Reforming Environmental Supervision and Sanctions: Key Points and Discrepancy whether Environmental Approval is Required for Building Approval

Regulatory Framework on Administrative Sanction in Environmental Protection and Management

In order to strengthen the law enforcement system in the environmental protection and management sector, the Minister of Environment and Forestry (“Minister of Environment”) has issued Minister of Environment and Forestry Regulation Number 14 of 2024 on the Implementation of Supervision and Administrative Sanctions in the Environmental Sector (“MoEF Reg. on Administrative Sanctions 2024”). This regulation is part of efforts to strengthen environmental administrative law enforcement and issued as a further implementation of Government Regulation Number 22 of 2021 on the Implementation of Environmental Protection and Management (“GR on Environmental Protection”). MoEF Reg. on Administrative Sanctions 2024 also replaces the following regulations (i) Minister of Environment and Forestry Regulation Number 2 of 2013 on Guidelines for the Imposition of Administrative Sanction in the Environmental Protection and Management Sector (“MoEF Reg. on Administrative Sanctions 2013”); (ii) Ministerial Decree Number 7 of 2001 on Environmental Supervisory Officers and Regional Supervisors; (iii) Ministerial Decree Number 56 of 2002 on General Guidelines for Environmental Compliance Supervision for Inspectors; (iv) Ministerial Decree Number 57 of 2002 on Work Procedures for Inspectors at the Ministry of Environment; and (v) Ministerial Decree Number 58 of 2002 on Procedures for Inspectors in the Provinces, Regencies, and Cities.

Supervision of Business and Activity

The provisions regarding supervision of business and/or activity compliance stipulated in business license and laws and regulations in the environmental protection and management sector, as previously regulated under MoEF Reg. on Administrative Sanctions 2013, remain the same under MoEF Reg. on Administrative Sanctions 2024, is conducted by the Minister of Environment, governor, or regent/mayor, in accordance with their respective jurisdictions. Based on Article 493 of GR on Environmental Protection, the supervision responsibility is in accordance with the issuance of environmental approvals. The Minister of Environment shall supervise approvals issued by the central government, governor shall supervise approvals issued by the provincial government, and regent/mayor shall supervise approvals issued by the district/city government.

MoEF Reg. on Administrative Sanctions 2024 provides more specific provisions on the procedures for supervision, which may be conducted on a regular and incidental basis. Furthermore, regular supervision may be conducted directly or indirectly. Regular supervision is directly conducted on businesses and/or activities as follows:

• a national vital object or an object of supervision that is a regional priority;
• is a public concern;
• has an important impact on the environment as well as threats to ecosystems and/or human health and safety;
• has a Certificate of Operational Feasibility (SLO) more than 1 (one) year from the date of issuance (i.e., for businesses and/or activities that conduct emission disposal, waste disposal, and/or hazardous waste management activities);
• has been operating for more than 2 (two) years; and/or
• committing repeated violations within a period of 5 (five) years.

Direct regular supervision is implemented through (i) field verification; (ii) installation of continuous monitoring tools; and/or (iii) continuous interoperability of monitoring information.

Indirect regular supervision is conducted on businesses and/or activities that: (i) have SLO for a maximum of 1 (one) year since the date of issuance; or (ii) have only been operating for a maximum of 2 (two) years and have consecutively achieved compliance status based on the results of performance assessment. Indirect regular supervision is conducted through reviewing data and information reports provided by the responsible person of the business and/or activity.

Incidental supervision is conducted on businesses and/or activities in response to (i) public complaints alleging non-compliance by the business and/or activity (ii) reports from the responsible person of the business and/or activity related to emergencies; and/or (iii) public complaints regarding environmental contamination and/or damage for which the source and the responsible party are unknown.

