One Year of OSS Implementation

KOMPAS/PRIYOMBODO

An officer explains the One-Stop Service (OSS) integrated business licensing facility to applicants on Wednesday (11/9/2019) at the office of the Investment Coordinating Board (BKPM) in Jakarta. The government has made a series of regulatory improvements and eased licensing procedures to attract more investment to Indonesia.

The government\'s commitment to reform business licensing and regulatory procedures does not always run smoothly. The response of ministries and institutions at the central and the regional governments does not set the same basic tone as the spirit of President Joko “Jokowi” Widodo.

The most recent example deals with the adoption of an online single submission (OSS) licensing platform to be integrated electronically. One year after being implemented, various challenges are being faced. If President Jokowi is angry because 33 Chinese companies have relocated businesses to a number of Asian countries but none to Indonesia, of course the culprit cannot be separated from our investment ecosystem problem. No doubt, this country is high attractive, as it is frequently ranked to be worthy of investment. However, only 40 percent of interested people continue to the realization phase. A large number of other investors are limited to the status of "will", no one knows for how long, or they may even end up cancelling. Possibly they keep investing, but not in Indonesia.

The same thing happens when registering tourism businesses (TDUP) to run a resort or hotel. There still many other similar cases.

The kinetic power of the Indonesian body resonates with very weak signals to ensure the ease (efficiency) and certainty (risk) of their business. The OSS, which is expected to be – citing President Jokowi\'s strong phrase in his speech "Vision of Indonesia" (14/7/2019) – a "new model, new way and new value" for inviting investment, seems still far from what is expected. To obtain an industrial business permit (IUI), business operators must still allocate three years of work time. Without the legality of "effective licensing", operational or commercial activities cannot begin. The same thing happens when registering tourism businesses (TDUP) to run a resort or hotel. There still many other similar cases.

To further assess the OSS implementation in a year, from June to July in 2019 KPPOD conducted an evaluation in the regions (six provinces and 10 regencies or cities). The root causes of a number of problem typologies were traced as a basis for proposing policy improvements and strengthening implementation in the future. This article starts from some of the study\'s findings and tries to take part in giving input for a settlement to encourage continued reform that is more robust.

Evolution of change

The presence of the OSS, as regulated by Government Regulation (PP) No. 24/2018, is intended as a new standard for the direction of policy (the new regime) and governance (new fashion) of licensing in this country. Various types of licenses that are currently scattered about in various lines and service centers are to be integrated into a national platform called the OSS. Horizontal integration (between ministries and agencies of the central government) or vertical (central and regional governments) becomes an entry point for continued efforts, including data sharing, business process standardization and centralized control.

Throughout the era of decentralization, licensing began to improve. Previously, during the centralized New Order era, business operators and the community processed licenses for various separate, fragmented and complicated institutions in the conventional institutional model. Applicants processed the licenses in each regional work unit (SKPD) according to a portfolio that was congruent with the division of work of the sectoral regime of the central government.

Unfortunately, Jakarta’s centralization was imitated by the regions in the form of a centralized licensing authority in the hands of the governor and regents or mayors. Extensive land and natural resources-based licenses were held by the regional heads themselves. The technical SKPD only became administrative bureaus that were quite effective at juggling in the realm of licensing similar to the black market for power so that it forced people to look for shortcuts by "raising" the affairs to the level of the regional heads.

Correction efforts were made at the early stage of autonomy. In line with the many jurisdictions being handed over to the regions, including inherent licensing, the merging of authority again in the hands of the regional heads or, vice versa, scattering it to each table of the heads of offices is suspected to be dangerous. The centralization of power in one hand would easily slip into the pit of licensing corruption, but its spread to various sectoral SKPDs can also lead to bureaucratic inefficiency. Therefore, through Home Ministerial Decree No. 24/2006 a division of work is arranged: Licensing services are centered on one door (one-stop integrated service/PTSP), while guidance is carried out by regional heads and supervision becomes the authority of the relevant technical SKPD.

