Government Expands Standardization of Business Classification

The government is currently preparing a draft Regulation of the Minister on Micro-, Small-, and Medium-Scale Enterprises (“UMKM”) on Guidelines for the Classification and Development Stages of UMKM. This is being done to establish a more comprehensive and standardized business classification system.

“Broadly speaking, it will regulate the types of UMKM business activities based on the KBLI, which serves to clarify the presence of UMKM across various sectors and business fields,” said Temmy Satya Permana, Deputy for Micro-Scale Enterprises at the Ministry of UMKM, to Hukumonline.

The draft regulation governs business activities based on the Indonesian Standard Industrial Classification (“KBLI”) to clarify the presence of business actors across various sectors. Additionally, it establishes classification criteria comprising standard criteria and supplementary criteria. 

These standard criteria aim to ensure uniformity and legal certainty in determining the status of micro-, small-, or medium-scale enterprises across various sectors and regions. 

Meanwhile, the additional criteria are used as the basis for formulating policies, planning programs, providing facilitation, and assessing business contributions according to their characteristics.

The determination of business classification continues to be based on business capital or annual sales revenue as regulated in Regulation of the Government No.  7 of 2021 on Ease, Protection, and Empowerment of Cooperatives and UMKM (“Regulation 7/2021”). However, the government has added several other indicators, such as the number of employees, investment value, local content, incentives and disincentives, and the adoption of environmentally friendly technology.