Second Tier Supervision

The provisions regarding second tier supervision were previously regulated under Article 8 of MoEF Reg. on Administrative Sanctions 2013, which allowed the Minister of Environment to impose administrative sanctions on environmental approvals issued by local governments if the Minister of Environment deemed that the local government had intentionally failed to impose administrative sanctions for serious violations in the field of environmental protection and management. MoEF Reg. on Administrative Sanctions 2024 clarified the authority of the Minister of Environment to conduct second tier supervision by allowing the Minister of Environment to directly inspect the compliance of environmental approvals issued by local governments if (i) it is deemed that serious violations in the environmental sector have occurred; and (ii) the local government does not carry out the supervision. Based on Article 29 of MoEF Reg. on Administrative Sanctions 2024, serious violations are defined as follows:

• Unlawful acts that result in relatively large environmental contamination and/or damage with the criteria of (i) violations that become national issues and constitute national policies; (ii) indicated impacts on health and safety of the human and the environment; and/or (iii) indicated extensive contamination impacts and/or crossing regional boundaries; or
• The violation has resulted in public concern sourced either from the complaint media, mass media, and/or social media.

Apart from those reasons, governor or regent/mayor in accordance with their respective jurisdictions may also request the Minister of Environment to supervise the business license or environmental approval issued by the local government if:

• Attempts to law enforcement have been made, but violations are still committed; and/or
• Environmental contamination and/or damage occurs that cannot be handled by the local government.

Forms of Administrative Sanction on Environmental Sector

The forms of administrative sanctions regulated under MoEF Reg. on Administrative Sanctions 2013 and MoEF Reg. on Administrative Sanctions 2024, remains the same, namely (i) written warning; (ii) government coercion; (iii) administrative fines; (iv) suspension of business license; and (v) revocation of business license.

1. Written Warning
   Under MoEF Reg. on Administrative Sanctions 2024, written warnings are given for minor violations as stated in Schedule XV of GR on Environmental Protection (e.g., not monitoring the water surface/ groundwater/soil, not having a water pollution emergency response system, and others). Written warnings shall be implemented within a maximum of 30 calendar days from the receipt of the written warning. under MoEF Reg. on Administrative Sanctions 2013, written warnings were issued to businesses and/or activities that committed violations of the requirements and obligations stated in the environmental approvals but had not yet caused significant environmental impacts. MoEF Reg. on Administrative Sanctions 2013 also did not regulate any time limit for the sanctioned party to implement the written warning.
2. Government Coercion
   Government coercion under MoEF Reg. on Administrative Sanctions 2024 shall be imposed as a further response to the non-compliance of the party that does not implement the orders in the written warning within a certain period of time. Government coercion may also be imposed without prior written warning if (i) there is a very serious threat to humans and the environment; (ii) greater and wider impacts may occur if not stopped immediately; and/or (iii) greater losses to the environment if not stopped immediately. Such government coercion may take the form of temporary suspension of an activity, closure of wastewater or emission disposal systems, seizure of certain goods or equipment, and other actions intended to stop violations and actions to restore environmental functions. In contrast, under MoEF Reg. on Administrative Sanctions 2013, government coercion was applied in cases where violations of environmental approvals resulted in environmental damage.

3. Administrative Fines
   Under MoEF Reg. on Administrative Sanctions 2013, administrative fines were imposed as a consequence of delays in implementing government coercion. In contrast, under MoEF Reg. on Administrative Sanctions 2024, administrative fines may be imposed concurrently with government coercion. In addition, MoEF Reg. on Administrative Sanctions 2013 did not regulate the amount of administrative fines that could be imposed. However, MoEF Reg. on Administrative Sanctions 2024 now sets a maximum of Rp3,000,000,000 (three billion Rupiah) for each violation. MoEF Reg. on Administrative Sanctions 2024 also provides specific provisions on the procedures for calculating administrative fines, which were not previously regulated under MoEF Reg. on Administrative Sanctions 2013, as follows:   

• not having environmental approval but has a business license is subject to a fine of 2.5% of the investment value of the business and/or activity or not having both an environmental approval and a business license is subject to a fine of 5% of the investment value of the business and/or activity;
• exceeding the wastewater and emission standard is subject to a fine as determined in Annex VII of MoEF Reg. on Administrative Sanctions 2024;
• failure to implement the obligations in the business license relating to environmental approval is subject to a fine as determined in Annex VIII of MoEF Reg. on Administrative Sanctions 2024 (e.g., not conducting wastewater management, submitting false data, and others), is subject to a fine as determined in Annex VIII of MoEF Reg. on Administrative Sanctions 2024;
• preparing Amdal without the appropriate certificate of competences is subject to a fine of 10% of the total cost of Amdal preparation; and/or
• failure to timely implement government coercive sanctions is subject to a fine as determined in Annex X of MoEF Reg. on Administrative Sanctions 2024.

