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Investment Legal Clarity Through Legalization of PERPPU CK as Law

The House of Representatives (DPR-RI) has legalized the Government Regulation in Lieu of Law on Job Creation (Perppu CK) as Law at the 19th Plenary Meeting Period IV on Tuesday, March 21, 2023. Prior to being passed into law, Perppu CK was issued to implement the mandate under Decision of the Constitutional Court No. 91/PUU-XVII/2020 on Law number 11 of 2020 concerning Job Creation (UUCK).

The urgency of the legalization of Perppu CK as Law is to create legal clarity for investment activities amid various economic and geopolitical challenges caused by global dynamics and national demand. In this article, we will delve further into the differences between the current Perppu CK and UUCK, and the impact of its new legalization on the investment climate.

Perppu CK has become effective since its issuance date on December 30, 2022. There are several transitional consequences of the revocation of UUCK through Perppu CK. However, even if there have been several changes to the provisions contained under Perppu CK, the current implementing regulations for UUCK will remain valid as they do not contravene any of the provisions stipulated in Perppu CK.

In general, Perppu CK and UUCK hold the same strategic policies in the areas of investment ecosystem and business activities, manpower, acceleration of national strategic projects and central government investment, protection and empowerment of micro-, small-, and medium-scale enterprises, and implementation of government administration. However, we will only highlight strategic policies for investment ecosystems pertaining to the following matters:

  1. Application of Risk-Based Business Licensing
  2. Simplification of Basic Requirements for Business Licensing

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Application of Risk-Based Business Licensing

The application of risk-based business licensing was first introduced under UUCK with no prior laws governing this matter. Further, Perppu CK makes no changes to these provisions, but again exists to provide legal certainty so that the application of business licensing can run smoothly.

The Ministry of Investment as the Ministry in charge of Risk-Based Business Licensing explained that the issuance of Perppu CK is necessary to accommodate the increase in economic growth, and to sustain a positive impact on the investment growth, particularly foreign investment, which on average has 24.9% growth after the issuance of UUCK.

Additionally, with the existence of Perppu CK, the Ministry of Investment continues to improve the integrated business licensing system known as the Online Single Submission (OSS) System by further integrating applications for Environmental Impact Assessment (EIA) Permit (Amdalnet), Building Management Information System (SIMBG) to the OSS system.

Simplification of Basic Requirements for Business Licensing

Both Perppu CK and UUCK emphasize the simplification of basic requirements for business licensing covering the following areas:

  1. Conformity of space utilization activities
  2. Environmental approvals; and
  3. Building approvals and functional worthiness certificates

Although most of the provisions remain the same as promulgated under UUCK, there are several differences introduced under Perppu CK, most of which clarify the general terms used in UUCK, and some amendments to the sentence structure without changing the substance of the provision.

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In conclusion, the legalization of Perppu CK as Law ultimately aims to fulfill the mandate to revise UUCK, and also to create legal clarity and certainty in the business activities and investment. Perppu CK is issued to adjust several provisions under UUCK without eliminating the aim of supporting and improving the investment climate in Indonesia to boost economic growth. In general, the adjustments featured under Perppu CK are mostly related to the use of terms and article references as well as the rearrangement of sentences. Although there have been a few revisions to the provisions under UUCK, the main idea of the regulations remains the same.

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ET Consultant is a Business Consultant and Legal Consultant Expert that provides support for local and multinational clients to start and manage their business operations in Indonesia. ET Consultant specializes in Business Incorporation, Licensing & Legal, Accounting & Taxes, Immigration, and Advisory Services.

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