1. Introduction

In order to streamline environmental permit procedures and improve the business environment, the Indonesian government enacted the Sub-Decree No. 22 of 2024 on Delegation of Environmental Approval Process from Central Authorities to Provinces and Regencies/Cities to Support the Implementation of Business Permits in November 2024.
The decree aims to streamline the process of obtaining environmental approvals (Persetujuan Lingkungan) and make it easier for companies to comply with environmental regulations.

2. The Importance of Environmental Approvals

Environmental approval is an important procedure to assess the impact of business activities on the environment and ensure appropriate management and monitoring.
This approval is a prerequisite for obtaining business licenses and is the basis for companies to meet their environmental responsibilities.

3. Delegation of authority and its background

Traditionally, authority for environmental approvals was dispersed among different agencies depending on the size and location of the project, such as the central government, state governments, and local governments (counties and cities).
Anyone running a business locally can easily imagine how this situation often led to uneven workloads and procedural delays.
For example, since 2021, the central government has processed around 300 environmental impact assessments (AMDALs), while local authorities have only processed a total of around 200.
Such differences point to the need for system efficiency.

To address this challenge, Government Regulation No. 22 of 2021 on the Implementation of Environmental Protection and Management empowers the national government to delegate certain environmental approval responsibilities to state and local governments.
Decree No. 22 of 2024 sets out the procedures and requirements for the concrete implementation of this framework.

4. Main powers delegated

The new decree delegates three major environmental approval powers to local governments:

(1) Issuance of new environmental approvals
Initial approval for a new business activity will involve a review of the AMDAL, the Environmental Management and Monitoring Plan (RKL-RPL) or the Environmental Management and Monitoring Efforts (UKL-UPL), depending on the size of the project.

(2) Amendments to existing approvals
It will be possible to make amendments to existing environmental approvals without the need for a new AMDAL or UKL-UPL.

(3) Granting of technical approval
This includes approval of wastewater and emission gas quality standards, as well as technical details for the storage of hazardous waste.

These mandates also include tasks such as reviewing administrative procedures, issuing recommendations on the evaluation of environmental documentation for AMDAL and UKL-UPL, and issuing Environmental Compatibility Decisions (SKKL) and Environmental Management Commitment Approvals (PKPLH).

5. Expected Effects, Risks and Challenges

The delegation of powers is expected to streamline the environmental approval process, allowing companies to obtain required permits more quickly.
In particular, it is expected to contribute to revitalizing local economies, as it will enable local governments to respond flexibly to local characteristics and needs.
On the other hand, while the implementation of Decree-22 will decentralize environmental approval procedures and transfer more authority to local governments, this transition also brings with it risks and challenges that companies should be aware of.

(1) Variation in responses among local governments
Local governments have different levels of experience and capacity regarding environmental approvals, which can result in variations in the speed at which applications are processed and the standards that are applied.
There are large disparities in the administrative capabilities of Indonesia's provinces, regencies, and cities, and there is a risk that procedures will be delayed in some local governments due to a lack of expertise and personnel.

(2) Risk of corruption and fraud
As you all already know, corruption in local government has been a long-standing issue in Indonesia.
It has been pointed out that delegating the environmental approval process to local governments could result in an opaque permitting process in some areas.
In particular, there is a possibility that issues of inappropriate administrative intervention and bribery may arise during the approval process for AMDAL and SKKL.

(3) Inconsistencies in the interpretation and application of laws and regulations
The implementation of environmental laws and regulations should be based on guidelines from the central government, but local governments may interpret them differently in practice.
This could lead to increased uncertainty when companies operate in different regions as rules regarding environmental approval procedures are not uniform.

(4) Increased Burden on Local Governments
While authority is being transferred from the central government to local governments, if local governments do not have sufficient capacity to respond, there is a possibility that delays will occur in processing applications and confusion will arise in the approval process.
In particular, for companies attempting to launch new businesses, delays in obtaining licenses and permits will have a significant impact on their business start-up schedules, so it will be necessary to keep a close eye on future operational developments.

6. Measures that Japanese companies should take

In light of these challenges, Japanese companies operating in Indonesia are advised to take the following measures to adapt to the changes in the environmental approval process:

(1) Advance information gathering and preparation
It is important to gather detailed information about changes to the environmental approval process and analyze in advance how they will affect your business.
In particular, you should find out what procedures for environmental approvals are in place with local governments in the areas in which you operate.

(2) Collaboration with local experts
It is effective to utilize lawyers and consultants who are familiar with Indonesia's environmental laws and regulations to stay up to date on the latest trends.
Through our local experts, we can facilitate smooth negotiations with local governments and provide accurate information on the necessary documents and procedures.

(3) Building relationships with local governments
Building good relationships with local governments can help make the approval process go smoothly.
It is advisable to build trust with local government regulators through regular dialogue and exchange of views.

(4) Strengthening environmental compliance
By ensuring strict compliance with environmental regulations and taking necessary environmental measures in advance, problems during the environmental approval process can be minimized.
For example, in the creation of AMDAL and RKL-RPL, we are required to strive to meet the latest standards.

(5) Ensuring flexibility in business planning
It is important to allow some leeway into the project schedule, taking into account delays and uncertainties in environmental approval procedures.
In particular, when launching a new project, it is necessary to carefully estimate the time it will take to obtain environmental approval.

7. Summary

Indonesia's new Decree No. 22 will decentralize the environmental permit process by transferring authority over the environmental approval process from the central government to local governments.
While this is expected to speed up the process for companies to obtain environmental approvals, there are concerns that there will be variations in the response among local governments and challenges due to differences in administrative capacity.
Japanese companies are required to take appropriate environmental compliance measures while thoroughly complying with environmental regulations and strengthening relationships with local governments. It is also important to deepen cooperation with local experts and stay up to date on the latest trends in laws and regulations so that they can flexibly respond to changes in the environmental approval process.