Licensing authority without licensing power: Regional business licensing law and investment regulation in Indonesia, with a case study of nickel governance in Sulawesi

Fawaz Muhammad Khaer ()
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Fawaz Muhammad Khaer: School of Social and Political Science, The University of Edinburgh, United Kingdom.

Indonesian Journal of Law, Governance, and Regulation, 2026, vol. 1, issue 2, 26-49

Abstract: Indonesia has spent two decades reforming business licensing, moving from big-bang decentralisation to a centrally operated, risk-based online system. This article asks what that trajectory has done to the licensing authority of regional government, and with what consequences for investment regulation. Using a socio-legal design that combines doctrinal analysis of statutes, government regulations and court decisions with an embedded case study of nickel licensing in Sulawesi between 2020 and 2026, it argues that Indonesian licensing law now exhibits a three-way decoupling: authority has moved to the centre, administrative capacity has not followed it, and legal accountability for licensed harm has remained local. The evidence includes the 2024 work-plan approval bottleneck that drove the world's largest nickel producer to import ore; a 2025 district court judgment holding a governor and a regent liable for pollution they cannot lawfully license; and a 39% fall in Morowali's revenue share between 2023 and 2025, during its fastest period of output growth. Comparison with revocation episodes in Raja Ampat and Wawonii shows revocation operating as a political instrument rather than a legal regime. The article proposes an authority–capacity–accountability alignment test for evaluating licensing reform in decentralised states.

Keywords: business licensing; regional autonomy; investment law; risk-based regulation; nickel downstreaming; legal certainty; Indonesia (search for similar items in EconPapers)
Date: 2026
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DOI: 10.55942/ijlgr.v1i2.2217

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