Indonesia has taken another step toward reshaping its investment climate with the issuance of BKPM Regulation No. 5 of 2025, a move that quietly but materially alters how businesses—particularly foreign-owned companies—enter and operate in the country. While the regulation is technical in nature, its implications reach far beyond administrative housekeeping. It reflects a broader policy direction: lowering friction at the entry stage while tightening expectations around execution, transparency, and accountability.
Issued by the Ministry of Investment and effective from early October 2025, the regulation consolidates and replaces several earlier rules dating back to 2021. It also operationalizes Indonesia’s risk-based licensing framework under Government Regulation No. 28 of 2025, aligning business approvals more closely with actual risk profiles rather than blanket assumptions.
One of the most closely watched aspects of the new regulation is its treatment of capital requirements for foreign-owned companies (PT PMA). For years, many investors believed that IDR 10 billion was a fixed minimum capital threshold to establish a foreign company. Regulation No. 5 of 2025 clarifies this long-standing confusion by lowering the minimum paid-up capital to IDR 2.5 billion for most sectors.
The distinction is important. Paid-up capital refers to funds actually injected into the company at establishment, while higher figures—often still exceeding IDR 10 billion—are tied to investment value, or the projected scale of operations over time. By separating these concepts more explicitly, Indonesia has reduced the upfront financial barrier for entry without abandoning expectations around long-term investment commitment.
For smaller foreign investors, startups, and service-based businesses, this clarification materially changes the entry calculus.
The regulation reinforces the logic of the Online Single Submission Risk-Based Approach (OSS RBA), Indonesia’s central digital licensing platform. Under this system, approvals are calibrated to business activity, sector classification (KBLI), and risk level. Rather than applying uniform rules, authorities assess what level of oversight is proportionate.
This approach is visible in several areas addressed by the regulation, including timelines for commencing commercial operations. Instead of vague expectations, businesses now have clearer guidance on when they are expected to move from establishment to activity, depending on whether infrastructure development is required. While the regulation introduces indicative timelines, these function more as benchmarks than hard prohibitions, offering both clarity and flexibility.
Another practical adjustment concerns import licensing. Regulation No. 5 of 2025 allows companies holding a general import license (API-U) to convert it into a producer import license (API-P) when their business model evolves toward manufacturing or internal use. The reverse conversion is not permitted, signaling a preference for traceable progression rather than regulatory arbitrage.
For foreign investors, this change reduces friction when scaling or pivoting operations. It also reflects improved coordination between the Ministry of Investment and the Ministry of Trade, an area that has historically caused delays.
Environmental and spatial licensing—often cited as a bottleneck—also see meaningful streamlining. The regulation centralizes processes such as spatial utilization confirmation (KKPR), building approvals (PBG), and certificates of proper function (SLF) within OSS, with clearer deadlines and standardized procedures.
Environmental approvals, including AMDAL and UKL-UPL, are now processed digitally through BKPM on behalf of the Ministry of Environment. An integrated screening feature within OSS identifies required documents automatically, reducing duplication and uncertainty. For investors, this signals a shift toward predictability rather than negotiation.
In a subtle but impactful change, the regulation allows companies to generate revenue from supporting activities—such as logistics, warehousing, or IT support—provided these activities are properly stated in the articles of association and meet investment thresholds. Previously, such activities were often restricted to cost centers.
This adjustment recognizes the realities of modern business models, where auxiliary functions can be commercial in nature, and aligns Indonesia more closely with international practice.
The food and beverage sector receives targeted flexibility. Minimum investment requirements now apply at the city or regency level rather than per outlet, easing expansion for multi-location operators. Digital businesses, meanwhile, face clearer registration expectations, with foreign electronic system operators required to obtain a Business Identification Number (NIB) and register under communications regulations—less a new barrier than a formalization of existing oversight.
At the other end of the spectrum, sensitive industries such as pharmaceuticals and energy face stricter conditions when revoking licenses, underscoring a parallel policy priority: accountability through the full lifecycle of a business.
Perhaps the most telling signal in Regulation No. 5 of 2025 is its emphasis on post-licensing behavior. Investment realization reporting (LKPM) is more closely monitored, and prolonged inactivity can trigger administrative sanctions. The message is clear: Indonesia is not only interested in attracting capital, but in seeing it deployed.
This reflects a broader shift from approval-based governance to performance-based oversight—a trend increasingly visible across emerging markets.
Taken together, the regulation suggests a recalibration rather than deregulation. Indonesia is lowering entry barriers where they were unnecessarily high, while sharpening tools to track progress and compliance once a company is established.
For foreign investors, this increases the importance of accurate structuring at the outset—choosing the right business classification, capital framework, and licensing pathway. Many investors therefore seek guidance on company registration and OSS RBA alignment early in the process. Advisory firms such as CPT Corporate are often referenced in this context for helping businesses interpret how the new rules apply to their specific sector and growth plans.
BKPM Regulation No. 5 of 2025 does not remove complexity from Indonesia’s regulatory environment, but it does make it more legible. By clarifying definitions, digitizing approvals, and aligning ministries, the government is signaling that Indonesia wants active, compliant investors—not speculative filings.
For foreign businesses weighing entry into Southeast Asia’s largest economy, the reform offers a clearer proposition: the door is open, the rules are better defined, and the expectation is progress. In that sense, the regulation is less about simplification alone and more about maturity—marking another step in Indonesia’s evolution as an investment destination.
This press release has also been published on VRITIMES
