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Strategies for Improving the Investment Ecosystem and Business Activities Based on Law Number 11 of 2020 concerning Job Creation

Indonesian Positive Law-

Improving the investment ecosystem and business activities is one of the government’s strategic policies regarding job creation which is described in CHAPTER III of Law Number 11 of 2020 concerning Job Creation.

The scope of improving the investment ecosystem and business activities as mentioned above includes:

Application of Risk-Based Business Licensing

Risk-based business licensing as stated in the clarification of Law Number 11 of 2020 concerning Job Creation is the granting of business licensing and the implementation of supervision based on the level of business and/or activity risks.

The application of risk-based business licensing is based on determining the level of risk and rating the scale of business activities, as stated in the provisions of Article 7 of Law Number 11 of 2020 concerning Job Creation.

Determination of Risk Level and Business Scale Rating of Business Activities

The level of risk is the potential for a danger to health, safety, the environment, the use of natural resources and/or other hazards that fall into the low, medium, or high category, as stated in the explanation of Law Number 11 of 2020 concerning Job Creation.

The determination of the level of risk and the rating of the scale of business activities is based on:

  1. Assessment of the degree of danger.
  2. Potential occurrence of danger.

Hazard Level Assessment

The assessment of the level of danger in the context of determining the level of risk and rating the scale of business activities consists of several aspects, namely:

  1. Health.
  2. Salvation.
  3. Milieu.
  4. Utilization and management of resources.

In addition to the aforementioned aspects, there are still other aspects in accordance with the nature of business activities for certain activities.

The indicators taken into account in the assessment of the degree of danger consist of:

  1. Type of business activity.
  2. Criteria for business activities.
  3. Location of business activities.
  4. Limited resources.
  5. Volatility risk.

Assessment of Potential Hazards

The assessment of the potential occurrence of hazards in the context of determining the level of risk and rating the scale of business activities includes:

  1. It’s almost impossible to happen.
  2. It is unlikely to happen.
  3. It is likely to happen.
  4. It almost certainly happened.

Risk Level and Business Scale Rating of Business Activities

Based on the brief description above regarding aspects and indicators of assessing the level of danger and the potential for danger, the level of risk and the rating of the business scale of business activities are divided into:

  1. Low-risk business activities.
  2. Medium-risk business activities.
  3. High-risk business activities.

Licensing of Low-Risk Business Activities

For business activities that are included in low-risk business activities, the licenses that are owned are sufficient by providing a business master number.

Business Identification Number (NIB) is the legality of the implementation of business activities, which has the following functions:

  1. Is proof of registration / registration of business actors to carry out business activities.
  2. Is the identity of business actors in the implementation of their business activities.

Licensing of Medium Risk Business Activities

Medium-risk business activities are divided into:

  1. Medium-low-risk business activities.
  2. Medium-high risk business activities.

Business licenses for medium-low-risk medium-risk business activities are in the form of:

  1. Business Identification Number (NIB).
  2. Standard certificate; this standard certificate is a statement of business actors to meet business standards in order to carry out business activities

Meanwhile, business licenses for medium-high-risk business activities are in the form of:

  1. Business Identification Number (NIB).
  2. This standard certificate; business standard certificate is a business standard certificate issued by the central government or local government according to its authority based on the results of verification of compliance with the standards for the implementation of business activities by business actors.

In the event that medium-risk business activities require product standardization with respect to standard certificates, the issuance of product standard certificates is carried out by the central government based on the results of verification of compliance with standards that must be met by business actors before carrying out product commercialization activities.

Licensing of High-Risk Business Activities

The granting of business licenses for high-risk business activities is in the form of:

  1. Business Identification Number (NIB).
  2. This permit; permit is the approval of the central government or local government for the implementation of business activities that must be fulfilled by business actors before carrying out their business activities.

In the event that high-risk business activities require the fulfillment of business standards and product standards, the central government or local government issues business standard certificates and product standard certificates based on the results of verification of standard fulfillment.

For all business activities ranging from low-risk to high-risk business activities, regular supervision is carried out by considering the level of compliance of business actors.

Regarding the application of risk-based business licensing, it is further regulated in government regulations, as an implementing regulation of the provisions of Article 7 – Article 10 of Law Number 11 of 2020 concerning Job Creation.

Simplification of Basic Requirements for Business Licensing

Simplification of the basic requirements of business licensing is regulated in the provisions of Article 13 of Law Number 11 of 2020 concerning Job Creation.

The simplified matters that constitute the basic requirements of the licensing undertaking include:

  1. Suitability of space utilization activities.
  2. Environmental approvals.
  3. Building approvals and certificates of proper functioning.

Suitability of Space Utilization Activities

The suitability of space utilization activities is the conformity of the location plan of its business activities with the Detailed Spatial Plan (RDTR), for this reason, local governments are required to compile and provide detailed spatial plans in digital form and in accordance with standards.

For regions that do not yet have a Detailed Spatial Plan (RDTR), the suitability of space utilization activities which are the basic requirements for licensing, submission of requests for approval of space utilization activities for their business activities by entrepreneurs is submitted to the central government through an electronic business licensing system in accordance with the provisions of laws and regulations.

Furthermore, the central government will approve the suitability of the use of the space that has been submitted in accordance with the spatial plan which consists of:

  1. The spatial plan of the national territory.
  2. Island/archipelago spatial plan.
  3. Spatial plan of the national strategic area.
  4. Provincial territorial spatial plan.
  5. District/city spatial plan.

