Why Your Industry Classification Determines Your Environmental Approval Path
The Sector Trap: Why Your Industry Classification Determines Your Environmental Approval Path
PERMEN LH 22/2025 Analysis Series - Article 2 of 4
- Who Decides Your Environmental Permit? Indonesia's Authority Maze
- The Sector Trap: Why Your Industry Classification Determines Your Approval Path
- October 27th Changed Everything: Your OSS Integration Survival Guide
1.0 The Dual Annex System: Sectoral Authority Classification
While PERMEN LH 22/2025 establishes location as the primary authority determinant, Articles 4(6) and 6(5) introduce two comprehensive annexes that assign specific business sectors to central or provincial authority regardless of geographic footprint. Lampiran I (Annex I) contains the "Daftar Usaha dan/atau Kegiatan yang Merupakan Kewenangan Menteri/Kepala" (List of Business and/or Activities under Minister/Head Authority), specifying high-polluting and high-risk activities that require central government approval per Article 4(2) and 4(3). Lampiran II (Annex II) contains the "Daftar Usaha dan/atau Kegiatan yang Merupakan Kewenangan Gubernur" (List of Business and/or Activities under Governor Authority), specifying provincially-significant activities per Article 6(2). Both annexes utilize KBLI (Klasifikasi Baku Lapangan Usaha Indonesia - Indonesian Standard Industrial Classification) codes, Indonesia's standardized 5-digit numerical business classification system similar to NAICS (North America) or NACE (Europe). The annexes carry full legal weight as "bagian tidak terpisahkan dari Peraturan Menteri/Badan ini" (inseparable part of this Ministerial/Agency Regulation), making their sectoral classifications legally binding. This dual-annex system creates a complexity where businesses must check both location criteria (Articles 3-9) AND sectoral lists (Lampiran I and II) to determine proper approval authority, with sectoral classification potentially overriding geographic simplicity (see Matrix 1.1 below).
Matrix 1.1: Dual Annex System Structure
| No. | Annex | Indonesian Title | Authority Level | Legal Basis | Number of Sectors | Classification Method |
|---|---|---|---|---|---|---|
| 1.1 | Lampiran I | Daftar Usaha dan/atau Kegiatan yang Merupakan Kewenangan Menteri/Kepala | Central (Minister/Head) | Article 4(6) | 7 sectors | High-polluting OR high-risk resource extraction (Art 4(2), 4(3)) |
| 1.2 | Lampiran II | Daftar Usaha dan/atau Kegiatan yang Merupakan Kewenangan Gubernur | Provincial (Governor) | Article 6(5) | 10 sectors | Provincial economic/social/spatial significance (Art 6(2)) |
2.0 Central Authority Sectors: Seven High-Risk Categories in Lampiran I
Lampiran I assigns seven distinct sectors to central government authority under the Minister of Environment and Head of Environmental Control Agency, focusing on activities with high pollution potential or high environmental risk from non-renewable resource extraction. Sector 1 (Transportation) includes 9 KBLI codes covering major port development (KBLI 52221), inter-provincial ferry terminals (KBLI 52223), primary collector airports (KBLI 52231), and national railway networks (KBLI 49110). Sector 2 (Tourism) contains a single entry (KBLI 68120) for kawasan pariwisata (tourism zones). Sector 3 (Energy and Mineral Resources) encompasses the most extensive coverage with approximately 50+ KBLI codes spanning coal mining operations (KBLI 05100, 05200), metallic mineral mining (KBLI 07101-07309), oil and gas exploration (KBLI 06100-06200), and geothermal energy (KBLI 35301), with specific provisions for activities involving submarine tailings placement or integrated processing and refining. Sector 4 (Nuclear Energy) covers nuclear power plants and nuclear fuel cycle facilities (NON KBLI designation). Sector 5 (Industry) includes high-polluting manufacturing such as pulp and paper (KBLI 17011-17099), petrochemicals (KBLI 19211-19299), and metal smelting (KBLI 24101-24999). Sector 6 (Hazardous Waste Management) covers B3 waste treatment, storage, and disposal facilities (KBLI 38220). Sector 7 (Special Categories) addresses cross-border activities and activities initiated by provincial environmental agencies. The common thread across these seven sectors is environmental risk: either high pollution potential (water contamination, air emissions) or high-risk resource extraction (landscape transformation, habitat destruction, failure risks) as defined in Article 4(2) and 4(3) (see Matrix 2.1 below).
