What if your business license could be automatically approved if the government didn’t respond in time? Indonesia plans to introduce the positive fictive mechanism to streamline the licensing process and attract more foreign investment. But how exactly will it work, and why is it set to transform the ease of doing business in the country?
What Is Positive Fictive Mechanism?
The Indonesian government has introduced various policies to make it easier for businesses to obtain licenses and boost investment appeal in the country. One key initiative is the implementation of the positive fictive mechanism in business licensing, first established in Article 175 of the Job Creation Law in 2020.
Recently, this mechanism is set to gain further legal backing with the upcoming revision of Presidential Regulation No. 5/2011 on Risk-Based Business Licensing. But what exactly is the positive fictive mechanism?
It’s a process where, if a government authority fails to respond to an application within a specified timeframe, the request is automatically considered approved. This ensures that businesses aren’t stuck waiting in bureaucratic limbo. If no decision is made by the deadline, approval is granted by default.
For example, if you apply for a business permit and the authority doesn’t respond within the set period, your permit could be automatically approved under this rule.
The revision of Presidential Regulation No. 5/2011 is now nearing completion.
“Once the updated regulation is in place, the Ministry of Investment will enforce the positive fictive licensing process. Any delays will result in automatic approval, ensuring certainty,” said Riyatno from Indonesia’s Ministry of Investment on October 9, 2024.
Currently, the business licensing process is conducted through the Online Single Submission (OSS) system, which links businesses and investors with multiple ministries. The positive fictive mechanism will apply across all ministries, not just the Ministry of Investment.
A Call for Foreign Capital
The Indonesian government has introduced the positive fictive mechanism to streamline business licensing and attract foreign investment. This is crucial because foreign investment is still needed to close the savings investment gap, as domestic savings alone cannot meet the growing capital requirements of the Indonesian economy. When local funds fall short, foreign investment becomes essential to fuel economic growth.
“Foreign investment is important. I need to say this, because in our country there are also many who are somewhat anti-foreign investment,” said Edy Priyono, Deputy III for the Economy, Chief of the Presidential Staff, at the “National Seminar: Evaluation of One Decade of Jokowi’s Administration” in Jakarta, Thursday, October 3, 2024.
In early October, Rosan Roeslani, the Minister of Investment and Head of the Investment Coordinating Board, reported that investment realization during President Jokowi’s 2nd term has seen a remarkable increase, reaching 90.2 percent compared to his first term from 2014 to 2019. This high level of investment shows that the Indonesian government’s policies are resonating positively with the market
Meanwhile, in pursuit of the ambitious target of 8% economic growth in his third year in office, Indonesia’s newly elected President for 2024-2029, Prabowo Subianto, aims to increase the investment figure from IDR 1,650 trillion in 2024 to IDR 1,905 trillion in 2025.
Rosan added that the target will continue to gradually increase year by year. In 2026, investment is projected to rise to IDR 2,133.5 trillion, then increase again to IDR 2,373.6 trillion in 2027, IDR 2,649.4 trillion in 2028, and finally IDR 2,793.3 trillion in 2029. The total accumulated investment is expected to reach IDR 11,855.5 trillion.
Expert Support for Your Business
With such bold investment targets and strategic reforms in place, Indonesia is shaping up to be an ideal place for foreign businesses to grow. The Indonesia government’s commitment to streamlining the business licensing process, highlighted by the introduction of the positive fictive mechanism, is just one of the many steps being taken to make investing in Indonesia easier and more attractive.
If you’ve been thinking about setting up shop in Indonesia, now’s the time to do it. On top of smoother processes, there are also plenty of tax breaks and incentives in place. So whether you’re expanding or starting fresh, the current economic strategies and investor-friendly changes make this the perfect moment to get in and succeed.
As this country opens doors for foreign investors, Seven Stones Indonesia is here to help you kickstart your business journey. We manage every detail from company incorporation, immigration, and tax services to ensuring ongoing legal compliance.
Our expert team offers personalized, full-service support to get your business up and running seamlessly. Contact us on WhatsApp today to schedule a free 30-minute consultation. Let’s talk about your business goals in Indonesia!
