Indonesia’s Agricultural Investment Gateway: An Omnibus Law and OSS RBA Blueprint

The New Compass for Foreign Direct Investment in Indonesian Agri-Business

I. Executive Summary and Strategic Synthesis: Unlocking the New Paradigm

The Indonesian Job Creation Law (Omnibus Law) and its implementing regulations represent a fundamental restructuring of the Foreign Direct Investment (FDI) environment, particularly within the crucial agricultural sector. This legislative measure aims to significantly streamline processes and remove conflicting regulatory barriers that previously hindered investment, with the core objectives of job creation and accelerating national economic recovery [User Query]. The United Nations Conference on Trade and Development (UNCTAD) confirms that the law introduced broad amendments covering ownership and control (entry and establishment), operational conditions (treatment and operation), and investment promotion through incentives and facilitation.1

This philosophical shift centers on the Online Single Submission Risk-Based Approach (OSS RBA) system. This platform moves away from bureaucratic licensing towards a dynamic, risk-assessment model.1 The OSS RBA is designed to provide unprecedented transparency regarding specific licensing requirements, maximum foreign ownership percentages (DPI), and estimated timelines for business commencement [User Query]. While the sector has historically been dominated by palm oil investment (53.7% of agricultural FDI from Singapore and 15.8% from Malaysia) 3, the new framework provides the strategic leverage needed to diversify capital towards high-value crops and advanced agri-technology.

For international investors, success relies on integrating the operational efficiency provided by OSS RBA with robust Environmental, Social, and Governance (ESG) management. Although the law facilitates procedures, responsible investors must strategically address the social and environmental implications often cited by critics.4 Our expertise ensures that your entry is not only efficient but also sustainable and legally resilient.

II. The Legal and Regulatory Architecture of Reform

II.1. The Foundation of Reform: The Omnibus Law (Job Creation Law)

Law No. 11 of 2020 (UU Cipta Kerja) is a landmark piece of legislation enacted in November 2020. Its primary purpose is to address the endemic regulatory complexity and conflicting legislation that historically deterred FDI into Indonesia.4 The law specifically targets land-intensive sectors, including agriculture, by removing bureaucratic obstacles to foster a more attractive and efficient business environment.6

II.2. The Pivotal Regulation: Government Regulation No. 5 of 2021 (GR 5/2021)

To operationalize the Omnibus Law, the government issued GR 5/2021 on April 1, 2021. This regulation establishes the mandatory Risk-Based Business Licensing (RBL) framework 2, superseding previous licensing regulations (such as GR 24/2018).7 It expands the RBL scope to cover 16 key sectors, including Agriculture, Environment, Forestry, and Maritime Affairs.2 The regulation centralizes the authority for setting standards and conducting detailed risk analysis with the Central Government 7, ensuring uniform application of the OSS RBA system across the Indonesian archipelago and minimizing local regulatory friction for foreign investors.

II.3. Clarity on Ownership: Presidential Regulation No. 10 of 2021 (PR 10/2021) and the Positive Investment List (DPI)

Presidential Regulation No. 10 of 2021 (PR 10/2021) is a crucial step that repealed numerous prior restrictions on foreign ownership, significantly expanding FDI opportunities.8 The regulation classifies business sectors into five clear categories that determine foreign investor access.9 These include: Reserved (Closed) sectors, sectors reserved for Cooperatives/SMEs, sectors fully open to investors, and Priority Sectors that qualify for attractive incentives.9

While sectors “partially open to foreign investors” are generally capped at a 49% foreign ownership limit 9, foreign investors (PMA) must consult the specific KBLI code for their target agricultural activity in the PR 10/2021 annexes (or the subsequent amendment PR 49/2021 11) to confirm the exact maximum DPI.9

The two frameworks work in tandem: PR 10/2021 defines who can own what percentage (DPI), and OSS RBA (under GR 5/2021) defines how that activity is licensed based on operational risk. For example, a large-scale agricultural activity may be open to 100% foreign ownership (PR 10/2021), yet be classified as “High Risk” under RBA due to its significant environmental impact. This requires rigorous, pre-operational verification by the Central Government 1, demonstrating that facilitation is paired with necessary scrutiny for large-scale projects.

III. Operational Transparency: The Online Single Submission Risk-Based Approach (OSS RBA)

The OSS RBA is the primary platform that implements the risk-based licensing methodology.1 It is designed to efficiently grant the Business Identification Number (NIB) and necessary operational licenses, delivering speed and transparency for investors.

