Regulation Update
Licensing Procedures and Business Facilities for Telecommunication Networks

Bayu Aditya, MUC Attorney at Law | Friday, 11 February 2022

Licensing Procedures and Business Facilities for Telecommunication Networks
Ilustrasi kemudahan dan fasilitas percepatan jaringan telekomunikasi (Photo: Troy Squillaci/Pexels)

Technology is part of a civilization that evolves from time to time. In the current context, digitalization is the new face of the industrial revolution which not only cuts distance and time but also tears down barriers to human interaction across countries and even continents.

The telecommunications industry is one of the sectors as well as the most vital factor in accelerating digitization in almost all areas of life. Especially in the current prolonged pandemic, information technology seems to be a new basic human need to exist—besides clothing, food, and housing.

As a result, the ease of communicating becomes the demands of the times. To answer these basic demands, the Government of Indonesia facilitates investment in the telecommunications industry for domestic and foreign investors.

In addition to developing the Online Single Submission (OSS) as a one-stop integrated service system, the Government of Indonesia also provides various ease of doing business through the Job Creation Law. One of them is to abolish restrictions on foreign investors' investment in the telecommunications industry. In other words, foreign businesses can control the telecommunications business in Indonesia up to 100%. The flexibility to invest is expected to accelerate the expansion of telecommunication networks to remote and eastern parts of Indonesia, with more affordable telephone and internet rates.

Investment Stages

In principle, starting a telecommunications business in Indonesia is almost the same as investing in other business fields. Since 2018, all investments in Indonesia must begin with accessing the OSS system to obtain business licenses.

In recent years, the OSS system has been continuously developed and refined by taking into account various business risks that may arise in the future. OSS Risk Based Approach is the latest generation of online one-stop business service system which was developed by taking into account the different characteristics and potential risks that vary between business fields.

For low-risk business activities, for example, entrepreneurs only need to have a Business Identification Number (NIB) to be able to carry out their business activities. This is different from high-risk business activities such as the telecommunications industry, which also requires sectoral licensing to support its business activities.

There are several stages for prospective investors who want to invest in the Indonesian telecommunications industry, ranging from making articles of incorporation to getting approval from the Ministry of Law and Human Rights.

  1. Determine or adjust business goals and objectives in the telecommunications sector in accordance with the 2020 Indonesian Standard Industrial Classification (KBLI).
  2. Create a Business Identification Number (NIB) through the OSS system, by completing the company's basic data and information, as well as attaching the required documents. Typically, the NIB will be issued no later than two working days after the document requirements are complete.
  3. Furthermore, handling sectoral permits related to the company's operational and/or commercial activities through the OSS system. For example, for a telecommunications network business that requires submarine cable installation, the required permits are Approval of the Suitability of Marine Space Utilization Activities (PKKPRL) from the Ministry of Marine Affairs and Fisheries (KKP). Document requirements for obtaining the permit include: 

          - Document of marine building and installation plan;

          - Document of marine space utilization information document;

          - Document data on the current condition of the location and its surroundings (ecosystem, hydrograph, and oceanography); and

           - Coordinate point file.

  4. All of the documents are uploaded to the OSS system to be verified by the KKP. If the requirements are declared complete, the PKKPRL will be issued and the submarine cable installation permits can be continued.
  5. Prospective investors must also apply for a business permit to the Ministry of Communication and Information (Kemenkominfo) via by uploading several documents on plans for the operation of telecommunications networks.
  6. The next process is the commissioning of the telecommunications network by the Ministry of Communication and Information.
  7. Finally, after being declared to have passed the commissioning, the company must upload all documents that have been declared complete into the OSS system for system verification and printing of permits.

Business Facilities

To encourage investment in the telecommunications sector, the Government of Indonesia provides various facilities or incentives. Among other things, exemption from import duties for capital goods and raw materials has not been produced or has been produced domestically but the supply is not sufficient for industrial needs.

The import duty exemption facility is valid for two years specifically for the import of the following commodities:

  • capital goods such as machinery and equipment;
  • goods and raw materials for the needs of two years of production capacity; or
  • goods and raw materials for the needs of four years of production capacity, with the condition of attaching a surveyor report above 30%.

*The Writer, Bayu Aditya, Associate at MUC Attorney at Law

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