KOMPAS/SIWI YUNITA C

The Minister of Trade Enggartiasto Lukita together with officials of the Government of Guangxi, China, witnessed the signing of the Chinese investment cooperation with Indonesia, Sunday (09/22/2019). The 16th CAEXPO 2019 in Nanning, Guangxi Province, China, resulted in a number of agreements, including investment in electric cars from China to Indonesia.

Throughout the 12-year operational period of PTSP, all regional governments implemented integrated licensing, both one-roof services and one-stop services. A number of success stories in Siak regency (Riau), Palembang city (South Sumatra), Denpasar city (Bali) and the province of South Sulawesi became an inspiration and were often replicated elsewhere. They are able to present business processes that are more efficient, win public trust through bureaucratic commitments to ensure the ease and certainty of doing business and are frequently chosen as champions in various innovation contests at the national and even global level.

However, normally in every change agenda there is always plenty of room for improvement. The integrated governance, deregulation bottlenecks (number of licenses), weak standardization (norms, standards, procedures, and criteria: NSPK), service inefficiency and licensing corruption remain the main business challenges. The ranking of investment ease has indeed improved, but the phase of starting a business and constructing a building has hardly changed because of inefficiencies in procedures, time and the cost of licensing. Similarly, licensing becomes an area prone to corruption by the regional heads and the bureaucratic apparatus authorized to issue location licenses, land allotments and administrative permits.

Inevitably, the success or failure of the implementation of the one-stop integrated service is very much determined by the regional leadership factor. Personal power is more of a determinant than system-based reforms that are designed to be solid and sustainable. The blurring of national standardization increasingly complicates the situation because it raises extreme local variations in practice. Business operators are led to the point of being completely uncertain. They experience different ways of working among regions because of weak reference to service standards, the sustainability of reforms is not guaranteed because of a change of leadership, legal bondage continues to lurk when they are forced to look for shortcuts to "buy" licensing tickets from regional heads and so on.

KOMPAS/PRIYOMBODO

A resident takes care of a business permit in the licensing service trying to integrate electronically or online single submission (OSS) at the One-Stop Integrated Service of the Investment Coordinating Board (PTSP BKPM), Jakarta, Wednesday (11/09/2019).

In this regard, in the second half of 2018 there emerged the OSS as the new game in town. The target to summarize the regulatory and licensing procedures in the phase of starting a business was quite successful. A total of 463 (including 16 KPPOD study sites) out of 542 regions in Indonesia have issued business ID numbers (NIB) as the first output of the OSS institution. In a matter of hours, everything from company registration certificates (TDP) to customs access can be obtained. Every day the OSS also serves thousands of requests for registration, account activation, business licenses and operational or commercial licenses. Within a year, the elementary achievement is a major one.

However, apparently that was the only one. The rest are challenges and all technical and political matters. At the central level, the integration of ministry and institution sector licensing services with the OSS system has not been optimal. Horizontal integration of IUI and tourism permits (TDUP) is difficult to run fully. Integration with the OSS system is limited to the initial processing of permits, as later it still has to follow the rules of the sectoral regime. New additional licenses that would be removed by the OSS system even emerge: Public Housing and Public Works Ministry, Industry Ministry, National Land Agency and others.

Fundamental breakthrough

Fragmentation in the central government flows to the regions. In addition to the confusion among regional government that are required to follow the ministries and institutions, they also have their own rules inherited from the old work system (pre-OSS), including digital applications that are very different from a single application (Si Cantik) as a prerequisite for the realization of "One System, One Data". Apart from Sidoarjo, none of the regions has fully joined the national platform. Outside the processing of the business licenses, Jakarta province still uses JakEvo. If major business cities such as Surabaya, Medan, Pontianak, Mataram and Makassar also barely move forward, it is easy to predict events in regencies such as Toba Samosir, Deli Serdang, Kubu Raya, Central Lombok, Maros and others.

Kompas/Heru Sri Kumoro

President Joko Widodo accompanied by Vice President Jusuf Kalla chaired a limited meeting to improve the investment ecosystem with relevant ministers in the President\'s Office, Jakarta, Wednesday (11/09/2019). Joko Widodo asked relevant ministers to examine and inventory one by one the problems which caused investment in Indonesia to not be realized. The meeting to improve the investment climate will also be held in a marathon for the next month.