III.1. The Risk-Based Licensing Methodology

The system evaluates commercial activities based on the potential scale of hazards, classifying them into four tiers: Low Risk, Medium-Low Risk, Medium-High Risk, and High Risk.2 Risk assessment is conducted by the Central Government using the Indonesian Standard Industrial Classification (KBLI 2020), which must precisely align with the company’s stated purpose in its articles of association.1

III.2. Licensing Requirements and Estimated Timelines

The risk level dictates the requirements for commencing commercial activity and directly influences the estimated timeline for operations:

• Low and Medium-Low Risk: Businesses in these categories can complete licensing via OSS RBA quickly.1 Low-Risk activities require only the Business Identification Number (NIB) and can commence operations immediately upon issuance.1 This translates to a near-instantaneous start-up time once basic documentation is complete. Medium-Low Risk activities require an NIB plus a standard certificate, allowing operations to begin subject to subsequent auditing.
• Medium-High and High Risk: These activities require an NIB plus a full business license. The law mandates pre-operational verification by the relevant Ministry, Agency, or Local Government to ensure all standards and requirements are met before operations can begin.1 This extends the timeline but provides regulatory certainty for complex projects. Given its environmental and resource impact, large-scale agricultural investment (such as dominant palm oil plantations) is likely classified as Medium-High or High Risk.1

The table below provides a concise overview of the operational requirements under the OSS RBA system:

Table I: OSS RBA System: Risk Classification and Operational Licensing Requirements

IV. Capturing Opportunity: Incentives and Foreign Ownership Dynamics

IV.1. Incentives for Priority Sectors

Investors targeting the Priority Business Sectors, defined under PR 10/2021, qualify for a comprehensive array of incentives designed to stimulate growth.10 These incentives are categorized as fiscal and non-fiscal. Fiscal incentives include attractive Tax Holidays, import duty exemptions, and generous tax allowances.10

Non-fiscal incentives are largely centralized and streamlined through the OSS RBA platform, which is administered by the Ministry of Investment/Investment Coordinating Board (BKPM).12 These include facilitated business licensing, provision of essential supporting infrastructure, guaranteed availability of energy and raw materials, and crucial Immigration and Employment (work permit) facilities.10 The centralization within OSS RBA ensures that these non-fiscal benefits are transparent and systematically delivered, mitigating the risk of delays caused by local administrative discretion. Special facilities are also offered for projects that include partnerships with Cooperatives (Koperasi) and Small- and Medium-sized Enterprises (SMEs).12

IV.2. Foreign Ownership Limitations (DPI) in Agriculture

The law mandates that the OSS RBA system must provide clarity on the maximum foreign ownership limits across various sectors [User Query]. While agriculture and agri-food activities are recognized as priority areas eligible for tax benefits 9, the general rule for partially open sectors sets the foreign ownership ceiling at 49%.9 However, foreign investors must directly consult the detailed annexes of Presidential Regulation No. 10 of 2021 (and its subsequent amendment PR 49/2021 11) to confirm the specific maximum DPI for their target agricultural KBLI 2020 code.9 This definitive percentage is crucial for sectors linked to national food security, where certain activities may remain partially reserved or require specific SME partnership conditions.

V. Focus on the Agricultural Sector: Trends and Strategic Opportunities

V.1. RBA Regulatory Map for Agriculture

The entire agricultural sector, encompassing plantations, livestock, and food crops, falls directly under GR 5/2021 and the Risk-Based Licensing regime.2 This structure ensures that rigorous compliance standards—such as those dictated by the Ministry of Agriculture regulations (e.g., Permentan No. 15/2021)—are strictly enforced, especially for high-risk agricultural projects requiring pre-operational verification.

V.2. Current FDI Trends and the Need for Diversification

Data from the Ministry of Investment/BKPM indicates that agricultural FDI realized between 2015 and March 2021 totaled USD 9.5 billion, representing 5.2% of the country’s total FDI.3 Critically, this investment was overwhelmingly concentrated in palm oil plantations.3 Capital predominantly originated from Singapore (53.7 percent) and Malaysia (15.8 percent) 3, with projects centered in Kalimantan and Sumatra.3 Recent data confirms continued positive FDI growth for Indonesia in Q3 2024, with Singapore and Malaysia remaining among the top contributors .

Table II: Analysis of Foreign Direct Investment in Indonesian Agriculture (2015 – March 2021)

V.3. Strategic Imperative: Technology and Diversification

The new legal framework must be leveraged strategically to guide FDI flow. The dominance of palm oil presents a prime opportunity for international investors to lead the shift towards advanced Agri-tech, modern aquaculture, and sustainable livestock farming.3 FDI is expected to introduce cutting-edge agricultural technology, boosting national productivity and promoting Indonesian products globally.3 For projects classified as “High Risk” under RBA, the introduction of modern practices—such as precision agriculture or efficient irrigation systems—can be a powerful factor in mitigating environmental risk, potentially expediting the rigorous government verification process required for final licensing.

VI. Strategic Compliance: ESG and Land Rights Due Diligence

While OSS RBA delivers bureaucratic efficiency, international investors must recognize that long-term success requires strategic compliance with ESG imperatives.

