On 5 October, The Parliament approved the job creation law (RUU Cipta Kerja, commonly known as the “Omnibus Law”). The Omnibus Law is expected to take effect within 30 days, upon signing by the President.
Initially, the Government proposed two separate omnibus laws, with the first focusing on the ease of doing business and the improvement of the investment ecosystem, and the second focusing on taxation issues. However, a part of what was to be in the second omnibus law is already covered in Government Regulation in Lieu of Law (Peraturan Pemerintah Pengganti Undang-Undang) No. 1 of 2020 (“Perppu 1/2020“), which has been passed as Law No. 2 of 2020. Therefore, the Government and the House of Representatives agreed to include the remaining content of the second omnibus law in the first omnibus law (i.e., the Omnibus Law on Job Creation)1.
This client alert covers amendments of the following laws on the healthcare and life science sectors under the Omnibus Law2:
- Law No. 36 of 2009 on Health (“Health Law“)
- Law No. 44 of 2009 on Hospitals (“Hospital Law“)
- Law No. 5 of 1997 on Psychotropics (“Psychotropic Law“)
- Law No. 35 of 2009 on Narcotics (“Narcotics Law“)
- Law No. 18 of 2012 on Food (“Food Law“)
- Law No. 33 of 2014 on Halal Product Assurance (“HPA Law“
We have addressed some of the key takeaways for the healthcare and life science sector based on the earlier draft Omnibus Law in our previous client alert, which you can find that here, in case you are interested in making comparative observation on the changes.
Changes to the Health Law
Overall, the Omnibus Law does not make significant changes to the provisions of the Health Law. The notable changes are as follows:
- Introduction of Business License Term
The Omnibus Law uses a generic licensing term, i.e., Business License (Perizinan Berusaha).
The unified use of the term Business License when referring to various licenses in health and other sectors indicates nationwide licensing unification.
Despite the above, only two of the licensing terms under the Health Law are changed to Business License, namely: (i) marketing authorization for food, drugs and medical devices, and (ii) traditional healthcare professional license.
- The Omnibus Law stipulates that Business Licenses, and the number and type of healthcare facilities will be further regulated in more specific government regulations.
The Omnibus Law removes provisions on Health Law relating to (i) the determination of numbers and types of healthcare service facilities by regional governments, and (ii) the issuance of operational licenses by regional governments in their respective territories, which are also applicable to foreign healthcare facilities. In other words, the Health Law provides that foreign healthcare facilities must observe the specific requirements imposed by the relevant regional government (i.e., based on where each healthcare facility is located) on the number and type of healthcare facilities, as well as the operational licensing regime applicable to them.
However, the above matters are to be further regulated in a government regulation, and it remains to be seen whether the provisions of the Health Law on these matters will be changed.
- Markings and Labelling Requirements for Food and Beverages
Provisions on markings and labelling requirements for packaged food and beverages are removed from the Health Law. However, it is possible that these requirements will be regulated in or simply moved to a more specific government regulation, considering that currently there are many existing technical implementing regulations on food and beverages markings and labelling, and these regulations would require a basis.
Changes to the Psychotropics and Narcotics Law
Psychotropic substances can only be produced by a pharmaceutical industry (not a pharmaceutical factory) that has fulfilled the Business License requirement. The change of the term pharmaceutical factory to pharmaceutical industry seems to be done for synchronization with the licensing regime, i.e., the Business License under the Omnibus Law.
Changes to the Hospital Law
- Introduction of Business License Term
The amendment introduces a generic term, i.e., Business License (Perizinan Berusaha) for all hospital licenses. All provisions under the Omnibus Law relating to licensing requirements and technical matters for hospitals will be further implemented in a government regulation.
- Classification of Hospitals
Unlike the Hospital Law, the Omnibus Law does not describe the classification of hospitals in a detailed manner. The classification of hospitals as well as the Business Licenses that will be granted in accordance with the classification of hospitals will be further regulated under a government regulation. It also remains to be seen whether the licensing requirement for foreign and domestic investment hospitals will be amended.
Under the Hospital Law, hospitals that do not comply with general requirements (such as location, buildings, facilities and equipment) are subject to sanctions in the form of rejection of license applications, non-renewal or revocation of licenses. These sanctions are slightly amended by the Omnibus Law, whereby the failure to meet those requirements will only lead to administrative sanctions. It is still unclear whether those requirements are still prerequisites for the establishment of hospitals.
Further, the Omnibus Law also introduces new administrative and criminal sanctions. Hospital operators may be subject to administrative or criminal (i) will be imposed with an administrative sanction if they do not fulfill the Business License requirement, and (ii) will be imposed with a criminal sanction if they do not fulfill the Business License requirement and cause casualties/damages to other parties or the environment with imprisonment of two years and a fine of up to IDR 7 million.
