Supervision and Compliance in Business Licensing

Introduction

Supervision and compliance are crucial aspects of the Perizinan Berusaha Berbasis Risiko (Risk Based Business Licensing) framework introduced under Peraturan Pemerintah Republik Indonesia Nomor 5 Tahun 2021. This regulation requires businesses to adhere to various legal and operational standards based on their risk level, with a strong focus on ensuring that businesses remain compliant throughout their operational lifecycle. The supervision and compliance mechanisms established under this framework are designed to monitor, evaluate, and enforce adherence to regulations by both business actors and regulatory bodies.

Key Elements of Supervision and Compliance

Supervision within the Perizinan Berusaha framework focuses on monitoring business activities to ensure compliance with the licensing requirements issued under the risk-based model. This includes verifying that businesses maintain operational standards, adhere to safety and environmental regulations, and fulfill any additional obligations tied to their specific risk level.

1. Regulatory Oversight

Article 17 of PP No. 5/2021 outlines the responsibility of the government in overseeing business activities. This includes the Pemerintah Pusat (Central Government), Pemerintah Daerah (Local Government), and specific ministries or regulatory bodies depending on the sector. Supervision is tailored to the risk classification of the business, with higher-risk businesses subjected to stricter scrutiny and more frequent inspections.

• Low-risk businesses: Supervision is relatively minimal, as these businesses only require a Nomor Induk Berusaha (NIB) and are considered to pose little threat to public health or safety.
• Medium-risk businesses: These businesses are subject to ongoing verification processes to ensure compliance with standards, as indicated by the issuance of a Sertifikat Standar.
• High-risk businesses: The most stringent supervision applies here, with the need for an Izin (formal license) and regular government inspections to ensure that the business meets all safety, environmental, and operational standards.

2. Verification of Compliance

Verification of compliance is a critical aspect of the risk-based licensing system. For medium and high-risk businesses, compliance verification is required before businesses can proceed with operational or commercial activities. For example, in the case of medium-high risk businesses, the Sertifikat Standar is only issued after thorough verification by government agencies (Article 14, PP No. 5/2021).

Additionally, for high-risk businesses, the Izin is issued after government approval, and further inspections may be conducted to verify ongoing compliance with applicable laws and regulations (Article 15).

3. Delegated Authority for Supervision

Supervision is delegated to a variety of government bodies at different levels:

• Ministries and National Authorities: Sector-specific ministries are responsible for overseeing compliance in industries like energy, health, and the environment. Each ministry sets guidelines for compliance within its jurisdiction.
• Local Government: Gubernur (Governors), Bupati (Regents), and Wali Kota (Mayors) are tasked with supervising businesses operating within their local jurisdiction, ensuring they adhere to regional regulations (Article 22).
• Special Economic Zones (KEK) and Free Trade Zones (KPBPB): Businesses operating in KEK or KPBPB are subject to specific supervisory bodies such as the Administrator KEK or Badan Pengusahaan KPBPB, which have their own regulatory and compliance frameworks.

Monitoring Mechanisms

Article 23 emphasizes that the responsibility for monitoring businesses falls on both central and regional authorities. Monitoring is not just limited to pre-licensing verification but also extends to post-licensing activities to ensure that businesses continue to meet the standards they initially agreed upon.

1. Inspections: For high-risk businesses, regular inspections are carried out by government agencies or certified third-party professionals to ensure compliance with standards related to health, safety, and the environment.
2. Self-Reporting: Businesses are often required to submit regular reports through the OSS system to ensure ongoing compliance with the operational standards set for their specific risk category.
3. Audits: In certain cases, particularly for high-risk businesses, audits may be conducted to evaluate the business’s adherence to the required safety and environmental protocols.

Enforcement of Compliance

When businesses fail to comply with the regulations, the government has several enforcement mechanisms available, including warnings, penalties, license suspension, or revocation. Enforcement is primarily tied to the risk level of the business and the severity of non-compliance.

1. Warnings and Administrative Sanctions: For minor compliance issues, businesses may first receive warnings or administrative penalties, giving them time to rectify the situation.
2. Suspension of Licenses: If a business repeatedly fails to comply or violates significant safety or environmental standards, its license (whether an NIB, Sertifikat Standar, or Izin) may be temporarily suspended, halting all operations until compliance is restored.
3. Revocation of Licenses: In cases of severe non-compliance, particularly where public safety or environmental health is jeopardized, the government may revoke a business’s license entirely. This applies most commonly to high-risk businesses, as their operations pose the greatest potential harm (Article 14-15).

Role of Business Actors in Compliance

Businesses are not passive recipients of licensing requirements but active participants in ensuring compliance. Under the Perizinan Berusaha Berbasis Risiko framework, business actors are responsible for adhering to the following:

• Fulfilling Standards: For medium-risk businesses, the responsibility to comply with operational standards is crucial. Failure to meet these standards can lead to penalties or the suspension of licenses (Article 13).
• Self-Monitoring and Reporting: Businesses are expected to self-monitor and report any discrepancies or issues that may arise in their compliance efforts. They are also required to declare their compliance with the applicable standards before obtaining a license or certificate through the OSS system (Article 17).
• Risk Management: High-risk businesses, in particular, must actively engage in risk management practices to mitigate any potential hazards that could result from their operations. This includes implementing measures that address safety, environmental protection, and resource management.

Key Challenges in Supervision and Compliance

Although the system is designed to streamline supervision and ensure compliance, there are several challenges:

1. Technological Barriers: Not all businesses, especially those in rural areas, have access to the OSS system or the necessary technology to fully engage in the self-reporting and compliance monitoring processes.
2. Coordination Across Agencies: Effective supervision requires coordination between various national and regional agencies, which can sometimes lead to delays or gaps in enforcement.
3. Capacity Building: For businesses to fully comply with the new licensing framework, continuous capacity building is required to ensure they understand their obligations and the technologies involved in monitoring compliance.

Conclusion

Supervision and compliance in the Perizinan Berusaha Berbasis Risiko framework play a vital role in ensuring that businesses operate safely, sustainably, and within the bounds of Indonesian law. Through a combination of risk-based oversight, verification mechanisms, and enforcement tools, the government maintains control over business activities while promoting efficiency and investment. Businesses, in turn, are expected to adhere to the standards and actively participate in self-monitoring, thereby fostering a more transparent and accountable regulatory environment.

Tags: #supervision #compliance #businesslicensing #OSS #IndonesianLaw

Disclaimer: This content is AI-generated with minimal human intervention.