New risk-based business licensing system to be implemented in Indonesia

30 August 2021

The Indonesia government has issued Government Regulation No. 5 of 2021 (“GR 5/2021”) on the Implementation of Risk-Based Business Licensing. GR 5/2021 implements Article 6 of Law No. 11 of 2020 on Job Creation Law (commonly known as the Omnibus Law), which simplifies business licensing by changing the approach from requiring a business licence for each business activity to business licensing based on the risk category for each business activity. GR 5/2021 repeals and replaces the business licensing regulatory framework set out in Government Regulation No. 24 of 2018 on Electronically Integrated Business Licensing Services. GR 5/2021 came into effect on 2 February 2021, although practical application of its provisions only became possible from 12 August 2021 when the Online Single Submission system, through which the new business licensing regime will be conducted, became operational.

A risk analysis of each application will be conducted prior to the issuance of a business licence and will involve the following determinations:

  • Identification of the relevant business activity; 
  • Assessment of the hazard level; 
  • Assessment of the potential for occurrence of hazards;  
  • Determination of the risk level and business scale rating; and 
  • Determination of the type of business licence.

The risk analysis will result in a determination of the level of risk, with a lower risk resulting in simpler business licensing requirements. For example, businesses determined to be of low risk need only obtain a business registration number to commence operations. High-risk business activities will require both a business registration number and a licence to operate, which will only be issued upon the fulfilment of conditions as set out by the central or regional government, such as the preparation of an environmental impact analysis.

GR 5/2021 provides that risk analysis will be undertaken for business activities in a range of specified sectors including maritime affairs and fisheries, energy and mineral resources, trading, industry and transport.