Matrix 2.1: Seven Central Authority Sectors (Lampiran I)
| No. | Sector | Indonesian Name | Key KBLI Codes (Examples) | Primary Risk Factor | Number of Specific Activities |
|---|---|---|---|---|---|
| 2.1 | Transportation | Transportasi | 52221 (Ports), 52223 (Ferries), 52231 (Airports), 49110 (Railways) | National infrastructure, cross-provincial impact | 9 activities |
| 2.2 | Tourism | Pariwisata | 68120 (Tourism zones) | Large-scale development | 1 activity |
| 2.3 | Energy & Mineral Resources | Energi dan Sumber Daya Mineral | 05100-08999 (Mining), 06100-06200 (Oil & Gas), 35301 (Geothermal) | Non-renewable resource extraction, high environmental risk | 50+ activities |
| 2.4 | Nuclear Energy | Ketenaganukliran | NON KBLI (Nuclear facilities) | Radiation hazard, national security | Multiple facilities |
| 2.5 | Industry | Industri | 17011-17099 (Pulp/Paper), 19211-19299 (Petrochemicals), 24101-24999 (Metal smelting) | High pollution potential (water, air emissions) | 30+ activities |
| 2.6 | Hazardous Waste | Pengelolaan Limbah B3 | 38220 (B3 waste management) | Toxic waste, bioaccumulation risk | Multiple facilities |
| 2.7 | Special Categories | Kategori Khusus | Cross-border, provincial agency-initiated | Jurisdictional complexity | Variable |
3.0 Provincial Authority Sectors: Ten Economic Significance Categories in Lampiran II
Lampiran II assigns ten sectors to provincial (Governor) authority based on provincial economic, social, or spatial significance per Article 6(2), focusing on activities that while locally-contained have province-wide implications. Sector 1 (Transportation) mirrors central authority but for intra-provincial scale: regency-level ports, local airports, provincial road networks. Sector 2 (Energy) covers provincial-scale renewable energy projects (solar farms, wind turbines, small-scale hydroelectric) and electricity distribution networks within provincial boundaries. Sector 3 (Nuclear) includes nuclear research facilities and radioisotope applications (medical, industrial) at provincial level. Sector 4 (Hazardous Waste) addresses provincial B3 waste collection and temporary storage facilities (not final disposal, which remains central authority). Sector 5 (Agriculture) introduces a critical distinction: all foreign-invested (PMA - Penanaman Modal Asing) agricultural operations automatically escalate to provincial authority regardless of scale, while domestic-invested (PMDN) operations follow normal location criteria. Sector 6 (Forestry) similarly treats PMA forestry operations as provincially-significant. Sector 7 (Marine and Fisheries) escalates PMA aquaculture and fisheries to provincial level. Sector 8 (Industry) designates certain strategic manufacturing sectors as provincially-significant even when located in single regencies, particularly food processing, textiles, and construction materials industries with province-wide supply chain implications. Sector 9 (Trade) covers large-scale wholesale and distribution centers. Sector 10 (Public Works) includes provincial infrastructure projects (water supply, wastewater treatment, solid waste management) that serve multiple regencies. The foreign investment (PMA) provisions in Sectors 5, 6, and 7 create a unique authority escalation mechanism: identical agricultural, forestry, or fisheries operations receive different approval authorities based solely on investor nationality, with foreign-invested operations requiring provincial approval while domestic operations may qualify for local authority (see Matrix 3.1 and 3.2 below).
