Introduction

The online single submission (OSS) system constitutes a significant overhaul of Indonesia's business and investment licensing regime (for further details please see "New online single submission system: what is it?"). The OSS was established by way of Presidential Regulation (PR) 24/2018, which took effect on 21 June 2018.

On 2 January 2019 responsibility for the OSS was officially transferred to the Investment Coordinating Board (BKPM). The Office of the Coordinating Ministry for Economic Affairs had previously administered the OSS from its inception on 9 July 2018.

Although responsibility for the OSS was always intended to pass to the BKPM, this handover – which was originally scheduled for November 2018 – took much longer than planned.

This article discusses some of the technical issues that continue to affect the OSS.

Ongoing issues

The government made it clear from the outset that the OSS would take time to perfect. This was to be expected given the sheer number of economic sectors, ministries, central and local government organisations and sectoral regulations involved.

For the most part, the OSS works reasonably well. However, a number of problems remain, the most significant of which are discussed below.

NSPK A number of state ministries and agencies have yet to provide the OSS with their norms, standards, procedures and criteria (NSPK).(1) This has resulted in a lack of clarity and certainty, with OSS users being forced to conduct independent research (eg, by studying the relevant laws and technical regulations) and consult directly with officials in order to identify the precise requirements to obtain a particular licence or permit. There are concerns that NSPK which are adopted by a ministry or agency after a licence or permit is issued by the OSS might contain new requirements that were unknown to the licence or permit holder at the time of its application, as this would render the licence or permit invalid.

Data cross-checking capability When an existing company first registers with the OSS and applies for a business registration number (NIB), the company data that is entered must match that which is recorded in the Ministry of Law and Human Rights database.(2) However, if the data has changed since the ministry's database was last updated, the OSS will reject the company's NIB application. For example, if a director has obtained a new passport, its passport number will be different from that recorded by the ministry. This will result in the OSS automatically rejecting the company's NIB application. In such a scenario, the relevant director's appointment will need to be reaffirmed so that their new passport can be recorded by the ministry. This would be inconvenient, as such reaffirmation would require a shareholders' resolution.

One difficulty in this regard affects companies whose NIBs were issued by the OSS during the first few months of its operation, prior to the activation of its capability to automatically cross-check company data with that recorded by the ministry. During this period, all company data had to be entered manually in the OSS. Thus, if a company obtained a NIB before the OSS's cross-checking capability had been activated and it subsequently updates its data with the ministry, this cannot be automatically cross-checked and recorded by the OSS. In such a case, the company would have to cancel its existing NIB and apply for a new one.

KLBI OSS users have experienced a number of problems relating to the standard Indonesian business-line classifications (KLBI).(3)

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 classifications as recorded by the ministry may be different to those set out in the current KLBI, which are 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 way of a shareholders' resolution and then register its new business lines with the ministry.

Second, the ministry's system can accommodate only 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 them on the OSS, this will result in a data mismatch and the automatic rejection of the company's registration application. To date, there is no known solution to this problem.

Recognition of OSS licences and permits at local level Many local government agencies still refuse to accept licences or permits issued by the OSS, such as the NIB and the location permit, which replace the business registration certificate and the company certificate of domicile, respectively. However, in practice, many local governments continue to demand a business registration certificate and a company certificate of domicile even though these are officially no longer required under PR 24/2018.

Integration with local government systems Problems prevail at the local level in some parts of the country with regard to the integration of the OSS with systems operated by local government investment and one-door licensing agencies.

Integration with BPJS system As part of the OSS process, all companies must register with the state social security provider, Badan Penyelenggara Jaminan Sosial (BPJS). However, the OSS and the system operated by BPJS have not yet been fully integrated. While the OSS has a dedicated feature that should allow direct registration with BPJS, users are directly referred back to the OSS website. This means that they will still have to visit a BPJS office in person.

Comment

The OSS's introduction 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 and Indonesia's ministries, agencies and local governments sufficient time to prepare, particularly with regard to system integration and the harmonisation of sectoral regulations with PR 24/2018. This has resulted in confusion and uncertainty among both public officials and OSS users. Nonetheless, it is understandable that the government was anxious to get the system up and running as quickly as possible given the current administration's commitment to improving ease of business in Indonesia.

Now that the BKPM has taken over responsibility for the OSS's administration, the various issues that persist are likely to be remedied quickly based on its vast experience and expertise in the investment licensing field.

For further information on this topic please contact Giffy Pardede or Adri Yudistira Dharma at Ali Budiardjo, Nugroho, Reksodiputro by telephone (+62 21 250 5125) or email (gpardede@abnrlaw.com or adharma@abnrlaw.com). The Ali Budiardjo, Nugroho, Reksodiputro website can be accessed at www.abnrlaw.com.

Endnotes

(1) Under Article 88 of PR 24/2018, state ministries and agencies with licensing authority that falls within the scope of the OSS must prepare NSPK for the licences and permits that they issue. These NSPK are important, as they essentially set out the requirements that must be satisfied before a licence or permit can be issued.

(2) Obtaining an NIB is the first step that a company must take in order to use the OSS. All other licences and permits are dependent on the NIB.

(3) KLBI are a list of business lines drawn up by the Central Statistics Bureau, the most recent version of which was issued in 2017. The KLBI are used for, among other things, determining whether a particular foreign investment is compliant with the restrictions contained in the Negative Investment List.

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.