- Hospital Accreditation and Supervision
Hospital accreditation will be carried out by an independent agency appointed by the central government and will be further regulated under a government regulation (instead of a ministerial regulation). Like under the Hospital Law, the central government and the regional governments will perform the supervision of hospitals.
Changes to the Food Law
- Introduction of Business License Term
Like the changes to the Health Law and the Hospital Law, the Omnibus Law uses a generic term for all required licenses in the food sector, i.e., Business License (Perizinan Berusaha).
- Importation of Food
Imported food is one of the main sources to fulfill consumption needs and food reserves. More flexibility on food import business is expected as the Omnibus Law removes provisions from the Food Law that limit importation of food if domestic production and the national food reserves are not enough. The policy and regulation of the import of food will be determined by the central government for the benefit of farming sustainability
The Omnibus Law provides administrative sanctions for (i) the repackaging and sales of end-product food packaging, (ii) violations of security and quality food standards, and (iii) sales of foods that do not meet the security and quality food standards. Further, the Omnibus Law provides exemptions from the imposition of criminal sanctions for low to medium risk food businesses.
- Laboratory Examination
The requirement for food to be examined in a laboratory before it can be distributed is removed from the Food Law. This may consequently simplify and shorten the regulatory process for food distribution business.
Changes on the HPA Law
- Simplification of Regulatory Process and Requirements
Under the Omnibus Law, every step of the halal certification process is now restricted to a certain time limit, including the time limit for the verification process, inspection/examination by the halal auditors and the issuance of the halal certificate. Based on the Omnibus Law, the duration of the halal certification process may take around 20 working days from the verification to the issuance of the halal certificate. You may appreciate that the Halal Examination Bodies (Lembaga Pemeriksa Halal or “LPH“) may ask the Halal Product Assurance Implementing Board (“BPJPH“) for an extension of time for the inspection/examination.
Unlike the previous draft, the current Omnibus Law does not allow BPJPH to take over or jump in on the halal certification process if LPH fails to finish the process within the time limit. In the current Omnibus Law, if LPH fails to finish the halal certification process within the time limit, LPH will be subject to evaluation and/or receive administration sanctions. Nevertheless, these new provisions should give more certainty to business actors as the Omnibus Law shortens the regulatory process. LPH will submit the results of inspection directly to the Ulema Council (Majelis Ulama Indonesia or “MUI“), instead of through BPJPH to shorten the regulatory process.
For the renewal of halal certificates, the Omnibus Law provides that BPJPH may directly issue renewals of halal certificates for products if business actors provide a statement letter stating that there is no change to the content of the certified product.
The Omnibus Law removes the requirement for halal auditors to obtain certification from MUI. Also, LPH may be established by an Islamic institution entity, a private university under an Islamic institution entity or an Islamic foundation entity.
- MUI’s Stronger Presence in the Implementation of Halal Product Assurance
In the previous draft Omnibus Law, the issuance of a fatwa halal (i.e., fatwa required for the issuance of a halal certificate) and determination of halal status is no longer exclusive to MUI, but other legally incorporated Islamic organizations may also issue a fatwa halal and/or determine halal status. This is not the case in the current Omnibus Law, as BPJPH will only be coordinating with MUI in relation to the determination of halal status, and the halal product decision will only be issued by MUI. This may also be a signal that BPJPH and MUI has cease their ongoing disagreement. If this is true, then it can only mean that BPJPH and government should have more readiness to fully implement the halal regulations.
- Halal Product Assurance for Micro and Small Businesses
Similar to the previous draft, the current Omnibus Law requires micro and small business actors to obtain a halal certificate. Micro and small business actors will not be charged any fees in relation to the halal certification process.
The Omnibus Law provides that the relevant implementing regulations, including government regulations, must be issued at the latest three months after the enactment of the Omnibus Law.
The existing implementing regulations of the Health Law, Hospital Law, Psychotropics Law, Narcotics Law, Food Law and HPA Law, remain effective to the extent they do not contradict the provisions under the Omnibus Law. The implementing regulations of the amended laws must be harmonized with the provisions under the Omnibus Law at the latest three months after the enactment of the Omnibus Law.
1 Hereinafter, when we refer to ‘Omnibus Law’ in this alert, it would be a reference to the aforementioned latest approved law of 5 October. When we make reference to a different draft or version of Omnibus Law, we will make specific note to distinguish it.
2 Readers should treat the comments in this alert as our preliminary view on the Omnibus Law. Although the Omnibus Law may seem to revoke certain requirements or provisions of the foregoing laws on healthcare and life science sector, it is still unclear whether those provisions are actually revoked or simply moved to further implementing regulations in the future.