Matrix 3.1: Ten Provincial Authority Sectors (Lampiran II)
| No. | Sector | Indonesian Name | Key Criteria | PMA Exception | Provincial Significance Basis |
|---|---|---|---|---|---|
| 3.1 | Transportation | Transportasi | Intra-provincial ports, local airports, provincial roads | No | Cross-regency infrastructure, provincial connectivity |
| 3.2 | Energy | Energi | Provincial renewable energy, distribution networks | No | Province-wide energy security |
| 3.3 | Nuclear | Ketenaganukliran | Research facilities, medical/industrial radioisotope use | No | Provincial safety oversight |
| 3.4 | Hazardous Waste | Pengelolaan Limbah B3 | Provincial collection, temporary storage (not final disposal) | No | Province-wide waste management |
| 3.5 | Agriculture | Pertanian | Commercial farming, plantations | YES - All PMA operations → Provincial | Provincial food security, economic impact |
| 3.6 | Forestry | Kehutanan | Timber operations, forest products | YES - All PMA operations → Provincial | Provincial forest resource management |
| 3.7 | Marine & Fisheries | Kelautan dan Perikanan | Aquaculture, commercial fishing | YES - All PMA operations → Provincial | Provincial marine resource management |
| 3.8 | Industry | Industri | Strategic manufacturing (food processing, textiles, construction materials) | Varies by subsector | Province-wide supply chain, employment |
| 3.9 | Trade | Perdagangan | Large-scale wholesale, distribution centers | No | Provincial commerce, logistics hubs |
| 3.10 | Public Works | Pekerjaan Umum | Water supply, wastewater, solid waste serving multiple regencies | No | Multi-regency service areas |
Matrix 3.2: PMA (Foreign Investment) Authority Escalation
| Sector | Activity Type | PMDN (Domestic Investment) Authority | PMA (Foreign Investment) Authority | Legal Basis |
|---|---|---|---|---|
| Agriculture | Commercial farming, plantations | Local (if single regency) or Provincial (if cross-regency) | Always Provincial | Lampiran II Sector 5 |
| Forestry | Timber operations, forest products | Local (if single regency) or Provincial (if cross-regency) | Always Provincial | Lampiran II Sector 6 |
| Marine & Fisheries | Aquaculture, commercial fishing | Local (if single regency) or Provincial (if cross-regency) | Always Provincial | Lampiran II Sector 7 |
Key Implication: Two identical palm oil plantations in the same regency may have different approval authorities: PMDN (domestic) → Regent/Mayor; PMA (foreign) → Governor.
4.0 Sectoral Overlap: Activities Appearing in Both Annexes
Four sectors appear in both Lampiran I (central authority) and Lampiran II (provincial authority) with differentiated criteria based on scale, scope, or risk level, creating a hierarchical structure where activities within the same sector are split between government levels. Transportation sector appears in both annexes: Lampiran I covers major ports (pelabuhan utama, pelabuhan pengumpul), primary collector airports (bandar udara pengumpul primer), and national railway networks connecting provincial capitals, while Lampiran II covers local ports, regional airports, and intra-provincial roads, with the distinction based on "lingkup operasional" (operational scope) - inter-provincial or international facilities trigger central authority, while intra-provincial facilities remain provincial. Energy sector splits between Lampiran I covering large-scale fossil fuel extraction (coal mining with AMDAL-scale operations, oil and gas exploration, geothermal exceeding certain megawatt thresholds) and Lampiran II covering provincial renewable energy projects (solar, wind, small-scale hydro) and distribution networks, with the differentiation based on energy source (non-renewable vs renewable) and scale (national grid vs provincial distribution). Nuclear sector divides between Lampiran I covering power generation facilities and nuclear fuel cycle operations (uranium enrichment, spent fuel reprocessing) requiring national-level oversight, and Lampiran II covering research reactors and industrial/medical radioisotope applications at provincial scale, with differentiation based on radiation risk and strategic importance. Hazardous waste (B3) management splits between Lampiran I covering final disposal facilities (landfills, incinerators, stabilization facilities) and integrated treatment centers, while Lampiran II covers provincial collection points and temporary storage facilities, with the critical distinction being "final disposal" (akhir) triggering central authority versus "temporary storage" (sementara) remaining provincial. This sectoral overlap requires careful analysis: businesses must first identify their exact activity within the sector, then check whether scale, scope, or risk level places them in the central (Lampiran I) or provincial (Lampiran II) category (see Matrix 4.1 below).
