The Importance of Decentralization in Investment Approval and Licensing

Oct 13, 2025 by magicalceylontours.com 110 views

The Authority to Grant Approval and Licensing of Investment According to Law No. 25 of 2007 Concerning Investment

Delegation of Authority in Investment Approval and Licensing in Indonesia: Between Centralization and Decentralization

Law Number 25 of 2007 concerning Investment (UUPM) is a regulation governing investment in Indonesia. The regulation has undergone significant changes over the years, with a shift from a centralized to a decentralized system of authority in granting approval and licensing of investment. This article aims to discuss the delegation of authority in investment approval and licensing in Indonesia, focusing on the implementation of the UUPM in the Province of Nanggroe Aceh Darussalam (NAD).

The Evolution of Investment Regulation in Indonesia

Prior to the enactment of the UUPM, Law Number 22 of 1999 concerning Regional Government (amended several times) had established decentralization of authority in giving approval and licensing investment. However, Presidential Decree No. 29 of 2004 concerning Implementation of Investment in the context of foreign investment and domestic investment through a one-stop service system, converted the system to be centralistic. The UUPM then returned the authority to the regional government by implementing the One Stop Integrated Service System (PTSP) based on the Minister of Home Affairs Regulation No. 24 of 2006 concerning Guidelines for the Implementation of One Door Integrated Services.

Investment Authority: Decentralization and Centralization

Article 30 of the UUPM explicitly states that the authority to organize investment is in the hands of local governments. This is a manifestation of the government's efforts to bring services closer to the community. The decentralization system allows local governments to provide approval and licensing investment, both for domestic and foreign investment. On the other hand, the centralized system emphasizes all investment processes to the central government, starting from the promotion, determination of policies, approval and licensing, to change.

The Role of PTSP in Investment Approval and Licensing

The UUPM also regulates PTSP in Article 1 number (10). PTSP is an integrated service that integrates various licensing and non-licensing processes, both delegated and delegated. This process starts from the application stage until the issuance of licensing documents, everything is carried out in one place. The implementation of PTSP aims to simplify the investment process and reduce the time required for approval and licensing.

Implementation in Aceh: Challenges and Problems

Although the Capital Affairs has returned the authority to the region, the reality in NAD Province shows that the system applied still depends on Presidential Decree Number 29 of 2004. This means that NAD Province still applies a centralistic system, which has the potential to hamper investment growth. The centralistic mechanism that is still applied is one of the obstacles in increasing investment in the region.

Conclusion:

The implementation of the UUPM in NAD Province is still not fully running optimally. The centralistic mechanism that is still applied is one of the obstacles in increasing investment in the region. Efforts to optimize PTSP and apply decentralization fully need to be done to increase legal certainty and encourage regional economic growth.

Suggestion:

Local governments in NAD Province need to conduct socialization and education to investors related to the regulations and licensing processes in force.
Increasing the capacity and quality of human resources in the Regional PTSP needs to be done to provide effective and efficient services.
Evaluation and reform of licensing systems in NAD Province must be carried out regularly to adjust to the dynamics of investment and regional needs.

By carrying out these efforts, it is expected that the implementation of the UUPM in NAD Province can run more effectively and contribute to increasing investment and regional economic growth.

The Importance of Decentralization in Investment Approval and Licensing

Decentralization is essential in investment approval and licensing as it allows local governments to provide services closer to the community. The decentralization system also enables local governments to respond quickly to the needs of investors and to adapt to the dynamics of the regional economy. In addition, decentralization can help to reduce the time required for approval and licensing, making it easier for investors to start their businesses.

The Role of PTSP in Simplifying Investment Approval and Licensing

PTSP plays a crucial role in simplifying investment approval and licensing by integrating various licensing and non-licensing processes. The implementation of PTSP aims to reduce the time required for approval and licensing, making it easier for investors to start their businesses. PTSP also provides a one-stop service for investors, making it easier for them to navigate the investment process.

Challenges and Problems in Implementing Decentralization and PTSP

Despite the importance of decentralization and PTSP, there are several challenges and problems that need to be addressed. One of the main challenges is the lack of capacity and quality of human resources in the Regional PTSP. This can lead to inefficient and ineffective services, making it difficult for investors to navigate the investment process. Another challenge is the need for regular evaluation and reform of licensing systems to adjust to the dynamics of investment and regional needs.

Conclusion:

In conclusion, the implementation of the UUPM in NAD Province is still not fully running optimally. The centralistic mechanism that is still applied is one of the obstacles in increasing investment in the region. Efforts to optimize PTSP and apply decentralization fully need to be done to increase legal certainty and encourage regional economic growth. By carrying out these efforts, it is expected that the implementation of the UUPM in NAD Province can run more effectively and contribute to increasing investment and regional economic growth.

