Risk-Based Approach to Compliance in Indonesia
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Indonesia has introduced a risk-based approach to business licensing, aimed at simplifying and streamlining the process for entrepreneurs. The regulation, known as GR 5/2021, assesses business activities based on their potential hazards, with four risk levels: low-risk, medium-low risk, medium-high risk, and high-risk.
How it Works
The government will conduct a risk analysis for each application, taking into account factors such as:
- Scale of hazards
- Potential occurrence
- Business scale rating
Based on this assessment, businesses will be classified into one of the four risk categories. The risk level determines the licensing requirements, which can range from a simple online registration to a more comprehensive verification process.
Licensing Requirements by Risk Level
Low-Risk Businesses
- Require only an Online Single Submission (OSS) registration number, known as Nomor Induk Berusaha (NIB)
- NIB serves as:
- Company’s import identification number
- Social insurance registration
Medium-Low Risk Businesses
- Need to obtain both an NIB and a Certificate of Standards before commencing operations
- May also require completion of the Environmental Management and Monitoring Efforts form through the OSS system
Medium-High Risk Businesses
- Need to obtain an NIB and Certificate of Standards, with verification by the central or regional government required before commencing commercial operations
High-Risk Business Activities
- Require a license to operate, issued once specific conditions and verifications are fulfilled
- NIB allows these businesses to conduct activities in preparation for commercial operations
Implementation and Impact
GR 5/2021 replaces GR 24/2018 and will be fully implemented through the OSS system by June 2021. The regulation impacts 16 sectors, including defense, energy, agriculture, and more.
The risk-based approach is expected to simplify business licensing requirements for low-risk businesses while ensuring that high-risk activities are thoroughly regulated. With its implementation, Indonesia aims to promote economic growth and attract foreign investment.
About Us
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