To simplify the basic requirements for business licensing and to provide legal certainty and convenience for business actors in obtaining spatial planning suitability, the government through Law Number 11 of 2020 concerning Job Creation made changes to the law that regulates this matter before.

The amended legislation in order to simplify the licensing requirements with regard to the suitability of space utilization is as follows:

  1. Law Number 26 of 2007 concerning Spatial Planning.
  2. Law Number 27 of 2007 concerning The Management of Coastal Areas and Small Islands.
  3. Law Number 32 of 2014 concerning Marine Affairs.
  4. Law Number 4 of 2011 concerning Geospatial Information.

Environmental Approvals

Simplification of the basic requirements for licensing is also carried out by the government in terms of environmental permits, namely by making changes to the laws that regulate previously through Law Number 11 of 2020 concerning Job Creation.

The amended law is Law Number 32 of 2009 concerning Environmental Protection and Management.

Building Approval and Certificate of Proper Functioning

Furthermore, in order to simplify the basic requirements for licensing related to the approval of gegung buildings and certificates of proper functioning, the government also made changes to the provisions of the laws and regulations that were previously in force through Law Number 11 of 2020 concerning Job Creation.

The provisions of the amended laws and regulations are as follows:

  1. Law Number 28 of 2002 concerning Building Buildings.
  2. Law Number 6 of 2017 concerning Architects.

Simplification of Sector Business Licensing and Ease and Investment Requirements

Not only simplification of the basic requirements for business activities, but the government also simplifies sector business licensing as well as ease and investment requirements by changing the provisions of its laws and regulations through Law Number 11 of 2020 concerning Job Creation.

The business licensing of the sector that was amended by the provisions of its laws and regulations is as follows:

  1. Marine and fisheries; changes were made to Law Number 31 of 2004 concerning Fisheries
  2. Agriculture; amendments were made to Law Number 39 of 2014 concerning Plantations;  Law Number 29 of 2000 concerning Protection of Plant Varieties;  Law Number 22 of 2019 concerning Sustainable Agricultural Cultivation Systems;  Law Number 19 of 2013 concerning Protection and Empowerment of Farmers;  Law Number 13 of 2010 concerning Horticulture;  Law Number 18 of 2009 concerning Animal Husbandry and Animal Health.
  3. Forestry; amendments were made to Law Number 41 of 1999 concerning Forestry as amended by Law Number 19 of 2004;  Law Number 18 of 2013 concerning Prevention and Eradication of Forest Destruction.
  4. Energy and mineral resources; amendments were made to Law Number 4 of 2009 concerning Mineral Mining as amended by Law Number 3 of 2020;  Law Number 22 of 2001 concerning Oil and Gas;  Law Number 21 of 2014 concerning Geothermal;  Law Number 30 of 2009 concerning Electricity.
  5. Power; changes were made to Law Number 10 of 1997 concerning Power.
  6. Industry; changes were made to Law Number 3 of 2014 concerning Industry.
  7. Trade, legal metrology, halal product guarantees, and conformity assessment standardization were made to Law Number 7 of 2014 concerning Trade;  Law Number 2 of 1981 concerning Legal Metrology;  Law Number 33 of 2014 concerning Halal Product Guarantee.
  8. Public works and public housing; changes were made to Law Number 1 of 2011 concerning Housing and Residential Areas;  Law Number 20 of 2011 concerning Flats;  Law Number 2 of 2017 concerning Construction Services;  Law Number 17 of 2019 concerning Water Resources.
  9. Transportation; amendments were made to Law Number 22 of 2009 concerning Road Traffic and Transportation;  Law Number 23 of 2007 concerning Railways;  Law Number 17 of 2008 concerning Shipping;  Law Number 1 of 2009 concerning Aviation.
  10. Health, medicine and food; changes were made to Law Number 36 of 2009 concerning Health;  Law Number 44 of 2009 concerning Hospitals;  Law Number 5 of 1997 concerning Psychotropics;  Law Number 35 of 2009 concerning Narcotics;  Law Number 18 of 2012 concerning Food.
  11. Education and culture; changes were made to Law Number 33 of 2009 concerning Cinema.
  12. Tourism; changes were made to Law Number 10 of 2009 concerning Tourism;
  13. Religious; changes were made to Law Number 8 of 2019 concerning the Implementation of Hajj and Umrah.
  14. Post, telecommunications, and broadcasting; amendments were made to Law Number 38 of 2009 concerning Post;  Law Number 36 of 1999 concerning Telecommunications;  Law Number 32 of 2002 concerning Broadcasting.
  15. Defense and security; changes were made to Law Number 16 of 2012 concerning the Defense Industry;  Law Number 2 of 2002 concerning the Police.

Simplification of Investment Requirements in Certain Sectors

Certain sectors that are amended by the provisions of their laws and regulations are as follows:

  1. Investment; amendments were made to Law Number 25 of 2007 concerning Investment;
  2. Banking; amendments were made to the provisions of Article 22 of Law Number 7 of 1992 as amended by Law Number 10 of 1998 concerning Amendments to Law Number 7 of 1992 concerning Banking.
  3. Sharia banking; amendments were made to the provisions of Article 9 of Law Number 21 of 2008 concerning Sharia Banking.

All changes to the provisions of the laws and regulations as mentioned above, are further regulated by government regulations. (RenTo) (200722)

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