Next week, Indonesia's Investment Coordinating Board (BKPM) plans to launch an upgraded version of its Online Single Submission (OSS) system. The OSS system is a web-based business licensing system that aims at cutting the red tape that is involved when investors try to obtain business permits in Indonesia. Massive red tape is considered to be one of the major obstacles in Indonesia's investment climate.
The OSS system was launched in July 2018. Initially, it was run by the Coordinating Ministry of Economic Affairs because BKPM (the non-ministerial government agency that is in charge of implementing policies and service coordination for direct investment) was not ready to handle the new online system. However, on 2 January 2019 BKPM finally took over the OSS system’s operation.
The new OSS system did not come without flaws. Possibly because the system was rushed into existence, there emerged various bugs and other problems, including outdated software, weak cooperation between the central and regional governments (some local governments simply refuse to adopt the system), the inability of the system to accommodate investors who are eligible for tax holidays, and more.
Although it has not been explained yet what the upgrades are that have been done to the OSS system, BKPM Chairman Thomas Lembong said synchronization and coordination between the various government ministries and institutions - both at the central and regional level - have been improved.
The OSS system was designed with the aim to attract more investment into Indonesia. In 2018 total direct investment realization reached IDR 721.3 trillion, up 4.1 percent from investment realization one year earlier (but missing the government's investment target of IDR 765 trillion). Domestic direct investment did great, rising 25.3 percent (y/y) to IDR 328.6 trillion last year. However, foreign direct investment (FDI) fell 8.8 percent (y/y) to IDR 392.7 trillion. Most likely foreign investors prefer to wait and see ahead of the legislative and presidential elections that are scheduled for Wednesday 17 April 2019. But also the high degree of persistent global uncertainties may reduce investors' appetite.
At BKPM's annual national coordination meeting, which is scheduled for the second week of March 2019, all 560 central and regional BKPM branches will meet. At this occasion the upgraded OSS system will be launched. This event will also be joined by Indonesian President Joko Widodo.
In our January 2019 report we discussed the performance (and challenges that are faced by) Indonesia's OSS system