4. Suspension of Business License
   Under both MoEF Reg. on Administrative Sanctions 2013 and MoEF Reg. on Administrative Sanctions 2024, the suspension of business license may be imposed on a party that does not implement government coercion. However, MoEF Reg. on Administrative Sanctions 2024 also provides that suspension may be imposed on a party that (i) do not pay administrative fines; and/or (ii) do not pay fines for late implementation of government coercion.
5. Revocation of Business License
   Under both MoEF Reg. on Administrative Sanctions 2013 and MoEF Reg. on Administrative Sanctions 2024, revocation of business licenses are conducted if the business actor fails to fulfil the obligations in the suspension of business license. In addition, under MoEF Reg. on Administrative Sanctions 2024, revocation may also be imposed on business and/or activities that cause environmental pollution and/or damage that cannot be repaired or is difficult to recover.

Implementation of Administrative Sanctions on the Obligation of Environmental Approval for Building Construction Activities

Pursuant to Article 36A of Law Number 28 of 2002 on Building as amended by Law Number 6 of 2023 on Enactment of Regulation of the Government In Lieu of Law Number 2 of 2022 On Job Creation into Law, the construction of a building must be carried out only after obtaining a Building Approval (Persetujuan Bangunan Gedung – “PBG”). Prior to 2020, an application for a building construction permit, now known as the PBG, required prior environmental approval through the preparation of environmental documents in the form of an Environmental Impact Analysis (Analisis Mengenai Dampak Lingkungan Hidup – “Amdal”) or Environmental Management Efforts and Environmental Monitoring Efforts (Upaya Pengelolaan Lingkungan Hidup dan Upaya Pemantauan Lingkungan Hidup – “UKL-UPL”). The requirement for Amdal or UKL-UPL, as regulated under Article 32 of the Minister of Public Works and Public Housing Regulation Number 05/PRT/M/2016 on Building Construction Permits as amended by Minister of Public Works and Public Housing Regulation Number 06/PRT/M/2017, was revoked through Minister of Public Works and Public Housing Regulation Number 2 of 2020 on the Second Amendment to Minister of Public Works and Public Housing Regulation Number 05/PRT/M/2016 on Building Construction Permit (“MoPWPH Reg. on Building Construction Permit”). With the revocation of such provision, it is doubtful whether the issuance of a PBG will be preceded by environmental approval. Nevertheless, despite such revocation, Article 3 paragraph (1) of the GR on Environmental Protection stipulates that all businesses and/or activities, whether having a significant or non-significant impact on the environment, must obtain environmental approval.

Article 3 paragraph (3) of the GR on Environmental Protection stipulates that environmental approval is a requirement for the issuance of a business license. As explained above, the MoEF Reg. on Administrative Sanctions 2024 also regulates sanctions for businesses and/or activities that have obtained a business license but do not have environmental approval is subject to a fine of 2.5%. In light of these provisions, the question arises whether a PBG qualifies as a business license as referred to under the GR on Environmental Protection and the MoEF Reg. on Administrative Sanctions 2024. If so, this would mean that environmental approval must be obtained prior to the issuance of a PBG, and that building construction activities carried out under a PBG without such approval may be subject to an administrative fine of 2.5%.

Read Also: Building Approval

Pursuant to Article 1 point 3 of the GR on Environmental Protection, a business license is defined as a form of legal authorization granted to business actors to initiate and conduct their business and/or activities (i.e., any activity that may cause changes and impact to the environment). Although the GR on Environmental Protection adopts a broad definition of business licensing, the applicable provisions regarding business licensing are currently governed under Government Regulation Number 28 of 2025 on the Implementation of Risk-Based Business Licensing (“GR on Business License”). Under GR on Business License risk-based business licensing consists of (i) basic requirements; (ii) business license; and (iii) business license for supporting business activities. The basic requirements include conformity of the spatial use activity, environmental approval, PBG, and Certificate of Feasible Function. Meanwhile, business license consists of the Business Identification Number, Standard Certificate, and/or License. Based on this classification, it is clearly reflected that the GR on Risk-Based Business Licensing distinguishes between basic requirements and business licenses. Accordingly, PBG is not considered as a business license.

