Streamlining Business Licensing in Indonesia: Key Changes and Highlights of GR 28/2025

Background

The Government of Indonesia recently enacted Government Regulation No. 28 of 2025 on the Implementation of Risk-Based Business Licensing (“GR 28/2025”) replacing Government Regulation No. 5 of 2021 on the same topic ("GR 5/2021").

GR 5/2021 marks a major reform of the business licensing framework of South-East Asia's largest economy geared at positioning Indonesia as a more attractive, business-friendly investment destination.

While GR 28/2025 retains the risk-based approach established under earlier regulations, it introduces refinements aimed at simplifying and accelerating licensing procedures by integrating all licensing processing, supervisory measures, and administrative sanctions into the Online Single Submission ("OSS") system, strengthening the digital infrastructure for business licensing. The new regime is intended to foster a more supportive business ecosystem across a wide range of sectors, including construction, energy, and environmental management.

Scope and Coverage

GR 28/2025 provides a comprehensive updated framework for business licensing in Indonesia, applying to all business actors across virtually all sectors.

The regulation governs the issuance of basic licenses (such as spatial utilization, environmental, and building approvals), business licenses, and supporting licenses (Perizinan Berusaha Untuk Menunjang Kegiatan Usaha or "PB-UMKU"), and is applicable nationwide, including special economic zones ("SEZs") and free trade zones ("FTZs").

GR 28/2025 is an extensive regulation spanning almost 400 pages (and 10825 pages of appendices), reflecting the government’s commitment to providing clear, sector-specific guidance and robust administrative procedures for all aspects of business licensing in Indonesia. The main body of the regulation consists of the following 14 chapters :

Chapter 1 – General Provisions
Chapter 2 – Basic Requirements
Chapter 3 – Business Licensing
Chapter 4 – Supporting Licenses (PB-UMKU)
Chapter 5 – Norms, Standards, Procedure And Criteria
Chapter 6 – Integrated OSS System
Chapter 7 – Supervision
Chapter 8 – Policy Reform
Chapter 9 – Funding
Chapter 10 – Dispute Resolution
Chapter 11 – Sanctions
Chapter 12 – Miscellaneous
Chapter 13 – Transitional Provisions
Chapter 14 – Closing Provisions

The regulation also includes 4 main appendices that clarify business lines (KBLI), risk levels, supporting license requirements, and technical standards.  

Key Highlights

1. Risk Based Licensing:

GR 28/2025 maintains a licensing regime based on risk level and scale of business activities, similar to that prevailing under GR 5/2021. The classification of business activities and licenses for each classification under GR 28/2025 remains the same as GR 5/2021, ie divided into the following 4 primary risk levels:

For fuller context, a standard certificate is issued for lower-medium risk activities and serves as a self-declared statement by the business actor that they will comply with the required business standards; it is granted automatically through the OSS system upon submission.

Whereas, a verified standard certificate applies to upper-medium risk activities and requires not only a self-declaration but also a subsequent verification by the relevant authority to confirm compliance with the applicable standards before the business can commence operations.

In contrast, a business license is required for high-risk activities and involves a more rigorous review process by the authorities, including the fulfilment of all substantive requirements and approvals, before the license is granted. This tiered approach ensures that the level of regulatory scrutiny matches the potential impact and risk of the business activity, providing both efficiency and legal certainty for business actors.

2. Integrated Electronic Licensing Process:

GR 28/2025 streamlines all business licensing processes through the OSS by furthering integration with the relevant ministries and government agencies’ systems, enabling better coordination and data consistency across sectors from the previous licensing platform. The new regulation introduces significant enhancements to the existing OSS system by launching 3 new subsystems, each with distinct functions and accessible only through authorized user access:

