Vol. 5, No. 12, December 2024
E-ISSN:2723 – 6692
P-ISSN:2723– 6595
http://jiss.publikasiindonesia.id/
Journal of Indonesian Social Sciences, Vol. 5, No. 12, December 2024 3373
Implementation of Individual Company Policies in Indonesia in
the Job Creation Law
Ismi Maulidya Utami, Ima Mayasari
Universitas Indonesia, Depok, Indonesia
Email: ismimaul[email protected]
Correspondence: ismimaulidy[email protected]
*
KEYWORDS
ABSTRACT
Individual Company; MSMEs;
ease of doing business;
policy implementation;
Job Creation Law
Ease of doing business is an important indicator for Indonesia's
economic growth, especially for the Micro, Small, and Medium
Enterprises (MSMEs) sector, which accounts for the majority of GDP
and national labor absorption. The implementation of the Individual
Company policy through the Job Creation Law is one of the efforts to
strengthen this sector. This study aims to evaluate the
implementation of Individual Company policies in Indonesia,
focusing on the role of the Ministry of Law and Human Rights as a
data manager and its impact on the ease of doing business. The
method used is a descriptive qualitative approach based on the post-
positivism paradigm. Data were obtained through in-depth
interviews with relevant actors and analysis of policy documents.
The results of the study show that this policy has encouraged an
increase in the registration of Individual Companies, reaching
151,355 entities by 2024. However, the main challenges include low
adoption of digitalization, limited financial reporting capabilities,
and constraints on policy socialization. This policy is considered
effective in providing legal protection through the separation of
personal and corporate assets, but requires strengthening the
socialization and mentoring strategy of MSMEs on an ongoing basis.
Attribution-ShareAlike 4.0 International (CC BY-SA 4.0)
Introduction
Ease of Doing Business is an important indicator for economic growth, job creation, and
encouraging investment in a country. In Indonesia, the government has made efforts to improve the
ease of doing business with various policies and reforms. Several steps have been taken to improve
the ease of doing business in Indonesia, one of which is by providing legal guarantees for business
actors (Canare, 2018). Business actors in Indonesia are often known as Micro, Small and Medium
Enterprises (MSMEs) where this sector has a big role in Indonesia's economic growth and is
considered a driver of the national economy (Guidi et al., 2020). MSMEs are also one of the main
pillars of the national economy. Based on data from the Ministry of Cooperatives and SMEs, the
number of MSMEs in Indonesia reached 64.2 million in 2020, with a contribution to GDP of 61.07
percent or Rp8,573.89 trillion. MSMEs also absorb 97 percent of Indonesia's workforce and have an
investment portion of 60.4 percent
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Generally, MSMEs are started and run by individuals or small groups, these MSME
entrepreneurs often start their businesses with limited resources, including capital, infrastructure,
and human resources. However, the spirit of entrepreneurship and innovation often drives them to
create unique and quality products or services. Based on data on the State of the Labor Force in
Indonesia in February 2021 released by the Central Statistics Agency, the number of people with the
main job of self-employment increased in 2020 but decreased in 2021. The consistent increase in
2019-2021 was seen in the category of self-employed, while the only classification of business actors
that increased was the type of self-employed. In 2019-2021, the population of 15 years and older with
the main job as entrepreneurs is dominated by those who are self-employed and tend to increase in
2021 (Leunbach, 2021; McMullen, 2024a, 2024b; McMullen et al., 2021). The target entrepreneurship
ratio in the RPJMN encourages the growth of entrepreneurs assisted by permanent workers, but the
proportion of entrepreneurs in this category is still very small compared to other categories (Ince et
al., 2023).
Figure 1. Characteristics of Business Actors in Indonesia
Source: BPS,2021 data processed by the author
MSMEs are also an integral part of Micro and Small Industries (IMK), this IMK includes various
types of businesses, including MSMEs, and together contribute significantly to the economy,
especially in creating jobs and economic growth. MSMEs are often the backbone of the local economy,
especially in rural or urban areas that are less developed. IMK, be it government agencies, non-
governmental organizations, or the private sector, provides various resources and support to MSMEs
by providing access to the resources they need be in the form of training, access to markets, financial
services, infrastructure, and other technical assistance that helps MSMEs to grow and develop in a
competitive business environment. Thus, the relationship between MSMEs and IMK is very important
in supporting inclusive and sustainable economic growth, as well as in promoting economic
independence and community empowerment.