Matrix 4.1: Sectoral Overlap Between Lampiran I and Lampiran II
| No. | Sector | Lampiran I (Central Authority) Criteria | Lampiran II (Provincial Authority) Criteria | Differentiation Factor |
|---|---|---|---|---|
| 4.1 | Transportation | Major ports (utama, pengumpul), primary collector airports, national railways connecting provincial capitals | Local ports, regional airports, intra-provincial roads | Operational scope: Inter-provincial/international vs intra-provincial |
| 4.2 | Energy | Large-scale fossil fuel (coal, oil, gas), geothermal >certain MW, national grid infrastructure | Provincial renewable energy (solar, wind, small hydro), provincial distribution networks | Energy source & scale: Non-renewable/national grid vs renewable/provincial distribution |
| 4.3 | Nuclear | Power generation facilities, nuclear fuel cycle (enrichment, reprocessing) | Research reactors, medical/industrial radioisotope applications | Radiation risk & strategic importance: Power/fuel cycle vs research/medical |
| 4.4 | Hazardous Waste (B3) | Final disposal (landfills, incinerators), integrated treatment centers | Provincial collection points, temporary storage facilities | Disposal permanence: Final disposal vs temporary storage |
Authority Determination Principle: When a sector appears in both annexes, specific activity characteristics (scale, scope, permanence, risk level) determine which annex applies.
5.0 KBLI Code System and Practical Application
KBLI (Klasifikasi Baku Lapangan Usaha Indonesia) serves as the primary classification mechanism throughout both Lampiran I and II, using 5-digit numerical codes organized hierarchically from broad divisions (2-digit) to detailed subclasses (5-digit). The standard format follows international industrial classification conventions: first two digits indicate division (e.g., "05" = Mining and quarrying), third digit indicates group (e.g., "051" = Mining of hard coal), fourth digit indicates class (e.g., "0510" = Mining of hard coal), and fifth digit indicates subclass providing specific activity detail (e.g., "05100" = Mining of hard coal including anthracite, bituminous coal). Both annexes frequently list multiple KBLI codes in sequence (e.g., "05100, 07101, 07102, 07291..." in Lampiran I Sector 3) to capture related activities within a regulatory category. Some activities carry "NON KBLI" designation, indicating activities not yet classified in the standard KBLI system but still requiring environmental approval, particularly for government-initiated infrastructure projects or emerging technology sectors (nuclear facilities, certain renewable energy technologies). Businesses determine applicable authority by: (1) identifying their primary KBLI code from their business license (NIB - Nomor Induk Berusaha); (2) searching for that KBLI code in Lampiran I - if found, central authority applies; (3) if not in Lampiran I, searching Lampiran II - if found, provincial authority applies; (4) if not in either annex, reverting to location criteria per Articles 3-9. The KBLI system creates precision but also complexity: businesses with multiple KBLI codes (diversified operations) may find different activities split across different authority levels, requiring separate environmental approvals from different government offices for different operational components. The regulation does not specify how to handle businesses with primary and secondary KBLI codes spanning both annexes, creating potential for interpretation disputes where companies argue for lower authority level based on "primary" business classification while regulators assert higher authority based on any activity appearing in Lampiran I (see Matrix 5.1 below).