Recommendations:

Based on the analysis of the challenges and problems in implementing decentralization and PTSP, the following recommendations are made:

Local governments in NAD Province need to conduct socialization and education to investors related to the regulations and licensing processes in force.
Increasing the capacity and quality of human resources in the Regional PTSP needs to be done to provide effective and efficient services.
Evaluation and reform of licensing systems in NAD Province must be carried out regularly to adjust to the dynamics of investment and regional needs.

By carrying out these recommendations, it is expected that the implementation of the UUPM in NAD Province can run more effectively and contribute to increasing investment and regional economic growth.
Frequently Asked Questions (FAQs) on the Authority to Grant Approval and Licensing of Investment According to Law No. 25 of 2007 Concerning Investment

Q: What is the purpose of Law No. 25 of 2007 concerning Investment (UUPM)?

A: The purpose of the UUPM is to regulate investment in Indonesia, including the authority to grant approval and licensing of investment.

Q: What is the difference between decentralization and centralization in investment approval and licensing?

A: Decentralization refers to the authority to grant approval and licensing of investment being in the hands of local governments, while centralization refers to the authority being in the hands of the central government.

Q: What is PTSP and how does it relate to investment approval and licensing?

A: PTSP (One Stop Integrated Service System) is an integrated service that integrates various licensing and non-licensing processes, both delegated and delegated. It aims to simplify the investment process and reduce the time required for approval and licensing.

Q: What are the benefits of decentralization in investment approval and licensing?

A: The benefits of decentralization include providing services closer to the community, enabling local governments to respond quickly to the needs of investors, and adapting to the dynamics of the regional economy.

Q: What are the challenges and problems in implementing decentralization and PTSP?

A: The challenges and problems include the lack of capacity and quality of human resources in the Regional PTSP, inefficient and ineffective services, and the need for regular evaluation and reform of licensing systems.

Q: What are the recommendations for improving the implementation of decentralization and PTSP?

A: The recommendations include conducting socialization and education to investors related to the regulations and licensing processes in force, increasing the capacity and quality of human resources in the Regional PTSP, and evaluating and reforming licensing systems regularly.

Q: How can investors navigate the investment process in NAD Province?

A: Investors can navigate the investment process in NAD Province by contacting the Regional PTSP, which provides a one-stop service for investors. They can also seek guidance from local government officials and other stakeholders.

Q: What are the consequences of not implementing decentralization and PTSP effectively?

A: The consequences of not implementing decentralization and PTSP effectively include inefficient and ineffective services, reduced investment, and decreased regional economic growth.

Q: How can local governments in NAD Province improve the implementation of decentralization and PTSP?

A: Local governments in NAD Province can improve the implementation of decentralization and PTSP by increasing the capacity and quality of human resources in the Regional PTSP, conducting regular evaluation and reform of licensing systems, and providing effective and efficient services to investors.

Q: What is the role of the central government in implementing decentralization and PTSP?

A: The central government plays a crucial role in implementing decentralization and PTSP by providing guidance and support to local governments, evaluating and reforming licensing systems, and ensuring that the implementation of decentralization and PTSP is effective and efficient.

Q: How can investors contribute to the improvement of the investment process in NAD Province?

A: Investors can contribute to the improvement of the investment process in NAD Province by providing feedback and suggestions to local government officials and other stakeholders, participating in socialization and education programs, and seeking guidance from local government officials and other stakeholders.

Q: What are the benefits of effective implementation of decentralization and PTSP?

A: The benefits of effective implementation of decentralization and PTSP include increased investment, regional economic growth, and improved services to investors.

Q: How can local governments in NAD Province measure the effectiveness of decentralization and PTSP?

A: Local governments in NAD Province can measure the effectiveness of decentralization and PTSP by evaluating the time required for approval and licensing, the number of investors served, and the level of satisfaction among investors.

Q: What are the challenges and problems in measuring the effectiveness of decentralization and PTSP?

A: The challenges and problems in measuring the effectiveness of decentralization and PTSP include the lack of data and information, inefficient and ineffective services, and the need for regular evaluation and reform of licensing systems.

Q: How can local governments in NAD Province address the challenges and problems in measuring the effectiveness of decentralization and PTSP?

A: Local governments in NAD Province can address the challenges and problems in measuring the effectiveness of decentralization and PTSP by increasing the capacity and quality of human resources in the Regional PTSP, conducting regular evaluation and reform of licensing systems, and providing effective and efficient services to investors.