• Basic Licenses Subsystem¹ : This subsystem serves as the centralized portal for fulfilling all basic requirements necessary before a business license can be issued. Through this subsystem, applicants can submit, track, and manage the processing of key approvals, including the Spatial Utilization Approval (Kesesuaian Kegiatan Pemanfaatan Ruang or "KKPR"), Environmental Approval (i.e. Statement of Environmental Management and Monitoring Capability ("SPPL"), Environmental Management and Monitoring Efforts ("UKL-UPL") and Environmental Impact Assessment ("AMDAL")), Building Construction Permit (Persetujuan Bangunan Gedung or "PBG"), and Certificate of Building Worthiness (Sertifkat Laik Fungsi or "SLF"). Both PBG and SLF were previously processed through the Building Management Information System (Sistem Informasi Manajemen Bangunan Gedung).
• Foreign Investment Facilities Subsystem² : This subsystem offers at least 8 types of services, including: import duty exemptions for machinery, goods, and raw materials used in industrial development, applications for corporate income tax reductions (tax holidays), requests for gross income deduction related to internships, training, or educational programs, and certain other investment facility services.
• Partnership Subsystem³ : This subsystem enables business actors to register and fulfil partnership commitments required under investment regulations, such as (i) large scale business mandatory partnership with MSMEs in specific business fields, as required under certain sectoral laws, and (ii) partnership on a voluntary basis, and supports monitoring and evaluation of these partnership commitments. The subsystem ensures that partnership obligations are considered within the broader risk-based licensing process.

These subsystems are designed to provide a more tailored support and improve regulatory oversight by creating specific modules or “rooms” for each business actor.

3. Clarified Steps to Starting and Operating a Business

GR 28/2025 provides greater clarity regarding the procedural steps for establishing and operating a business in Indonesia. Article 7 of GR 28/2025 outlines 2 primary stages of a business activity:

a. Initiation

This phase covers the preparatory steps a business actor must undertake before operations can commence. GR 28/2025 identifies several key sub-activities:

• Fulfillment of legal entity requirements;
• Fulfillment of basic licensing requirements as set out in Section 2(a) above; and
• Submission and/or Issuance of Business Licenses, by applying for the issuance of the appropriate risk-based Business License, integrated through the OSS system.

b. Operation

This phase consists of 2 sub-phases:

• Preparation phase: Business actors must undertake several preparatory steps in order to undertake their activities, including land procurement, fulfillment of PBG (if required), construction of facilities and buildings, manpower recruitment, compliance with specific business license requirements applicable to the relevant activity.
• Operational and/or Commercial phase: includes the production and distribution of goods and/or services, logistics, marketing, etc.

4. Fictitious Positive Mechanism

GR 28/2025 introduces a so-called “fictitious positive” (fiktif positif) mechanism designed to provide legal certainty and efficiency in the processing of certain key approvals and licenses. The fictious positive mechanism entails that if a government authority fails to act within a prescribed timeframe, the relevant approval or license shall be deemed granted, allowing the business process to proceed with applications for other licenses or its operations without undue delay.

The mechanism covers:

a. KKPR:

• If the relevant authority does not issue the required technical consideration (pertimbangan teknis pertanahan) for KKPR within 20 working days of receiving a complete application, the KKPR shall be automatically issued⁴.
• This ensures that land use approvals cannot be indefinitely delayed by administrative inaction.

b. Environmental Technical Approvals:

• For technical approvals related to environmental standards (such as wastewater, emission, or toxic and hazardous (B3) waste management), GR 28/2025 sets strict response/issuance deadlines: 30 working days for wastewater and emission standards, and 16 working days for toxic and hazardous (B3) waste assessments, calculated from the date the application is declared complete and correct⁵.
• If these deadlines are not met by the relevant authority and the application is complete, the business may proceed to apply for its environmental approval by attaching proof of submission of the technical approval application, even if the technical approval itself has not yet been issued.
• This is a significant development, as it prevents environmental technical approvals from becoming a bottleneck in the licensing process (which was quite common under the previous licensing regimes).
• We should note that these environmental technical approvals are not processed through the OSS system and the processes are subject to a separate screening process conducted through dedicated government information systems, depending on the type of technical approval required. We elaborate further on the technical approvals and its interface with the environmental approval in the section just below.

c. Medium-High and High-Risk Business Licenses:

• For business activities classified as medium-high or high risk, if the relevant authority fails to verify licensing requirements and input the results into the OSS system within the prescribed timeline, the OSS system will automatically issue the relevant business license.⁶
• Again, this development ensures that businesses are not held back due to administrative delays in the verification process.

