Indonesia is one of Southeast Asia’s most promising investment destinations — a market of more than 280 million people, a growing middle class, abundant natural resources, and a strategic position at the heart of regional supply chains. Just as importantly, Indonesia’s legal framework has, in recent years, moved consistently toward greater openness to foreign direct investment. For foreign investors considering entry into Indonesia, this is an opportune moment to understand what is on offer
An Increasingly Open Legal Foundation
Indonesia’s foreign investment framework rests on Law No. 25 of 2007 on Investment, later reinforced by the Job Creation Law (now Law No. 6 of 2023). This reform brought a fundamental shift: away from a restrictive negative investment list and toward a far more open approach.
Through Presidential Regulation No. 10 of 2021, as amended by Presidential Regulation No. 49 of 2021, the government classifies business sectors into priority, MSME-partnership, conditional, and open categories. The spirit is clear: most sectors are now open to foreign ownership — many up to 100% — with certain priority sectors even eligible for special incentives.
Streamlined Licensing: Risk-Based OSS
One of the biggest leaps is the risk-based licensing system administered through the Online Single Submission platform (OSS-RBA), under Government Regulation No. 5 of 2021. Instead of navigating layers of manual permits, investors now enter through a single digital gateway. The Business Identification Number (NIB) serves as a single identity, and licensing obligations are calibrated to the risk level of the business activity. For foreign investors, this means a more transparent, faster, and more predictable process.
The Latest Good News: A More Rational Capital Threshold
The most encouraging development comes from Regulation of the Minister of Investment and Downstreaming/Head of BKPM No. 5 of 2025, aligned with Government Regulation No. 28 of 2025. The capital requirements for a Foreign Investment Limited Liability Company (PT PMA) are now more rational and accessible:
- The minimum issued and paid-up capital has been lowered — from the figure commonly understood as IDR 10 billion — to at least IDR 2.5 billion. This capital must be genuinely paid up and ready for use in business operations, not merely an administrative figure.
- The minimum investment value remains above IDR 10 billion (excluding land and buildings) per five-digit KBLI code per project location — a marker that the investment is genuinely of scale and delivers real economic impact.
Lowering the paid-up capital threshold reduces the initial barrier to entry while preserving investment quality. The government also allows capital adjustments for certain sectors, such as technology startups, special economic zones (SEZs), and research-and-development-based ventures.
Practical Steps to Establish a PT PMA
Broadly, the typical path for foreign investors to establish a PT PMA involves:
- Determining the line of business and accurately mapping the KBLI code, including checking foreign ownership limits and risk levels.
- Preparing the deed of establishment through a notary and obtaining legal entity ratification from the competent ministry.
- Registering through OSS-RBA to obtain the NIB and business licensing appropriate to the risk level.
- Meeting capital requirements and opening a corporate bank account.
- Fulfilling post-establishment obligations, including periodic submission of the Investment Activity Report (LKPM).
Each step looks simple on paper, but the accuracy of KBLI selection, ownership structure, and fulfilment of investment commitments largely determines how smoothly — and how safely — the investment proceeds over the long term.
Why Now, and Why with the Right Partner
The combination of a large market, fiscal incentives such as tax holidays and tax allowances in priority sectors, special economic zones, and an increasingly efficient licensing framework makes Indonesia a destination worth serious consideration. Yet openness does not mean the absence of rules. Precisely because regulation is now monitored more strictly and in real time, compliance from the planning stage is essential.
This is where the right legal partner adds value. Rather than an added cost, sound legal support is a way of protecting your investment from day one. Our Direct Investment team accompanies foreign investors end to end — from sector mapping and ownership structuring, to PT PMA establishment, OSS licensing, and ongoing compliance — so that your journey in Indonesia begins on a solid legal foundation.
This article is prepared for general information purposes only and does not constitute legal advice. For specific matters, please consult our team.