17 Jan 2019
BKPM Takeover of OSS Should Help Iron Out Glitches
As we reported in our ABNR Legal Update titled The OSS System: What Exactly is it? (4 September 2018), the Online Single Submission system (“OSS”) represents a quite revolutionary new departure for business and investment licensing in Indonesia. The OSS was established by Presidential Regulation 24/2018 (“PR 24/2018”), which entered into effect on 21 June 2018.
In the latest development, responsibility for the operation of the OSS has been officially transferred to the Investment Coordinating Board (“BKPM”), effective 2 January 2019. It had previously been administered by the Office of the Coordinating Ministry for Economic Affairs from the time of its inception on 9 July 2018.
It was always planned that the BKPM would eventually take over responsibility for the OSS, although the handover took place much later than planned – it was originally scheduled for November 2018.
In this ABNR Legal Update, we will discuss some of the technical issues that continue to affect the OSS.
From the outset, the government was at pains to stress that the OSS would take some time to perfect. This was only to be expected given the sheer number of economic sectors, ministries, central and local government organizations and sectoral regulations involved.
Currently, ABNR lawyers report that the system is, for the most part, working reasonably well. Nevertheless, a number of problems continue to be encountered. The most significant of these may be summarized as follows:
A related difficulty in this regard affects companies that have NIBs that were issued by the OSS during the first few months of its operation, prior to the activation of its capability to automatically crosscheck company data with the data recorded by the Ministry. During this period, all company data had to be entered manually in the OSS. Thus, if a company obtained an NIB before the OSS’ crosschecking capability had been activated and the company subsequently updated its data with the Ministry, this cannot be automatically crosschecked and recorded by the OSS. In such a case, the company would have to cancel its existing NIB and apply for a new one. One of our clients was forced to do this simply to record a change of address on the OSS.
First, in the case of an existing company that registered with the Ministry using an earlier version of the KLBI, the company’s KLBI business-line classification(s) as recorded by the Ministry may not be the same as the classification(s) set out in the current KLBI, which is obviously the version used by the OSS. If this is the case, the company will be unable to register on the OSS. To overcome this problem, the company would have to amend the business lines set out in its articles of association by shareholders’ resolution and then register the new business lines with the Ministry.
Second, the Ministry’s system can only accommodate two KLBI business lines, while the OSS can accommodate more than two. Consequently, if an existing company that is registered with the Ministry has more than two lines of business and attempts to register all of these on the OSS, this will result in a data mismatch and automatic rejection of the company’s registration application. There is as yet no solution to this problem, to the best of our knowledge.
The above are just some of the problems that continue to be encountered by our lawyers when using the OSS on behalf of clients. It is not intended to be an exhaustive list, and no doubt other OSS users will have their own experiences in this regard.
The introduction of the OSS undoubtedly marked a significant step forward for business and investment licensing in Indonesia. However, it is difficult to avoid the impression that it was launched in haste, without affording the BKPM, ministries/agencies and local governments sufficient time to prepare, including as regards system integration and harmonizing their sectoral regulations with PR 24/2018. This has resulted in a degree of confusion and uncertainty among both public officials and OSS users. Nevertheless, it is entirely understandable that the government was anxious to get the system up and running as quickly as possible, given the current administration’s undoubted commitment to improving Indonesia’s ease-of-doing business.
Now that the BKPM has taken over responsibility for the administration of the OSS, we are optimistic that the various issues that persist to date can be quickly overcome given the BKPM’s long experience and expertise in the investment-licensing field.
 Under Article 88 of PR 24/2018, state ministries and agencies with licensing authority that comes within the scope of the OSS are required to prepare NSPK (Norms, Standards, Procedures and Criteria / Norma, Standar, Prosedur dan Kriteria) for the licenses and permits that they issue. These NSPK are very important as they essentially set out the requirements that must be satisfied before a license or permit can be issued.
 The obtaining of an NIB is the first step that must be taken by a company in order to use the OSS. All other licenses/permits are dependent on the NIB.
 KLBI: Standard Indonesian Business-Line Classifications (Klasifikasi Baku Lapangan Usaha Indonesia / KLBI), that is, a list of business lines drawn up by the Central Statistics Bureau, the most recent version of which was issued in 2017. The KLBI is used for, among other things, determining whether a particular foreign investment is compliant with the restrictions contained in the Negative Investment List (Daftar Negatif Investasi / DNI).