Recent changes to Indonesia’s licensing system, as outlined in Law No. 6/2023, have shifted the approach from a traditional license-based framework to a risk-based licensing model. This transition aims to simplify the often complicated licensing process that has historically posed challenges for businesses, particularly in sectors like energy where regulatory compliance can be complex and time-consuming.
Erly Aristo from Universitas Surabaya, the lead author of a study published in ‘DiH’, highlights that the new system requires licenses only for businesses deemed to have certain risk levels. This change is designed to enhance convenience for entrepreneurs and businesses, potentially leading to a more vibrant market environment. However, Aristo warns that “the application of uncertain risk standards may injure legal certainty in society.” This concern is particularly pertinent for the energy sector, where regulatory clarity is crucial for investment decisions and operational planning.
The shift to a risk-based licensing system presents both challenges and opportunities for the energy sector. On one hand, the reduction in bureaucratic hurdles could accelerate project development and attract foreign investment, as companies may find it easier to navigate the regulatory landscape. On the other hand, the ambiguity surrounding risk standards could lead to inconsistencies in how regulations are applied, potentially creating confusion and legal disputes.
For energy companies, this means that while the pathway to obtaining necessary licenses may become more streamlined, there is a need for vigilance. Companies must stay informed about the evolving criteria that determine risk levels and engage proactively with regulatory bodies to ensure compliance and mitigate legal risks.
As the Indonesian government implements this new risk-based licensing system, it is vital for stakeholders in the energy sector to monitor its development closely. Engaging in dialogue with regulators and participating in discussions about risk criteria will be essential to harness the benefits of this reform while safeguarding legal certainty.
The study by Aristo calls for careful implementation of the risk-based licensing system to avoid potential pitfalls. As the energy sector navigates this transition, the balance between convenience and legal certainty will be critical for fostering a stable and attractive business environment.
