Sustained by its diverse landscape and fertile soils, the agricultural sector in Indonesia has long been a potential sector and an important source of income for many local households and foreign investors.
Though serving as one of the pillars of Indonesian economy, it is believed that agriculture is yet to achieve its full potential. Therefore, a significant progress has been made over the years under the leadership of President Jokowi with the recent reform initiatives.
These initiatives are established with the purpose of simplifying and streamlining all business licensing processes in order to encourage more foreign investments. One of the recent business updates – Regulation 5/2019 – from the government for agriculture companies in Indonesia sees the unwavering effort of the administration: to push the ease of doing business in Indonesia to a new height.
This article elaborates the latest update of this regulation on business licensing for agriculture companies in Indonesia, and why this is the best time for you to invest in the agriculture sector.
Why Invest in Agricultural Sector in Indonesia
Indonesia is the major producer of diverse agricultural products. These agricultural products include palm oil, rubber, coffee, cocoa, cassava, tea, tropical spices and rice. Not only does this sector contribute to Indonesia’s main household income, but it also boosts the country’s export revenue and overall economy, which grows at least 5% every year.
As of the first quarter of 2018, GDP from agriculture industry in Indonesia surged to IDR 84,578 billion (USD 6.1 billion), compared to the fourth quarter of 2017 at IDR 43,801 billion (USD 3.2 billion).
In addition to the impressive growth, according to the statistics from Statista.com, the GDP growth of Indonesia’s agriculture sector will hit another 4% in 2019.
Business Licensing for Agriculture Companies in Indonesia under Regulation 5/2019
The Indonesian government has recently enacted the Regulation 5/2019 on Procedures for Business Licensing within the Agricultural Sector. This regulation was issued to optimise the process of obtaining a business license in Indonesia through the Online Single Submission (OSS), a streamlined process that is done electronically through an online platform.
The Regulation 5/2019 addresses matters that include the following:
- Business licensing classification
- Business licensing requirements
- Fees of business license application
Business License Classification
Licensing within the agricultural sector in Indonesia can be divided into two categories:
- Crops business licenses and registrations
- Plantation business licenses and registrations
- Horticultural business licenses and registrations
- Animal medicine business licenses
- Livestock business licenses and registrations
Operational or commercial licenses
- Livestock and seed import and export licenses
- Seed import and export licenses
- Food ingredients (derived from plants, animals, etc.) import and export licenses
- Pet import and export licenses
You can apply for business licenses, operational licenses or commercial licenses only when you have obtained your business identification number (Nomor Induk Berusaha – NIB).
Business Licensing Requirements
For each type of business license, commercial or operational license, there are comprehensive requirements enforced under the Regulation 5/2019. However, we are going to discuss the requirements for crop business licenses and plantation business licenses.
Plantation Business Licenses
In general, you must fulfill the following requirements to secure your plantation business licenses:
- Location permit
- Environmental license
- Forest relinquishment permit (if forestry areas are used)
- Right to cultivate (Hak Guna Usaha – HGU)
- Right to build (Hak Guna Bagunan – HGB)
- Work plan for the development of a processing business
- Statement of ownership of seed resources
- Statement of employment of experts
- Statement of ownership of production unit
Crop Business Licenses
In general, you must fulfill the following requirements to secure your crop business licenses:
- Location permit with appropriate scale on map
- AMDAL environmental impact assessment or UKL/UPL
- Work plan for the development of a crop production unit
- Statement of willingness to participate in cooperation
- Guarantee of the supply of raw material
- Statement of the implementation of food quality assurance systems
- Land procurement letter
How Cekindo Can Help Indonesia Agriculture Companies
Interested in doing business in the country’s agricultural sector? Get in touch with us today to know more about business license and business incorporation in Indonesia by filling in the form below. Or visit our offices in Jakarta, Bali and Semarang.