Matrix 5.1: KBLI Code Structure and Application
| Component | Digit Level | Example | Meaning | Application in Annexes |
|---|---|---|---|---|
| Division | 2-digit | 05 | Mining and quarrying | Broad sector identification |
| Group | 3-digit | 051 | Mining of hard coal | Activity grouping |
| Class | 4-digit | 0510 | Mining of hard coal | Specific activity category |
| Subclass | 5-digit | 05100 | Mining of hard coal (detailed) | Precise activity used in Lampiran I/II |
Matrix 5.2: Authority Determination Using KBLI Codes - Decision Process
| Step | Action | If Match Found | If No Match | Example |
|---|---|---|---|---|
| 1 | Check business license (NIB) for primary KBLI code | Note all KBLI codes listed | Cannot proceed - obtain KBLI first | KBLI 05100 (Coal mining) |
| 2 | Search KBLI code in Lampiran I | Central Authority applies → Stop | Continue to Step 3 | 05100 found in Lampiran I → Central |
| 3 | Search KBLI code in Lampiran II | Provincial Authority applies → Stop | Continue to Step 4 | If not in Lampiran I, check Lampiran II |
| 4 | Apply location criteria (Articles 3-9) | Use geographic authority rules | Should not occur - residual clause applies | Cross-provincial? → Central; Single regency? → Local |
| 5 | Check if PMA (foreign investment) in agriculture/forestry/fisheries | If PMA → Provincial (even if Step 4 suggested Local) | If PMDN → Use Step 4 result | PMA palm oil plantation → Provincial regardless of location |
Critical Note: If business has multiple KBLI codes, ANY code appearing in Lampiran I triggers central authority for activities under that code. Businesses cannot choose lowest authority level among multiple KBLI classifications.
Continue Reading: PERMEN LH 22/2025 Analysis Series
This is Article 2 of 4 in this comprehensive legal analysis series:
- Who Decides Your Environmental Permit? Indonesia's Authority Maze - Authority distribution and location criteria
- The Sector Trap: Why Your Industry Classification Determines Your Approval Path (this article) - Sectoral classifications in Lampiran I and II
- October 27th Changed Everything: Your OSS Integration Survival Guide - Implementation timeline and OSS integration
Regulation Reference
Full Citation: Peraturan Menteri Lingkungan Hidup dan Kepala Badan Pengendalian Lingkungan Hidup Nomor 22 Tahun 2025 tentang Kewenangan Penerbitan Persetujuan Lingkungan (Ministerial/Agency Regulation Number 22 of 2025 on Authority for Issuing Environmental Approvals)
Annexes:
- Lampiran I: Daftar Usaha dan/atau Kegiatan yang Merupakan Kewenangan Menteri/Kepala
- Lampiran II: Daftar Usaha dan/atau Kegiatan yang Merupakan Kewenangan Gubernur
- Promulgated: October 22, 2025
- Effective: October 27, 2025 (Article 16)
- Signed by: HANIF FAISOL NUROFIQ (Minister of Environment and Head of Environmental Control Agency)
Legal Analysis by the CRPG Environmental Law Team | Analysis Date: November 16, 2025 | Regulation Effective: October 27, 2025
LEGAL DISCLAIMER: This article is provided for informational and educational purposes only and does not constitute legal advice, legal opinion, or professional consultation. The analysis presented herein is based on the authors' interpretation of PERMEN LH 22/2025 and related regulations as of the publication date and may contain errors, omissions, or inaccuracies despite reasonable efforts to ensure accuracy. Laws and regulations are subject to amendment, judicial interpretation, and administrative clarification that may affect the applicability or interpretation of the provisions discussed. This article does not create an attorney-client relationship between the authors, the Center for Regulation, Policy and Government (CRPG), and any reader. Readers should not act or refrain from acting based solely on the information contained in this article without seeking appropriate legal counsel from qualified Indonesian legal practitioners licensed to practice environmental and administrative law. The application of sectoral authority criteria under PERMEN LH 22/2025 Lampiran I and Lampiran II depends on specific factual circumstances including accurate KBLI code identification, business license classification, foreign versus domestic investment status, activity scale and scope determination, and integration with the Online Single Submission (OSS) system, all of which require case-specific legal analysis. Neither the authors nor CRPG assume any liability for actions taken or not taken based on information in this article, nor for any direct, indirect, incidental, consequential, or punitive damages arising from use of or reliance on this material. For specific legal guidance on KBLI-based authority determination, sectoral classification questions, or PMA/PMDN distinction issues under PERMEN LH 22/2025, consult with qualified legal counsel familiar with Indonesian environmental law, business licensing regulations, and current regulatory practice.