5. Environmental Approval and Technical Standards

GR 28/2025 reaffirms environmental approvals as one of the fundamental licensing requirements for businesses as previously already established through Government Regulation No. 22 of 2021 on the Implementation of Environmental Protection and Management but was not expressly stated in GR 5/2021. GR 28/2025 now clearly provides that such approvals are. Depending on the risk classification of the activity, the required environmental approval may be in the form of:

• AMDAL (Environmental Impact Assessment);
• UKL-UPL (Environmental Management and Monitoring Efforts); or
• SPPL (Statement of Environmental Management and Monitoring Capabilities).

One key clarification introduced under GR 28/2025 is that in cases where multiple KBLI-classified activities are conducted by a business actor in one integrated location, the applicable environmental approval must be based on the environmental document required for the highest-risk activity.⁷  This has always been the case by policy, but GR 28/2025 now confirms such requirement.

In addition, GR 28/2025 clarifies the position of technical approvals in the environmental approval process. Specifically, it provides that technical approvals must be obtained as an administrative prerequisite for applying for environmental approvals involving an AMDAL or UKL-UPL. These technical approvals (as mentioned in Section 4 above).

While GR 28/2025 provides that environmental approvals (i.e., AMDAL, UKL-UPL, and SPPL) are submitted and processed through the OSS system, technical approvals are subject to a separate screening process conducted through dedicated government information systems, depending on the type of technical approval required, approved by the central government or, if delegated, the regional governments (i.e. provincial or district/city environmental agencies).

The new regime requires businesses to self-asses which technical approvals may be applicable for them, using the following platforms:

• For wastewater standards, emission standards, and toxic and hazardous (B3) waste management,⁸  the self-screening must be conducted through the environmental information system (sistem informasi lingkungan hidup).
• For vehicle traffic impact analysis (ANDALALIN),⁹  the screening is conducted through the traffic information system (sistem informasi lalu lintas).

On the other hand, business actors located in industrial estates, SEZs, or FTZs and free port zones who either (i) do not discharge wastewater into water bodies or (ii) discharge wastewater through treatment facilities provided by the zone management, are not required to obtain technical approvals.¹⁰

6. Updates to Certain Business Activities and KBLI Codes

One of the key developments under GR 28/2025 is the reclassification and expansion of business activity scope under the KBLI business classification. The regulation not only divides certain existing KBLIs into more specific sub-categories based on activity type and risk level but also broadens the scope of several KBLIs to reflect evolving industry trends—particularly in the energy, carbon management, and infrastructure sectors. Below are some notable examples of these changes:

• KBLI 35111 (Power Generation) and KBLI 35114 (Power Sales) are now divided into 2 categories. The first covers conventional power generation and sales, which are classified as high risk and require both an NIB and a Business License, issued within 14 business days from complete application. The second covers renewable energy (RE) power generation and sales that are integrated with electric vehicle (EV) charging stations, which are classified as medium-low risk and require an NIB and a Standard Certificate, issued automatically through the OSS system.
• KBLI 35129 (Other Electricity-Related Supporting Activities) has been expanded to include energy conservation services as a new business scope. The risk level remains medium-low, and there are no changes to the licensing requirements—businesses still require an NIB and a Standard Certificate.
• KBLI 49300 (Pipeline Transport Services) now includes the transport of carbon through pipelines. This activity is classified as high risk, requiring both an NIB and Business License which must be issued within 15 business days from complete application.
• KBLI 39000 (Waste Management and Recycling) has been designated to cover Carbon Capture and Storage (CCS) activities, including both exploration and storage activities. These activities are classified as high risk and require an NIB and Business License, issued within 20 business days.