What is even more serious, the regional governments control a number of key licenses. If they lock down the location licenses, building and environmental permits, it is difficult for business operators to meet commitments and obtain "effective permits" to operate legally. Then entrepreneurs are not only confused, but feel caught in a licensing trap. It is easy manage business ID numbers, but once they are in the field, the rules of the game differ between the OSS system and the sectoral and local government regimes. Frustration and resistance to the OSS emerge.

With the above-mentioned sketch of the problems, the fundamental solution is clear: Reorganize the change strategy. If deregulation, debureaucratization and digitalization are accepted as a complete package for licensing reforms, priorities and sequences must be appropriate. At present the government intervention is targeting the arena of bureaucratization and digitalization. What happens is that it is difficult for the integration of governance (OSS) and digital platforms (SiCantik) to be effective because the substance of licensing still spreads and is controlled by sectoral and regional government regimes. As an authority holder, ministries (having the field and sector laws up to the norms, standards, procedures and criteria) and regional governments (having local regulations up to standard operating procedures/SOPs) are very powerful for deflecting the rules of the game for any reason.

What should be integrated is the content of the policy, while the method of implementation (administration) is carried out centrally or entrusted to the regional governments. Here, an omnibus law is clearly urgent. First, the product level is the law because almost all permits in this country are under the law. Second, its position is as the main law, as the only licensing regulator. Third, the substance regulates the number and types of permits in the closed list system so that any discretion outside the list, whether in ministries or regional governments, must be assessed to ensure it is not a permit or illegal permit. Fourth, the number and type of licenses is to be regulated, while the granting of licenses is submitted to the government level according to the level of authority.

The proposal to make this omnibus law is at the same time a moment of integration (re-modification) and rationalization of various types of permits that are spread across 70 sector laws that inhibit investment (Kompas, 13-14/9/2019). The implication is clear. The law aims to provide certainty about the type of permit and reduce the amount to a proportional size, as well as never withdrawing the operating authority that must be kept in an autonomous region. It is difficult to ignore that fact that this impression of decentralization has become the reason for the regional governments to be half-hearted in applying the OSS because the main licensing authority was handed over to provinces and regencies or cities (Law No. 23/2014).

Its precedent can refer to the experience of improving regional taxes and contributions. During the first decade of autonomy, mushrooming levies gave the economy a high cost (transaction costs). The emergence of a regional tax omnibus law (Law No. 28/2009) eliminated various types of levies in the sectoral law, closing new levies space, and through the use of closed list systems certainty was guaranteed for taxpayers regarding the amount of taxes and levies, levy objects and tariff structures. Now, in the second decade, we rarely hear about strange levies, while the regional governments remain autonomous to administer levies based on the tax policy of the single law.

Therefore, in the new licensing law, spatial planning must have a clear and clean status, as an absolute requirement in any land-based permit, or have environmental externalities.

At the same point, another fundamental agenda item is the guarantee of land certainty as a locational basis for licensing. The location tagging feature in the OSS system is not functioning optimally because only 43 regions have a Spatial Detail Plan (RDTR); even fewer have digital RDTR. Uncertainty haunts the service provider and the permit recipients because of the lack of clarity of the bloc and plot designations as references for the location permit. Several entrepreneurs, regional governments, banks, or notaries are not yet convinced about the legal position of OSS products, especially business licenses and production or commercial ones. Therefore, in the new licensing law, spatial planning must have a clear and clean status, as an absolute requirement in any land-based permit, or have environmental externalities.

Kompas

Robert Endi Jaweng

At the beginning of his second term, the President must re-arrange the direction of the structural reform. It is obvious that incremental steps are not enough, let alone are patchworks. We need a fundamental and comprehensive breakthrough for an agile and superior Indonesia. It starts from weaving the fragmentation and disharmony of all lines of the investment ecosystem today. The figure of the leader of change, a President without burden, must be present even stronger.

Robert Endi Jaweng, Executive Director of the Regional Autonomy Implementation Monitoring Committee (KPPOD) Jakarta