VI.1. Navigating Environmental and Social Concerns

Studies have noted that while the Omnibus Law reduces regulatory burdens, it may be perceived as “overlooking potential environmental consequences” 4 and weakening social safeguards.5 Legal challenges have been raised by civil society, citing concerns that the law restricts public participation in environmental impact assessments (AMDAL) and removes legal tools previously used to challenge harmful projects.4

VI.2. Addressing Land Rights Risks

The legislation aims to attract investment by facilitating land tenure privileges for foreign entities.4 However, this provision raises significant concerns regarding its impact on the land rights of local and indigenous communities. The potential for legal challenges (Judicial Reviews) related to claims of forced evictions and land grabs remains a tangible risk.5

Strategic Insight: An investor may secure a rapid NIB through OSS RBA for a seemingly Low-Risk project, but this efficiency does not guarantee legal or social sustainability. Projects that bypass stringent social due diligence on land tenure are vulnerable to costly, long-term legal disputes and reputational damage.5 We advise that bureaucratic efficiency be complemented by rigorous, independent ESG due diligence that goes beyond the minimum legal threshold.

VII. Strategic Roadmap for International Agricultural Investors

Based on our expert analysis of the Omnibus Law and OSS RBA framework, the following strategic roadmap is essential for achieving successful and sustainable FDI in the Indonesian agricultural sector:

VII.1. Maximize OSS RBA Efficiency

• Precision KBLI 2020 Compliance: Ensure the company’s articles of association precisely define business activities using the Indonesian Standard Industrial Classification (KBLI 2020).1 This guarantees correct risk classification and the most efficient licensing pathway (immediate NIB or streamlined pre-verification).
• Strategic Risk Targeting: Orient investment toward areas likely to be classified as Low or Medium-Low Risk—such as specialized Agri-tech services or low-impact processing—to maximize the benefit of the immediate licensing offered by the NIB.1

VII.2. Responsible Investment and Diversification Strategy

• Focus on Agri-Tech and Diversification: Leverage the available fiscal and non-fiscal incentives to direct FDI away from over-saturated areas like palm oil and into high-priority sectors such as modern aquaculture, essential food crops, and smart livestock farming. Focus on bringing in technology to boost national agricultural productivity and meet food security goals.3
• Proactive ESG Due Diligence: Implement independent assessments of environmental and social impact and land rights (ESIA/LRDD) that exceed basic local compliance requirements. This proactive measure minimizes the risk of social conflict and judicial review challenges arising from land rights disputes and lack of indigenous consent.4

VII.3. Compliance and Transparency Blueprint

• Direct DPI Verification: Foreign entities must directly consult the detailed annexes of Presidential Regulation No. 10/2021 (and its amendments) to confirm the specific maximum foreign ownership percentage (DPI) for every target KBLI code.9
• Leveraging Centralized Incentives: Partner closely with BKPM, which manages the OSS RBA 12, to systematically activate promised non-fiscal incentives, including facilitated work permits, immigration assistance, and guarantees for raw materials and infrastructure, which are now more transparent and centralized.

Works cited

1. OSS-RBA / Online Single Submission Risk-Based Approach, , https://kontrakhukum.com/en/article/getting-to-know-rba-oss/
2. Indonesia – Introduced Risk Based Business Licensing | Investment Policy Monitor, , https://investmentpolicy.unctad.org/investment-policy-monitor/measures/3713/indonesia-introduced-risk-based-business-licensing
3. News Detail Page | قطاع العلاقات الاقتصادية الدولية – دائرة التنمية الاقتصادية – أبوظبي, , https://adegstaging.atlp.ae/index.php/ar/news/696005
4. View of The Omnibus Law in Indonesia: Assessing Its Consequences on Environmental Sustainability and Land Rights – Journal of Human Security, , https://jhumansecurity.com/menuscript/index.php/jhe/article/view/105/100
5. Civil society challenges Indonesian deregulation law over rights and environment, , https://news.mongabay.com/2025/07/civil-society-challenges-indonesian-deregulation-law-over-rights-and-environment/
6. Indonesia – “Omnibus Law” on job creation has been enacted | Investment Policy Monitor, , https://investmentpolicy.unctad.org/investment-policy-monitor/measures/3567/indonesia-omnibus-law-on-job-creation-has-been-enacted
7. Indonesia’s Omnibus Law implementing regulations – Hogan Lovells, , https://www.hoganlovells.com/en/publications/indonesias-omnibus-law-implementing-regulations_1
8. Indonesia’s New Investment List Increases FDI Opportunities for Foreign Investors | Herbert Smith Freehills Kramer | Global law firm, , https://www.hsfkramer.com/notes/indonesia/2021-03/indonesias-new-investment-list-increases-fdi-opportunities-for-foreign-investors
9. Indonesia – Impacts of the Omnibus Law on Foreign … – DS Avocats, , https://www.dsavocats.com/mailing/Indonesia-Impacts-Omnibus-Law-on-foreign-investments.pdf
10. Indonesia’s omnibus law: A foreign investors’ guide to the positive investment list | Vistra, , https://www.vistra.com/insights/indonesias-omnibus-law-foreign-investors-guide-positive-investment-list
11. Indonesia Investment Realization Q-3 2024 – Jakarta Investment Centre, , https://invest.jakarta.go.id/news/192/indonesia-investment-realization-q-3-2024
12. OSS RBA: A new guideline for business registration in Indonesia …, , https://www.vistra.com/insights/oss-rba-new-guideline-business-registration-indonesia