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Based on data from the 2022 Micro and Small Industry Profile issued by the Central Statistics
Agency, it shows that the Characteristics of Micro and Small Industries in Indonesia are described by
the 2016-continued Economic Census (2022). The number of Micro and Small Industry companies in
Indonesia is estimated to be 4.34 million in 2022. Micro and Small Industry Operations are
concentrated on the island of Java, accounting for approximately 62.58% of the total Micro and Small
Industry operations throughout Indonesia. The provinces with the highest number of Micro and Small
Industry companies are Central Java, East Java, and West Java at 20.56 percent, 20.15%, and 15.39%,
respectively. On the other hand, the number of Micro and Small Industry companies in the eastern
region of Indonesia is the least, which is only 1.62%. Meanwhile, North Kalimantan is the province
with the least number of Micro and Small Industry companies, which is 0.12% of the total national
Micro and Small Industries.
Figure 2. The Distribution of the Most Micro and Small Industries in the Province
From the two data above, it can be concluded that the problems that occur in Micro and Small
Industries and Small and Medium Enterprises include constraints on access to financing and capital,
constraints on market access, marketing and product promotion, constraints on access to raw
materials/production tools, and constraints on access to digitalization/electronics and technology.
Meanwhile, the level of the self-employed category continues to increase every year.
The theoretical framework for this study is rooted in policy implementation theories,
emphasizing the interplay between regulatory frameworks and entrepreneurial activities. Grindle's
(1987) theory highlights the importance of context in policy implementation, while Creswell (2014)
underscores the value of qualitative methods in exploring nuanced policy impacts. Previous studies,
such as those by Audretsch et al. (2007) and Canare (2018), demonstrate the correlation between
ease of doing business policies and increased entrepreneurial activity. Furthermore, empirical
evidence indicates that streamlined legal frameworks, like the Individual Company policy in
Indonesia, can reduce bureaucratic barriers and promote formalization among micro and small
businesses.
Relevant research supports the necessity of simplified business regulations. For instance,
Nugroho (2006) emphasizes the role of coherent public policy in fostering sustainable economic
growth. Similarly, Bruton et al. (2010) identify institutional reforms as pivotal in enhancing
entrepreneurial ecosystems.
This study aims to evaluate the implementation of the Individual Company policy under the Job
Creation Law in Indonesia. It focuses on the role of the Ministry of Law and Human Rights as a data
manager and examines the policy’s impact on the ease of doing business. By identifying the policy's
strengths and challenges, this research seeks to provide actionable insights to improve policy
effectiveness and support MSME growth.
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Materials and Methods
The approach used by the researcher in this study is the post-positivism paradigm. The post-
positivism approach is an approach that intends to improve the weaknesses of the Positivism
approach, where Positivism only relies on the ability to directly observe the object being studied. The
positivism paradigm is a view used to measure cause and effect, as well as test a Neuman theory
(2014, p. 65). The method that will be used as a research method is a qualitative approach method. In
addition, Creswell (2014, p. 32) said that the descriptive qualitative method is a type of research that
aims to describe or explain what actually happened. The descriptive method allows the researcher to
select research subject to be studied thoroughly and critically rather than simply providing an
overview of the policy research subject. The qualitative method involves in-depth interviews with all
key actors in the policy process. According to Marvasti (2004), this method was also chosen because
it can help researchers present data in more depth. This is because different assumptions, research
strategies, methods of data collection, analysis, and interpretation are used in this approach
(Creswell, 2012).
Thus, the researcher uses the Post-Positivism approach, namely through qualitative research
methods because the researcher in this case wants to get an in-depth understanding of the
implementation of the Individual Company policy in the Law on Job Creation and specifically wants
to know the extent of the role of the Ministry of Law and Human Rights as a data collector of individual
companies by referring to the concepts, definitions, dimensions, and indicators in the regulation
(Gobel et al., 2023). With this approach, it is hoped that the researcher will be able to accurately and
objectively describe the problems of implementing individual company policies. In addition, it is also
possible to use qualitative data as a complement to the information used in the analysis of research
questions.
