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.

Ongoing Issues

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:

• NSPK [1] - A number of state ministries/agencies have yet to provide the OSS with their NSPK. This results in a lack of clarity and certainty, with OSS users being forced to conduct independent research, such as studying the relevant laws and technical regulations, and consulting directly with officials, so as to identify the precise requirements that need to be fulfilled in order to obtain a particular license/permit. In the case of a license/permit that was issued by the OSS prior to the adoption of NSPK by a ministry/agency, the big fear is that the NSPK that are eventually adopted might contain new requirements that were not known to the license/permit holder at the time of their application, with the result that their license/permit would be rendered invalid;

• Data Crosschecking Capability – When an existing company initially registers on the OSS and applies for a Business Registration Number (Nomor Induk Berusaha / “NIB”) [2] for the first time, the company data that is entered must match that which is recorded in the Ministry of Law and Human Rights (the “Ministry”)’s database. However, if changes in the data have occurred since the last time it was updated in the Ministry’s database, the OSS will reject the company’s NIB application. As a concrete example, if a director has obtained a new passport, then its number will be different from the passport number recorded by the Ministry. This will result in automatic rejection of the company’s NIB application by the OSS. In such a scenario, the relevant director’s appointment will need to be reaffirmed so that his/her new passport can be recorded by the Ministry. This would be inconvenient as it such reaffirmation would require a shareholders’ resolution.

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.

• KLBI [3] – OSS users have experienced a number of problems related to KLBI:

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.

• Recognition of OSS Licenses/Permits at Local Level - Many local government agencies still refuse to accept licenses/permits issued by the OSS. For example, two of the most important new licenses/permits issued by the OSS are the NIB and the Location Permit (Izin Lokasi), which respectively replace the previous TDP (Business Registration Certificate - Tanda Daftar Perusahaan) and SKDP (Company Certificate of Domicile - Surat Keterangan Domisili Perusahaan). However, the reality on the ground is that many local governments continue to demand a TDP and SKDP, even though these are officially no longer required under PR 24/2018.

• Integration with Local Government Systems - There continue to be problems at the local level in some parts of the country as regards the integration of the OSS and the systems operated by Local Government Investment & One-Door Licensing Agencies (Dinas Penanaman Modal dan Pelayanan Terpadu Satu Pintu / DPMPTSP));

• Integration with BPJS System – As part of the OSS process, all companies are required to register with the BPJS (state social security provider). However, the OSS and the system operated by the BPJS have not yet been fully integrated. While the OSS has a dedicated feature that should allow direct registration with the BPJS, when you attempt to use it you are directly referred back to the OSS website. This means that you still have to visit a BPJS office in person.

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.

ABNR Commentary

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.

By Giffy Pardede (gpardede@abnrlaw.com) and Adri Yudistira Dharma (adharma@abnrlaw.com)

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[1] 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.

[2] 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.

[3] 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).