Interactive Dashboard: Indonesian Agricultural Law

The Paradigm Shift: Risk-Based Business Licensing

Government Regulation No. 28 of 2025 ("PP 28/2025") fundamentally restructures Indonesia's business licensing process. It moves away from a complex, fragmented system to a centralized, streamlined approach based on risk assessment. This section explains the core principles of this new framework, which is designed to improve the ease of doing business by focusing government oversight on high-risk activities while simplifying entry for low-risk ventures.

Centralization via OSS

All licensing is now processed through the Online Single Submission (OSS) system, a single electronic gateway that integrates various ministries and regional agencies, eliminating bureaucratic silos and standardizing procedures for all business actors (Pasal 4(4), PP 28/2025).

Risk-Based Approach (RBA)

The government analyzes business activities to classify them into four risk tiers based on hazard and potential impact. The licensing requirements are directly determined by this risk level, focusing oversight on high-risk sectors (Pasal 126-127, PP 28/2025).

Interactive: The Four Tiers of Risk

Click on a risk level below to see the required licensing instrument and its key compliance obligation. This interactive diagram illustrates the core of the Risk-Based Approach.

Low Risk

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Medium-Low Risk

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Medium-High Risk

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High Risk

Prerequisites: The Basic Requirements

Before applying for a primary business license (PB), all businesses must fulfill foundational legalities known as "Basic Requirements" (*Persyaratan Dasar*). These ensure compliance with national spatial, environmental, and building regulations.

1. Spatial Utilization Conformity (KKPR)

Replacing the old Location Permit, KKPR confirms that the business location aligns with the government's spatial plans (RDTR/RTR). An automatic "Confirmation" is issued if the area has a detailed plan integrated with OSS; otherwise, a manual "Approval" process is required (Pasal 15-26, PP 28/2025).

2. Environmental Approval (PL)

Every business needs an Environmental Approval based on its potential impact. The OSS system determines if an AMDAL (high impact), UKL-UPL (moderate impact), or SPPL (low impact) is needed. For low-risk businesses, the NIB also serves as the SPPL (Pasal 78-105, PP 28/2025).

3. Building Approvals (PBG & SLF)

If construction is involved (e.g., processing plants, warehouses), a Building Approval (PBG) is required before construction, and a Certificate of Worthiness (SLF) is needed after, to certify safety and fitness for use (Pasal 106-123, PP 28/2025).

Agricultural Sector Licensing Framework

The agricultural sector, under Pasal 141 of PP 28/2025, includes Plantations, Food Crops, Horticulture, and Livestock. This section provides an interactive tool to explore the specific risk levels for various business activities within these sub-sectors, as identified by their KBLI code.

Filter by Agricultural Sub-Sector:

KBLI	Business Activity	Business Scale	Risk Level

Sector Deep Dive: Key Laws & Regulations

While PP 28/2025 governs the *procedure* of licensing, the *substantive* obligations for agricultural businesses are rooted in foundational sectoral laws. The Cipta Kerja Law amended many of these, but their core principles remain. This section outlines the key governing laws for each sub-sector.

🌿 Plantations (UU No. 39/2014)

Governs obligations like community plantation development (*plasma*) and land use rights (HGU). These requirements are now the "standards" to be met for obtaining a license via the OSS system.

🥕 Horticulture (UU No. 13/2010)

Regulates seed usage, cultivation techniques, and post-harvest handling. Technical standards are detailed in ministerial regulations, which serve as the benchmark for compliance under the new system.

🐄 Livestock & Animal Health (UU No. 18/2009)

Sets standards for animal feed, veterinary protocols, and disease control. These health and safety standards form the basis for the Standard Certificate or Permit required for livestock businesses.

🌍 Sustainable Agriculture (UU No. 22/2019 & UU No. 41/2009)

These laws mandate environmentally sound practices and protect prime agricultural land from conversion. Compliance is enforced during the initial spatial planning (KKPR) and environmental approval stages of the licensing process.

Foreign Investment & International Trade

The Cipta Kerja reforms significantly liberalized Indonesia's foreign investment regime and clarified the separate regulatory process required for export-import activities.

Foreign Ownership Liberalization

The previous "Negative Investment List" (DNI) with strict foreign ownership caps has been replaced. Most agricultural sectors are now open to 100% foreign ownership. Foreign investment must be through a PT PMA with a minimum investment of > IDR 10 billion per business line.

Export-Import Regime

A business license (PB) from the OSS system does **not** grant the right to export or import. These activities are governed by a separate system and authority (Pasal 135(2), PP 28/2025).

Governing System

All trade licensing is managed through the **Indonesia National Single Window (INSW)** system, not the OSS.

Regulatory Authority

The Ministry of Trade is the primary authority, issuing specific regulations and quotas for agricultural commodities based on the national "commodity balance" (*neraca komoditas*).

Ease of Doing Business: Theory vs. Practice

The new framework was designed to improve Indonesia's business climate. While theoretically sound, practical implementation presents both opportunities and challenges.

Theoretical Improvements

**Simplification:** Risk-based approach reduces entry barriers for low and medium-risk businesses.
**Centralization:** The OSS system provides a single, standardized gateway for all applications.
**Transparency:** Codified requirements and timelines increase predictability for investors.

Practical Challenges

**System Integration:** Technical glitches between the central OSS and regional agency systems cause delays.
**Regional Capacity:** Lack of resources and detailed spatial plans (RDTR) at the local level creates bottlenecks.
**Compliance Burden:** The shift to post-audit supervision increases ongoing operational risk and the need for robust internal compliance.

Supervision and Administrative Sanctions

The new framework shifts the regulatory focus from pre-approval to post-operational compliance. This means businesses face a greater risk of sanctions if they fail to adhere to standards during supervision.

Supervisory Framework (Pasal 265, PP 28/2025)

Supervision is conducted by the Minister of Agriculture, Governors, or Regents/Mayors and is coordinated through the OSS system. It occurs in two primary ways:

Routine Supervision: Involves reviewing mandatory reports (like the LKPM) and conducting scheduled field inspections.
Incidental Supervision: Triggered by specific events, such as public complaints or intelligence suggesting non-compliance.

Based on supervision, businesses are given a compliance profile (e.g., "good," "poor"), which influences the frequency of future inspections.

Typology of Sanctions (Pasal 363-365, PP 28/2025)

PP 28/2025 provides authorities with a range of administrative sanctions that can be applied sequentially or, in serious cases, immediately. The severity depends on the nature of the violation.

For Primary Business License (PB) Violations

Written warnings
Administrative fines
Temporary suspension of activities
Product recall
Revocation of license
Closure of business

For Supporting License (PB UMKU) Violations

Includes all PB sanctions
Plus, potential for **destruction** of non-compliant products (e.g., unsafe inputs, contaminated produce).

Conclusion & Strategic Recommendations

The Cipta Kerja framework, operationalized by PP 28/2025, represents a major reform promising greater speed and predictability in market entry but imposes a greater burden of continuous, self-monitored compliance on businesses.

Strategic Considerations for Investors

Compliance as a Core Function: Treat compliance as an ongoing operational process, not a one-time hurdle. Invest in robust internal monitoring systems.
Navigate Regulatory Layers: Synthesize requirements from PP 28/2025, amended sectoral laws, and specific ministerial regulations to ensure full compliance.
Proactive Engagement: Maintain open communication with both central and regional authorities to navigate verification and supervision efficiently.

Potential Areas of Legal Uncertainty

The technical details in forthcoming Minister of Agriculture regulations.
The practical efficacy of OSS integration with regional government systems.
Judicial interpretation of which legacy regulations remain in force.

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