Following the issuance of Government Regulation No. 5 of 2021 on Risk-Based Criteria Business (here), as one of the implementing regulations of the job creation law (commonly known as the Omnibus Law), the new Indonesian licensing system has been launched. This new system is called the Risk-Based Online Single Submission (OSS) System. The Risk-Based OSS System initially was expected to be launched on 2 June, but after several delays it was finally launched last week.
While the Risk-Based OSS System is still developing and there are still teething issues, the following are some of the key issues based on our review of the system as of the issuance of this client alert.
- Migration of the OSS access rights obtained from the old OSS System. The Risk-Based OSS System refers to the access rights of an entity, while the old OSS System referred to the access rights of an individual (director, commissioner, chief representative etc.). The existing access rights under the old OSS System would need to be migrated to access rights under the Risk-Based OSS System, by following the steps in the Risk-Based OSS System. A manual guide on how this should be done is already available on the website of the Risk-Based OSS System (oss.go.id). Clients would need to do that before they can log in to the Risk-Based OSS System.
- Checking investment data or entity information recorded in the Risk-Based OSS System. Technically, the investment data (for companies) or information (for companies and representative offices) previously recorded in the old OSS System should automatically be recorded in the Risk-Based OSS System. But that is not always the case. Clients would need to check whether their investment data or information previously recorded in the old OSS System has been fully recorded in the Risk-Based OSS System. If not, they would need to update the relevant data.
- Reviewing the lines of business under the Priority List. The Priority List (under Presidential Regulation No. 10 of 2021 on Investment Business Lines as amended by Presidential Regulation No. 49 of 2021) replaces the negative list (under Presidential Regulation No. 76 of 2007 and Presidential Regulation No. 44 of 2016) (here). The Priority List still adopts the same concept as the negative list, i.e., that all business lines are open for foreign investment, except those that are determined closed or conditionally open for foreign investment.
The key change introduced by the Priority List is a significant reduction in the number of business lines that remain subject to foreign investment limitations. As such, clients should check the Priority List to find out whether their intended lines of business are open for foreign investment or if they have been liberalized. The Risk-Based OSS System also has a feature that could be used to assist with checking this (but the Priority List should be reviewed as well). The feature can be accessed through the Capital Investment Business Sector feature under the "Information" section.
- Checking the scale of business and level of risk of the lines of business. There is a substantial mindset change with Government Regulation No. 5 of 2021 on Risk-Based Criteria Business. Rather than the government issuing licensing in advance, but subject to the fulfilment of certain commitments (which was the case under the old OSS System), the concept is back to that of the old licensing process where requirements/conditions need to be fulfilled before licenses are issued. What licenses are required to operate and the requirements/conditions to apply for the licenses would depend on the scale of business and level of risk of the relevant lines of business. As such, clients whose foreign investment companies do not yet have a license to operate or would like to expand their business, and clients that would like to establish companies in Indonesia, would need to check the scale of business and level of risk of the relevant lines of business stipulated under this regulation (of course in addition to considering any foreign investment restriction in the Priority List). The Risk-Based OSS System also has a feature that could be used to assist with checking this (but the regulation should be reviewed as well). The feature can be accessed through the 2020 Classification Business Codes (Klasifikasi Baku Lapangan Usaha Indonesia (KBLI) 2020) feature under the "Information" section.
Things to Watch
- 2020 KBLI implementation. In Indonesia, companies must have lines of business that correspond to the applicable KBLI numbers. The KBLI numbers are amended from to time. The Risk-Based OSS System uses the KBLI numbers issued in 2020.
Companies' legal information recorded in the Risk-Based OSS System (or the old OSS System) is retrieved from the Ministry of Law and Human Rights (MOLHR) system. Because the MOLHR system has only just started to use the 2020 KBLI numbers, most lines of business of companies recorded in the MOLHR system still refer to the KBLI numbers issued in 2017. As such, it remains to be seen whether a KBLI adjustment (as previously occurred) would be required again at this time.
- Some features are not yet available or cannot be accessed. The Risk-Based OSS System still does not have complete features. For example, it cannot cater for mergers or branch office. Also, some features that are already available cannot be accessed (like quarterly investment realization (LKPM) filings). Again the system is developing. Before conducting an action that will involve a process at the Risk-Based OSS System, it is important for clients to check whether that process at the Risk-Based OSS System can be conducted.
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This client alert was issued by HHP Law Firm (Hadiputranto, Hadinoto & Partners), a member firm of Baker McKenzie International, a global law firm with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a "partner" means a person who is a partner or equivalent in such a law firm. Similarly, reference to an "office" means an office of any such law firm. This may qualify as "Attorney Advertising" requiring notice in some jurisdictions. Prior results do not guarantee a similar outcome."