Indonesia Launches New Economic Policy Package

By Michael S. Carl and Revaldi Wirabuana

On August 31, Indonesian President Joko Widodo, commonly known as Jokowi, enacted the 16^th economic reform package aimed at improving the ease of doing business in the country (16^th Reform Package). This new economic policy package contains measures to accelerate the issuance of business licenses and permits at the central and regional levels.

Background

This is the 16^th package of economic reforms issued by Jokowi since he took office in October 2014. These packages are a series of regulations issued by the government to expedite the process of doing business in various sectors. Previous packages included those designed to accelerate nationally strategic projects, implement tax incentives, ease the investment process and establish road maps for future development of certain business sectors.

The 16^th Reform Package deals exclusively with the general licensing process for business activities. It was enacted with the view that Indonesia's lengthy, sequential and unintegrated licensing process has discouraged potential investors. The 16^th Reform Package was enacted in the form of a Presidential Regulation and will be realized in two phases.

First Phase of the Reform Package

The first phase of the new economic policy package revolves around streamlining and expediting the current licensing system. This phase includes the following actions: Implementation of a License Checklist for Particular Licenses

A license checklist will be introduced in Special Economic Areas, Free Trade Zones, Industrial Areas and Tourism Areas. This checklist will be provided through the One-Door Integrated Service (PTSP) in the respective areas and will contain a list of licenses that must be obtained by business actors. A business actor will select its business location after it obtains an Indicative Investment Certificate (Pendaftaran Penanaman Modal).

The business actor will then go through PTSP to obtain a deed of establishment and incorporation, taxpayer registration number, company registration certificate, foreign labor utilization plan, foreign labor employment permit, import identification number and customs access. The business actor will also sign the license checklist. The license checklist will be deemed a temporary license comprising an environmental license (UKL-UPL), land certificate, building technical licenses/building construction license and business license.

With the signed checklist, PTSP will process the granting of tax, and customs and excise facilities for the business. The checklist will also accelerate the licensing process related to labor, immigration and land affairs. Business actors may begin land clearance and construction after signing the checklist.

Reforming Licensing Regulations

Government ministers, heads of relevant institutions, governors and regents/mayors will be required to evaluate the legal basis underlying the licenses relevant to their institutions, including licenses for small and medium enterprises. Using the results of these evaluations, each institution will attempt to simplify the licensing process by enacting new regulations, including at the regional level, that provide clear provisions on standard timelines, procedures and costs for license applications, as well as the service standards and obligations of PTSP in processing license applications.