As PBG is not classified as a business license, the provision under Article 3 paragraph (1) of the GR on Environmental Protection, which requires environmental approval as a prerequisite for the issuance of a business license, does not apply to the issuance of a PBG. In addition, the MoPWPH Reg. on Building Construction Permit also does not require environmental approval to be obtained prior to the submission of PBG application. Therefore, the administrative fine of 2.5% regulated under the MoEF Reg. on Administrative Sanctions 2024, which applies to businesses and/or activities that have obtained a business license but yet to obtain an environmental approval, does not necessarily apply to building construction activities that have obtained a PBG without environmental approval, since PBG is not considered a business license.

This situation creates a regulatory inconsistency and different meaning between what may constitute business license under the GR on Environmental Protection, namely, may include PBG, than what may constitute business license under the GR on Business License which excludes PBG. While Article 3 paragraph (1) of the GR on Environmental Protection mandates that all activities must obtain environmental approval, there is currently no specific provision requiring environmental approval to be obtained prior to the issuance of a PBG. There exists obligation to obtain Amdal or UKL-UPL for certain threshold of real property development. But it may not be considered as precondition of applying for a PBG. Furthermore, the 2.5% administrative fine stipulated in the MoEF Reg. on Administrative Sanctions 2024 becomes irrelevant in this context, as under the GR on Business License, PBG is not classified as a business license. This regulatory disharmony indicates the need for further synchronization between the current regulation in the environmental sector and sector business licensing.

Comprehensive Guidance but Lacking of Harmony

MoEF Reg. on Administrative Sanctions 2024 serves as a reform to the policy on supervision and administrative sanctions in the environmental sector that strengthens administrative environmental law enforcement as a follow-up to GR on Environmental Protection. MoEF Reg. on Administrative Sanctions 2024 also provides more detailed provisions on supervision mechanisms, clarifies and strengthens the second-tier supervisory authority of the Minister of Environment, and sets out more specific forms of administrative sanctions. Although the MoEF Reg. on Administrative Sanctions 2024 offers relatively comprehensive guidance on administrative sanctions and environmental supervision, its application to environmental approval requirements and sanctions, particularly in the building construction sector, remains unclear. These unclear provisions not only confuse business actors, but also have the potential to weaken environmental protection. A thorough evaluation and alignment between regulations is needed to ensure that the licensing system truly supports legal certainty and environmental sustainability. It is better to obligate the obtainment of environmental approval, whether Amdal or UKL-UPL, prior to issuance of PBG. When this process is separated, environmental damage may happen and restoring it to its original condition, if possible, will cost more than preventing it happening in the first place.

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Sources:

• Law Number 28 of 2002 on Building;
• Law Number 6 of 2023 on Enactment of Regulation of the Government In Lieu of Law Number 2 of 2022 On Job Creation into Law;
• Government Regulation Number 22 of 2021 on the Implementation of Environmental Protection and Management;
• Government Regulation Number 28 of 2025 on the Implementation of Risk-Based Business Licensing;
• Minister of Environment and Forestry Regulation Number 14 of 2024 on the Implementation of Supervision and Administrative Sanctions in the Environmental Sector;
• Minister of Environment and Forestry Regulation Number 2 of 2013 on Guidelines for the Imposition of Administrative Sanction in the Environmental Protection and Management Sector;
• Minister of Public Works and Public Housing Regulation Number 05/PRT/M/2016 on Building Construction Permits;
• Minister of Public Works and Public Housing Regulation Number 06/PRT/M/2017 on the Amendment to Minister of Public Works and Public Housing Regulation Number 05/PRT/M/2016 on Building Construction Permits; and
• Minister of Public Works and Public Housing Regulation Number 2 of 2020 on the Second Amendment to Minister of Public Works and Public Housing Regulation Number 05/PRT/M/2016 on Building Construction Permit.