7. Removal of Certain Foreign Investment Restrictions

It is notable that GR 28/2025 seems to have removed certain foreign investment restrictions which applied previously under GR 5/2021. For example, under Section II.8.A.1 of Schedule 2 to GR 5/2021, the following foreign ownership restriction applied to foreign investment construction companies ("BUJK PMA"):

• the maximum foreign ownership of foreign construction services business entity from non-ASEAN countries in BUJK PMAs was 67%; and
• the maximum foreign ownership of foreign construction services business entity from ASEAN countries in the BUJK PMAs was 70%.

However, the above restriction is no longer present in GR 28/2025.

Also, a number of business lines which were previously reserved for micro, small, and medium enterprises (MSMEs) are now open to large-scale and foreign investment.

8. Supervision and Sanctions

GR 28/2025 reinforces the supervisory function over the implementation of business licensing by business actors. The supervision is carried out by the relevant authorities in accordance with their respective jurisdictions, which include the Central Government, Regional Governments, SEZ Administrators, and FTZ and Free Port Zone Authorities.

The new regime outlines 2 main types of supervision:

Routine supervision refers to the standard oversight activities conducted on a regular basis. These may take the form of reviews of periodic reports submitted by business actors and/or regularly scheduled field inspections.

In contrast, incidental supervision is defined as supervision conducted at specific points in time, usually in response to certain triggers. These include public complaints, requests or notifications from the business actors themselves, or indications that a business actor may be operating in violation of basic licensing requirements, general business licenses, or sector-specific licenses. Where incidental supervision is warranted, the relevant authority may conduct an unscheduled or ad hoc field inspection.

In terms of sanctions, GR 28/2025, introduces a more structured and sector-specific sanctions framework compared to the previous regime under GR 5/2021. Each sector is now provided with detailed sanction provisions, clarifying applicable enforcement mechanisms including for violations of specific sectoral licenses. While the general types of administrative sanctions remain unchanged (e.g., written warnings, temporary suspension of activities, and revocation of business licenses), GR 28/2025 also introduces new types of enforcement measures (e.g. police coercive measure (daya paksa polisional), cessation of government services, etc) across various sectors and industries. For example:

• Transportation Sector: GR 28/2025 introduces a new enforcement mechanism known as police coercive measures (daya paksa polisional). This sanction may be imposed in cases where violations result in, or pose a risk of causing, harm to public health, safety, the environment, casualties, or accidents. Measures under police coercive measures include temporary suspension of business operations or public services, sealing of premises, operating bans, site closures, demolition of buildings, and other immediate corrective actions to stop violations and restore public safety or environmental conditions.
• Forestry Sector and Marine & Fisheries Sector: A new sanction in the form of cessation of government services has been introduced. This may involve the temporary or permanent halting of certain public services to non-compliant business actors.

9. Facilitation of Micro and Small Enterprises

GR 28/2025 continues to prioritize the development and ease of doing business for micro and small enterprises ("MSEs"). The regulation simplifies licensing requirements for MSEs by maintaining a lower threshold for risk classification, allowing most MSEs to operate with only an NIB and, where applicable, a standard certificate. The OSS system provides a dedicated pathway for MSEs, streamlining the application process and reducing administrative burdens.

Additionally, GR 28/2025 introduces measures to facilitate access to partnership opportunities, government support programs, and investment incentives for MSEs. The regulation also clarifies that certain PB-UMKU are only required at the operational or commercial stage, not during initial establishment, further reducing barriers for small businesses.

