04 Sep 2018
The OSS System: What Exactly is it?
The establishment of the integrated OSS system under Government Regulation No. 24 of 2018, which entered into force on 21 June 2018, constitutes a quite fundamental overhaul of Indonesia’s business licensing regime. The essential idea is that all necessary business and operating licenses from both central and local government should eventually be capable of being obtained online using the OSS system portal.
The OSS system is designed for use by all types of private-sector business organization, from limited liability companies to civil partnerships, across all economic sectors, with the notable exceptions of financial services, mining, and oil & gas. Licensing in the financial services industry will continue to be administered by the Financial Services Authority (OJK), while licensing in the mining and oil and gas sectors will remain the responsibility of the relevant line ministries and, to some extent, the BKPM.
The beneficial changes brought about by GR 24/2018 are not confined to the establishment of an integrated, online licensing system. The Schedule to GR 24/2018 also sets out comprehensive lists of the licenses and technical recommendations required to carry on business in all major economic sectors (once again, with the exception of financial services, mining, and oil & gas). This inventory of licenses/recommendations will make it much easier for people to identify exactly what documents they need to obtain from government in order to carry on business.
Further, the Schedule significantly streamlines the number of licenses and technical recommendations required in many sectors. Overall, GR 24/2018 appears to be a reasonably comprehensive, well-thought-out instrument that should help further improve Indonesia’s ranking in the World Bank’s Ease of Doing Business Index, where Indonesia’s position has improved dramatically from 129th place in 2011 to 72nd this year.
It provides for both incentives and sanctions for ministries and government agencies to encourage them to properly operate the OSS system – the incentives include the prospect of budget increases while, conversely, the sanctions include the possibility of budget cuts.
Further, ministries and government agencies are required to draw up business licensing standards, encompassing norms, criteria and procedures for issuing licenses, something that should make things more predictable for business, provided, of course, that these standards are made public.
GR 24/2018 also provides a mechanism for accommodating public complaints regarding such issues as abuse of power, and establishes administrative sanctions for provincial governors and local government chief executives and officials who fail to implement the system as required. Should there be prima facie evidence of criminality, the regulation envisages that this should be forwarded to the police or prosecution service for follow-up action. However, no sanctions are provided for ministers who fail to properly implement the system.
Despite all the good news, everything in the garden is not yet entirely rosy. The OSS system continues to be a work in progress, with various bugs, glitches, and difficulties emerging from time to time as the system continues to be rolled out. However, this is only to be expected given the sheer number of economic sectors, ministries, central and local government organizations and sectoral regulations involved.
The OSS system is presently administered by the Coordinating Minister for the Economy on an interim basis. However, a release posted on the BKPM website on 19 July 2018 states that the BKPM will assume full responsibility for its administration in November.
By Giffy Pardede (firstname.lastname@example.org)