Government Aims to Upgrade 2.5 Million Microbusinesses by Easing Permit Process

Jakarta – This year, the government is aiming for 2.5 million informal businesses to become formal. In their attempts to help microbusinesses “graduate”, the government is aiming to ease permit and certification processes for businesses who have business registration numbers (NIB).

The Small, Medium Scale Enterprises (UKM) and Cooperatives Ministry’s (KemkopUKM) deputy for microbusiness affairs Eddy Satria explained that many micro and small-scale businesses (UMKM) believe that formal business certification is only required for large scale businesses.

“Furthermore, many still think that applying for a business permit is a difficult, convoluted process that would only take time away from their business,” Eddy said.

In Law (UU) no. 20/2008 on UMKMs, article 12, it is stated that business licensing is necessary to help simplify licensing procedures and data, which culminated in the availability of a one-stop permit service. This service also includes waiving licensing fees for microbusinesses and giving subsidies to small-scale businesses to obtain permits.

“The importance of having a business license for UMKMs is that UMKMs will have better access to legal protection, as well as help their growth. They will also gain access to easier funding and will be able to receive assistance from the government,” he said.

The Omnibus Job Creation Law no. 11/2020, Eddy added, also benefits UMKMs in terms of providing them the legal and financial protection necessary for doing business.

As a result of the Omnibus Job Creation Law, Government Regulation (PP) no. 7/2021 was also issued, concerning the protection and empowerment of cooperatives and UMKMs in Indonesia.

“The PP itself regulates the simplification of business licensing processes through the application of risk-based business permits. Where the risk of a business activity determines the type of license needed,” Eddy said.

The risks are classified in several levels: low risk, low-to-mid-risk, mid-to-high risk and high. For low-risk business ventures, businesses would only need to acquire NIBs.

For low-to-mid risks, businesses are required to have NIBs as well as an official statement that shows they have fulfilled certification requirements. For the mid-to-high risk category, businesses are required to have NIBs and a standard certificate that has been verified. For high-risk ventures, businesses are required to have NIBs as well as a full license that has been verified.

Eddy added that through the Online Single Submission (OSS) application has helped simplify the permit process. Previously, a standard operational permit or commercial permit can only be issued after a series of permits, such as environmental impact analysis (AMDAL) permits, were already obtained by the business.

“However, with the OSS and NIBs, businesses will be able to obtain operational permits and commercial permits more directly, with AMDAL processes able to be handled gradually after they are issued their NIBs,” he said.

Because of this, Eddy underlined the need to accelerate the implementation of PP no.7/2021 through the coordination of stakeholders. In addition, assisting UMKMs to apply for NIBs, especially microbusinesses, and facilitating their permit processes will be able to bring benefits for many businesses so that they can become more competitive and grow in the future.