10. Free Trade Zones and Special Economic Zones

Under GR 28/2025, SEZs and FTZs are subject to a distinct regulatory framework that delegates significant licensing and supervisory authority to their respective administrators. Specifically, the issuance of basic requirements (as mentioned above in Section 1) as well as business licenses and PB-UMKU, for activities located within SEZs and FTZs, falls under the exclusive jurisdiction of the SEZ Administrator or the Head of the FTZ Management Agency, rather than the general central or regional government authorities.¹¹

These administrators are empowered to process, issue, and supervise all relevant licenses and approvals through the OSS system, ensuring that licensing procedures are streamlined and tailored to the unique regulatory environment of each of these zones.¹²  Furthermore, the administrators are responsible for ongoing supervision and enforcement of compliance within their respective zones, including the authority to conduct inspections, impose administrative sanctions, and coordinate with other government bodies as necessary.¹³

This framework seems to be designed to incentivize investment and operational activities in SEZs and FTZs by providing a single point of contact for licensing and regulatory oversight, thereby supporting the government’s objectives of fostering economic growth and enhancing Indonesia’s competitiveness as an investment destination. As a reference, Indonesia currently has 24 SEZs and 4 designated FTZs (namely, Batam, Bintan, Karimun, and Sabang).

Transitional and Closing Provisions

To ensure a smooth transition from the previous regulatory regime to the new framework under GR 28/2025, Articles 547 to 549 provide specific provisions governing the treatment of ongoing and existing business licensing processes.

Under Article 547, licensing applications that are already in process when GR 28/2025 took effect (i.e. on 5 June 2025) will continue to follow the previous regime and requirements, until the new OSS system is fully operational (according to Article 551(b), the OSS must be updated to comply with GR 28/2025 at the latest within 4 months since the enactment of GR 28/2025). The article outlines the following scenarios:

• Licensing applications that are still being processed—such as those for basic requirements, business licenses, PB-UMKU —will remain governed by GR 5/2021 until the OSS system has been updated to comply with the new provisions of GR 28/2025.
• For medium-high risk businesses that have already received a standard certificate (but which has not yet been verified) and/or a PB-UMKU (but which has not yet become effective), the licensing process will continue under the requirements of GR 5/2021 until the adjusted OSS system becomes fully functional. Similarly, for high-risk businesses that have either obtained an accelerated license but have not yet met all substantive requirements, or a PB-UMKU that has not yet become effective, those licenses will also remain subject to GR 5/2021 until the OSS system update is complete.

These transitional rules are intended to prevent regulatory disruption and allow business actors to continue their licensing processes without needing to restart a new application under the new regulation.

As to the validity of existing licenses, Article 549 addresses the status of licenses and approvals that were already granted prior to the enactment of GR 28/2025 and provides that:

• Any basic requirements, business licenses, or PB-UMKU that were issued, verified, or approved and are still valid at the time GR 28/2025 took effect will continue to be recognized and remain in force under the new regulation.
• However, if the provisions under GR 28/2025 are more favorable to the business actor, such as where a business activity’s risk level classification has changed, resulting in lighter compliance requirements or becoming more open to foreign investment, the business may choose to adopt the new framework and benefit from the more advantageous conditions.

Conclusion

GR 28/2025 marks a significant advancement in Indonesia’s risk-based business licensing regime, delivering greater clarity, efficiency, and legal certainty for businesses across all sectors.

By fully integrating licensing, environmental, and building approval processes into the OSS system, and introducing mechanisms such as the "fictitious positive" approval for certain approvals/licenses, the regulation addresses longstanding bottlenecks and should in practice accelerate the path to operational readiness. The harmonization of sectoral standards, delegation of authority to SEZ and FTZ administrators, and the more robust framework for supervision and sanctions collectively foster a more predictable and business-friendly investment environment.

Importantly, GR 28/2025 not only streamlines procedures for mid and large scale businesses but also lowers barriers for micro and small businesses, supporting inclusive economic growth and entrepreneurship.

The regulation’s sector-specific updates and the clear(er) delineation of supervisory responsibilities are aimed at further aligning Indonesia’s investment climate with global best practices, making it more attractive to both domestic and foreign investors.

As the government finalizes the necessary implementing regulations and system upgrades (of the OSS), businesses are encouraged to review their licensing status and seek to take advantage of the new, more favourable provisions where possible.

Other Authors: Hadisti Azzahra, Associate; Rachelia Jumani, Associate