The OSS system was launched last week (mid-July 2018), although there are still teething issues with the system, and the system has limited coverage at this time. However, ultimately all licensing processes will be streamlined and will be easier under the OSS system.
There is a substantial mindset change with the new OSS system. Rather than the government monitoring compliance prior to licenses being issued, the OSS system assumes that companies will self-assess and will ensure compliance; with the ultimate sanction being that a noncompliant company's registration will be frozen, and dealings with the government and third parties will be delayed or will become more difficult until there is compliance.
OSS System Overview
We have had a briefing with the government on the OSS system and processes. Acknowledging that there are still teething issues, the following points should be noted:
- Nature of System - Self-Assessment: With the OSS system, the
government is placing more trust in investors, advisers and especially
notaries, and companies are expected to be more proactive with and ensure
their own compliance. Business licenses are now issued with an obligation
to fulfill certain commitments/obligations. Business licenses will only be
effective after all commitments/obligations imposed to enable the holders to
conduct commercial activities are fulfilled. The intent is that when
obligations are fulfilled, it will be recorded in the OSS system, so relevant
government agencies are aware of compliance. The OSS system will not
issue an additional document to confirm the effectiveness of any license.
As an example, to speed up the business/foreign investment process, a company will be established first by obtaining the Ministry of Law and Human Rights (MOLHR) approval for the establishment, and then it will obtain its foreign investment approval/business license from the OSS system. What this means is that appropriate advice needs to be obtained
first, any necessary discussions should be held with the Capital Investment Coordinating Board (BKPM) if there is any uncertainty, and a self assessment of the appropriate business licenses, capital, investment plan etc. should be done.
- NIB - Essential Identification: As and when relevant sectors are covered
by the OSS system, new businesses must register with the OSS system.
Eventually existing business entities will need to register also with the OSS
system. Upon registration, a Business Identity Number (Nomor Induk
Berusaha/"NIB") will be issued. The NIB will serve as an "identity card" for
business entities. The NIB will subsume some other licenses and
registrations that previously had to be obtained by a business.
The NIB can now serve as the Company Registration Certificate (TDP), the Importer Identification Number (API) and the customs access right (hak akses kepabeanan). The NIB will be valid as long as the business entity operates. So a company having an NIB will have fewer licenses to renew.
- Mandatory Registration: The OSS system applies to all business entities,
and is intended in the future to capture all sectors and to be integrated with
all other government agencies. Some sectors are not yet covered by the
OSS system (e.g., finance sector, and mining, oil and gas sector), and some
government agencies are not yet integrated. Also currently a limited number
of government agencies' online systems are integrated, e.g., the MOLHR
(AHU) online system, the Population and Civil Registration (Dukcapil) online
system, the INSW and the Ministry of Employment online system.
- OSS Monitoring Teams: As the OSS system is more of a self assessment/compliance system rather than the government checking
upfront compliance before issuing licenses, government agencies are
restructuring their workforces to form OSS monitoring teams. As the OSS
system is integrated with more government agencies, noncompliance by a
business entity could lead to the NIB number being "suspended or revoked"
or to the business licenses being suspended or revoked, with notifications
being sent to other government agencies. While government agencies have
been cross checking compliance for other government agencies for the past
three years, the OSS system is intended to be the ultimate tool to ensure all
compliance is up to date with all government agencies.
- Regulatory Changes: Indonesian agencies (including BKPM) need to issue
technical guidance on using the OSS system, and amend their existing
regulations/decrees etc. to conform with the OSS regulation.
What You Need to Do
The following are some immediate pointers:
- Clients should get familiar with the OSS system and what it covers. The OSS
system is a licensing system only at this time, and reports (such as the
foreign investment realization report (LKPM) and representative office
reports), other reports and filings still need to be made with relevant
- Given the emphasis on self-assessment and compliance, clients may need to
beef up their compliance departments, and ensure that there is training and
that reports, filings and registrations are done in time and are updated.
Failure to do so could hamper a company's operations ̶ for instance in the
future, a failure to submit financial statements in a timely manner may result
in imports being stopped.
The era of multiple and independent government agency systems is coming to a close.
- New business entities must commence using the OSS system to the extent
- Existing licensed businesses are not immediately required to register
themselves in the OSS system (to obtain an NIB). However, registration will
be required for any license renewals that are currently, or in the future will be,
issued through the OSS system. Progressively all business entities will be in
the OSS system.
- For existing business entities, we advise doing a prompt compliance check
and that any deficiencies should be rectified before applying for an NIB from
the OSS system. This is to ensure that there is no immediate compliance
issue, once registered in the OSS system ̶ which could then result in the
NIB being suspended or revoked, government agencies being alerted and
- Clients must monitor the OSS system site to determine upgrades in the OSS system and the coverage of the OSS system, as it is progressively rolled out to more and more sectors and agencies.