Indonesia’s business licensing system plays a crucial role in the nation’s economic development, yet it continues to pose significant challenges for entrepreneurs.
The complex, multi-step process often discourages foreign investors and slows down local business growth. Bureaucratic inefficiencies, lengthy approval timelines, and unclear regulations are just a few of the barriers businesses face.
These obstacles can delay the start of new ventures, making Indonesia less attractive for investment compared to other emerging markets. However, the government is actively working to address these issues, offering reforms aimed at simplifying the process and boosting the country’s competitiveness.
Bureaucratic Hurdles in Indonesia’s Business Licensing System
Indonesia’s business licensing system continues to present significant challenges for companies, both foreign and domestic. Francois de Maricourt, Chairman of EuroCham, emphasized that one of the main obstacles faced by investors is the bureaucratic complexity.
“One of the common challenges mentioned by our members and prospective investors is bureaucracy. Unfortunately, in Indonesia, there are still many regulations from various entities,” he said, as reported by Kontan.
This multi-layered regulatory environment often results in delays, making it difficult for businesses to obtain the necessary permits and approvals quickly. Additionally, the lack of special tariffs for local companies further hampers their ability to compete effectively.
As Maricourt added, “We sincerely hope there will be progress in the signing of this Indonesia-European Union trade agreement, as it will greatly support the flow of trade and investment.”
The delay in finalizing the Indonesia-European Union Comprehensive Economic Partnership Agreement (IEU CEPA) only adds to the uncertainty, preventing businesses from fully capitalizing on trade opportunities and limiting the country’s economic potential.
Key Reforms in Indonesia’s Business Licensing System to Ease Process
To address the challenges faced by businesses, the Indonesian government has implemented several reforms aimed at simplifying the licensing process, particularly for micro, small, and medium enterprises (MSMEs).
The Online Single Submission (OSS) system has proven to be a game-changer, enabling MSMEs to obtain the necessary legal recognition much faster.
As Rosan Roeslani, Head of the Indonesian Investment Coordinating Board, shared, “Within 30 minutes, the permit can be issued, specifically for MSMEs.” As reported by Bisnis.com.
This efficiency marks a significant improvement, offering business owners a streamlined process to receive their Business Identification Number.
By December 10, 2024, over 11.3 million Business Identification Numbers had been issued, with more than 99% of these going to MSMEs.
This surge in Business Identification Numbers reflects the government’s focus on empowering small businesses, ensuring they are better equipped to tap into investment opportunities and contribute to the economy.
The Indonesian Investment Coordinating Board is also working to foster partnerships between large businesses and MSMEs, aiming to create a more inclusive and sustainable business environment.
The Impact of Simplified Licensing on MSMEs and Investment
The streamlined licensing process has already started to show positive results for MSMEs, with many businesses now able to access legal recognition and formalize their operations quickly.
The introduction of the Online Single Submission (OSS) system, which allows MSMEs to receive their Business Identification Number within 30 minutes, has significantly reduced the bureaucratic delays that previously hindered business growth.
This ease of access not only simplifies administrative processes but also enables MSMEs to tap into formal financial services, attract investors, and participate more actively in the market.
As a result, these businesses are better positioned to contribute to Indonesia’s economic development. The Indonesian government’s ongoing commitment to improving the business climate for MSMEs further enhances investor confidence, promising greater investment inflows that can drive job creation and innovation across the country.
Business Licencing System Still A Work in Progress
Indonesia’s ongoing reforms in business licensing are pivotal in empowering MSMEs and attracting investment. Rosan Roeslani noted that under President Prabowo Subianto’s administration, empowering MSMEs remains a key priority.
To support this, the Indonesian Investment Coordinating Board is intensifying efforts to foster partnerships between large enterprises and MSMEs, ensuring these smaller businesses directly benefit from incoming investments. This approach aims to foster more inclusive economic growth, creating a dynamic business environment for future development.
Entering the Indonesian market can be complex and challenging, with language barriers and bureaucratic hurdles standing in the way. That’s why partnering with trusted local support is crucial.
Seven Stones Indonesia offers expert assistance to help foreign investors navigate the regulatory landscape, overcome language barriers, and streamline the business setup process. With our local expertise, you can focus on growing your business while we handle the complexities. Contact us today to make your market entry smoother and more successful!
Source: nasional.kontan.co.id, ekonomi.bisnis.com
Image: Getty Images