Results and Discussions
The Ministry of Law and Human Rights of the Republic of Indonesia through the Directorate
General of General Legal Administration (Ditjen AHU) participates in an active role in presenting a
new type of legal entity service, namely individual companies, where this individual company is also
one of the realizations of the Job Creation Law. The concept of an individual company in Indonesia is
a form of legal entity that provides legal protection to business actors through the separation of
personal and corporate assets in the form of capital statements, as well as making it easier for
business actors to access financing from banks. Individual Companies are actually not a completely
new policy, especially for some countries only the concept of mention is different. For example, in the
UK it is called a Sole Trader, in the Netherlands it is known as "Eenmanszaak", in Vietnam it is called
"Private Enterprise" and then in the United States, Canada and Singapore it is called an Individual
Company "Sole Proprietorship". However, in Indonesia, the concept of Individual Companies is
different from those countries.
The form of an Individual Company in the Job Creation Law changes the definition of a PT to "A
Limited Liability Company, hereinafter referred to as the Company, is a legal entity that is a capital
partnership, established based on an agreement, carrying out business activities with authorized
capital that is entirely divided into shares or an individual legal entity that meets the criteria for Micro
and Small Enterprises as regulated in the laws and regulations concerning Micro and Small
Enterprises. shareholders in Individual Companies are owned by individuals. In the sense that the
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owner of shares of an Individual Company must not be in the form of a legal entity. This refers to
Article 153E of the Job Creation Law, "Shareholders in a PT for the MSE category are natural persons,
not legal entities. One person can only establish one Individual Company in the MSE category in one
year This Individual Company Concept allows each individual to establish a Limited Liability
Company (hereinafter referred to as PT) with only one founder. In contrast to ordinary PTs that must
be established with a minimum of two people, as referred to in Article 7 of Law Number 40 of 2007
concerning Limited Liability Companies (hereinafter referred to as the PT Law).
Although the Job Creation Law has been repealed and replaced by Government Regulation in
Lieu of Law Number 2 of 2022 concerning Job Creation, the regulation regarding Individual
Companies is not much different. Individual Companies are expected to be one of the benchmarks to
assess the ease of doing business in Indonesia. The regulation regarding Individual Companies will
remove the public's view that the cost of establishing a PT requires a large cost. As mentioned in
Article 3 paragraph (2) of the Job Creation Perpu, the amount of authorized capital of an Individual
Company is determined based on the decision of the company's founders. Through the simplification
of regulations on business establishment licensing with the concept of Individual Companies, the
government hopes that this effort can increase the number of business actors in Indonesia. Individual
Companies have several advantages such as:
1) Business Actors can establish an Individual Company which is only established by 1 (one) and is
a legal entity so as to provide legal protection to business actors in the form of limited liability
through the separation of personal and corporate assets in the form of a capital statement as befits
a Limited Liability Company in general
2) The establishment of an Individual Company does not require a notary deed by only filling out the
statement of establishment form, the status of a legal entity is obtained by filling out the statement
of establishment electronically without the ratification of the Minister of Law and Human Rights
of the Republic of Indonesia.
3) Individual Companies also make it easier for business actors to access financing from banks. The
founder is done simply by filling out the statement of establishment form electronically and the
legal entity status can be obtained after receiving proof of registration.
4) business actors who establish Individual Companies are exempt from the obligation to announce
in the Supplement to the State Gazette as a form of bureaucratic simplification. This Individual
Company is one-tier, meaning that the sole shareholder also concurrently serves as a director
without the need for a commissioner.
5) The requirements for the establishment of an Individual Company are limited to being established
by Indonesian Citizens, at least 17 (seventeen) years old and legally competent.
6) meet the Criteria for Micro and Small Enterprises in accordance with the provisions of
"Government Regulation No. 8/2021", namely having a maximum business capital of 5 billion
excluding land and buildings, or having an annual sales result of IDR 2,000,000,000.00 (two
billion Rupiah) or more up to a maximum of IDR 15,000,000,000.00 (fifteen billion Rupiah).
