday.

Inpres No. 7/2019 not only grants the BKPM the authority to take over all business permits but also makes the agency the lead in evaluating and making recommendations on policies that are deemed as unfavorable for investors.

The government hopes to boost the country’s EODB ranking to 53rd place on the World Bank’s list this year in a bid to attract more investment into the country.

The omnibus bill on job creation simplifies business licenses across almost all business sectors, including maritime and fisheries, agriculture, forestry, energy and mineral resources, electricity and industry. Trade, standardization including halal certification, infrastructure and public housing, transportation, health, drugs and food, education and culture, tourism, postal services, telecommunications and broadcasting, security and defense are also covered.

The government submitted the omnibus bill on job creation to the House of Representatives for deliberation on Wednesday, aiming for the bill to be passed within 100 days to boost investment, create jobs and stoke economic growth.

Bahlil said that to cut red tape that has hampered investment in the country, all licensing processes issued by regional administrations will be handed over to the Capital Investment and One-Stop Integrated Services Agency. The agency, which operates under the BKPM, will serve to avoid regional intervention, he added.

 “We have also set up an investment alert task force involving BKPM officials, the National Police and the Attorney General’s Office to oversee and protect investments from being disrupted in regions,” said the BKPM head.

The BKPM will also have the authority to issue tax holidays and tax allowances except for several business types as agreed with the Finance Ministry, said Bahlil.

The omnibus bill also includes changes to the negative investment list as all business sectors will be open to direct investment, except those declared prohibited from such activity or those that can only be handled by the
government.

“It will be finalized by the Office of the Coordinating Economic Minister but certainly we will not open logistics, [telecommunications] towers and small and medium businesses to 100 percent foreign ownership,” Bahlil added.

Not all businesses will require business licenses as the omnibus bill stipulates only high-risk businesses will need one. High-risk businesses are those that are considered to have potential damage to health, safety, environment and resource utilization.

Meanwhile, low-risk businesses will only need to register to operate, with no need to acquire a fully fledged business license, according to the bill.

The Indonesian Chamber of Commerce and Industry (Kadin), representing local businesspeople, supported the government’s efforts to boost the ranking in the EODB index.

“The biggest obstacle for investors in Indonesia is starting a business,” Kadin deputy chairwoman Shinta W. Kamdani told the Post, adding that local businesses could not compete globally without significant improvements.

“The omnibus bills will break the deadlock to facilitate more investments,” she said.