7) The establishment fee is only with PNBP of IDR 50,000 (based on PMK Number
49/PMK.02/2021)
Based on data obtained from the Report of the Directorate General of General Legal
Administration for 2021 to 2024, there are 151,355 companies that have been registered in the
database, which can be seen through the following table:
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Table . Registrar of Individual Companies by Province
No
Province
Year
2021
Year
2023
January
2024
1
Aceh
98
1014
1636
2
Bali
280
2008
4424
3
Banten
800
7425
13487
4
Bengkulu
39
553
928
5
IN Yogyakarta
260
1765
3303
6
Jakarta
1020
10585
16897
7
Gorontalo
30
525
836
8
Jambi
72
708
1117
9
West Java
2500
19984
36540
10
Central Java
833
7482
11910
11
East Java
1414
10739
18066
12
West Kalimantan
98
1112
1964
13
South Kalimantan
119
986
1714
14
Central Kalimantan
77
623
1369
15
East Kalimantan
199
1589
2779
16
North Kalimantan
15
215
401
17
Bangka Belitung
20
357
573
18
Riau Islands
73
1375
2471
19
Lampung
131
1872
3022
20
Maluku
22
292
487
21
North Maluku
12
192
365
22
West Nusa Tenggara
83
1058
1782
23
East Nusa Tenggara
47
549
1059
24
Papua
26
718
903
25
West Papua
13
140
201
26
Riau
142
1714
2989
27
West Sulawesi
55
471
886
28
South Sulawesi
154
2210
3858
29
Central Sulawesi
60
622
1230
30
Southeast Sulawesi
43
717
2294
31
North Sulawesi
72
904
1540
32
West Sumatra
94
1230
1885
33
South Sumatra
131
1679
2860
34
North Sumatra
356
3321
5482
TOTAL
9388
86734
151355
(Source: Report of the Directorate General of General Legal Administration in 2024, processed)
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Based on the table above, it shows that the largest number of provinces with individual
company registrants based on the distribution of provinces with the five most provinces are in West
Java, East Java, DKI Jakarta, Central Java and Banten. This happens because the island of Java is the
largest island in Indonesia and has a very large population, has better infrastructure including
transportation access, such as toll roads, ports, and airports that facilitate the distribution of goods
and services. Then have better access to human resources, including a trained and educated
workforce, which supports business growth and innovation. In addition, the center of industry,
business and government is still concentrated on the island of Java.
The government then adopted the Perpu on Job Creation to anticipate global situations such as
global economic uncertainty, rising inflation, the threat of stagflation, and increased geopolitical
tensions. The government reasoned to enact this Perpu because there is no law, especially in terms of
the investment sector. The Constitutional Court's Decision No. 91/PUU-XVIII/2020 concerning the
Job Creation Law with Article 57 paragraph (2) of Law No. 7 of 2020 concerning the Third
Amendment to Law No. 24 of 2003 concerning the Constitutional Court shows that the Perpu on Job
Creation is also intended to replace the Law on Job Creation which is officially considered
unconstitutional. Prior to the Constitutional Court's decision No. 91/PUU-XVIII/2020 regarding the
Job Creation Law, MSME business actors who had taken care of business licensing felt unsure about
the legal force of their business legality and were unsure whether their business would be legally
protected.
The implementation of the Perppu on Job Creation is expected to increase investment and
improve the quality of cooperatives and MSMEs, as well as increase job opportunities for the
Indonesian people. This is in line with the Regulation of the Minister of Cooperatives and Small and
Medium Enterprises Number 4 of 2015 which regulates the growth and development of cooperatives,
cooperative members, micro enterprises, small businesses, start-up entrepreneurs, and non-
governmental educational institutions throughout Indonesia.
Conclusion
Progress in achieving the main goal of having an individual company, namely easy access to
capital with banking for business actors. One of the challenges of MSME implementation for the
establishment of individual companies is the change in the criteria for MSMEs which are increasing,
most MSMEs have not been able to access digitalization/electronics, many MSMEs have not been able
to make financial statements, and there are still MSMEs that often change locations and business
activities. A coaching strategy is needed that is carried out continuously by the government by
conducting intensive policy socialization, increasing assistance to MSMEs in the context of
establishing individual companies and it is not easy to give sanctions to MSMEs. The fundamental
challenge that then emerged that there is still a lack of interest from business actors in establishing
business entities, this is reflected in the number of registrants which is still at 151,355, while
Indonesia needs 4 million new entrepreneurs to become a developed country while currently the
ratio of entrepreneurs in Indonesia is still around 3.1 percent of the total population of Indonesia.
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