Indonesia continues to position itself as one of Southeast Asia’s most dynamic investment destinations. Yet, regulatory complexity and administrative hurdles have long been cited as barriers to smooth market entry.
Recognizing these challenges, the Indonesian government has introduced the new regulation No. 5 of 2025, issued by the Ministry of Investment (BKPM).
This regulation represents a significant policy step toward creating a more investor-friendly environment, streamlining licensing procedures, and reducing structural obstacles for foreign capital.
It not only simplifies the investment process but also aligns Indonesia’s regulatory framework with international standards of ease of doing business.
About the New Regulation No. 5/2025 and Its Purpose
The new regulation No. 5/2025, officially titled Peraturan Menteri Investasi dan Hilirisasi No. 5 Tahun 2025, was issued by the Ministry of Investment / Investment Coordinating Board (BKPM) on October 1, 2025.
It forms part of the government’s broader reform agenda to modernize investment governance, enhance transparency, and integrate digital processes through the Online Single Submission (OSS) system.
Meanwhile, the new regulation introduces the following provisions
- Companies are required to deposit a minimum capital of IDR 2.5 billion into their own bank account and maintain the balance for 12 months, unless the funds are utilized for working capital or investment-related expenditures
- The remaining IDR 7.5 billion may comprise eligible tangible or intangible assets, including machinery, vehicles, production equipment, feasibility studies, and construction costs
- Companies holding multiple KBLI (Business Classification Codes) within the same business group may now consolidate them into a single investment plan, without preparing separate capital calculations
In sectors such as property, agriculture, and fisheries, land and building values are now recognized as part of the total investment value
The Purpose of New Regulation No. 5/2025
The regulation serves several key purposes:
- Simplifying Licensing and Administrative Procedures
It builds upon the risk-based licensing framework introduced under the Job Creation Law (Omnibus Law), ensuring that investment permits are issued proportionally to the level of business risk. Low-risk sectors can now proceed through a simpler notification process, while higher-risk industries are subject to more detailed supervision.
- Lowering Entry Barriers for Foreign Investors
One of the most notable provisions in the new regulation is the reduction of the minimum paid-up capital requirement for foreign-owned limited liability companies (PT PMA). As mentioned above, previously set at IDR 10 billion per business activity (KBLI), the threshold has now been lowered to IDR 2.5 billion for many sectors. This move is designed to attract smaller-scale investors and promote diversity in foreign participation.
- Encouraging Downstream Investment
Consistent with Indonesia’s long-term economic vision, the regulation supports the downstreaming (hilirisasi) policy by directing foreign investment into processing, value-added, and green industries. It emphasizes sustainable and strategic investments that contribute to national development goals.
- Enhancing Transparency and Oversight
By integrating the licensing process within the OSS system, the government aims to reduce bureaucratic discretion and minimize corruption risks. Investors can track applications, monitor compliance obligations, and obtain permits more efficiently through a single digital platform.
How the New Regulation Benefits Foreign Investors
- Easier Market Entry and Faster Licensing
The streamlined OSS integration means that investors no longer need to navigate multiple agencies for separate permits. The system automatically determines risk classifications and corresponding requirements, allowing for faster issuance of licenses particularly for low- and medium-risk sectors.
- Lower Capital Requirements
Reducing the capital threshold from IDR 10 billion to IDR 2.5 billion significantly lowers the financial barrier to entry. This change encourages startups, SMEs, and regional investors to participate in Indonesia’s growing economy without excessive upfront investment.
- Greater Legal Certainty
The new regulation provides clearer definitions and procedures for registration, reporting, and compliance. By codifying these processes, it reduces ambiguity that previously caused delays or inconsistencies in approval timelines. Investors can now operate with higher confidence in the predictability of the legal system.
- Digitalized and Transparent Processes
The full integration of licensing into the OSS portal allows investors to manage submissions, updates, and renewals entirely online. This digitization improves transparency, cuts administrative time, and enables companies to maintain compliance records efficiently.
- Opportunities in Priority Sectors
The regulation also aligns with Indonesia’s priority investment map, promoting opportunities in renewable energy, manufacturing, infrastructure, and digital technology.
Foreign investors entering these sectors may receive additional incentives, such as tax holidays or import duty exemptions, subject to coordination with the relevant ministries.
Practical Steps for Investors Entering Indonesia
While the new regulation simplifies the overall investment process, investors should still approach market entry with careful preparation. Below are practical steps to ensure a smooth and compliant incorporation process:
- Conduct Market and Regulatory Research
Before incorporation, investors should identify the relevant KBLI codes applicable to their business. Each KBLI has specific licensing requirements and may fall under different risk categories within the OSS system. Consulting a local expert can prevent classification errors that delay approvals.
- Prepare Incorporation Documents
Foreign investors must establish a foreign-owned limited liability company (PT PMA) to operate legally in Indonesia. Required documents typically include Articles of Association, identification of shareholders, investment plans, and proof of paid-up capital.
- Register Through the OSS System
All investment licenses and business permits are issued digitally through the Online Single Submission (OSS) platform managed by BKPM. Investors must register their business, complete data input, and upload required documents. Once verified, the system will automatically issue a Business Identification Number (Nomor Induk Berusaha / NIB) which serves as the company’s primary license.
- Ensure Compliance with Additional Sectoral Regulations
Certain industries such as energy, health, mining, or finance may require additional permits or clearances from line ministries. Investors should check whether sectoral regulations impose higher capital thresholds, special approvals, or environmental impact assessments (AMDAL).
- Maintain Ongoing Reporting and Compliance
After establishment, companies are expected to submit periodic reports on business progress, employment, and investment realization to BKPM through the OSS system. Consistent compliance ensures smooth renewals and protects investors from administrative sanctions.
- Engage Professional Advisory Support
Given Indonesia’s evolving regulatory environment, partnering with a reliable consulting firm can minimize errors and save time. Experienced advisors understand both the legal framework and practical procedures necessary to achieve full compliance.
Partner with Watershore and Remain Compliant with Indonesia’s New Regulation
Navigating Indonesia’s investment procedures can still be complex without proper guidance. That’s where Watershore makes the difference. Watershore provides comprehensive support for foreign investors establishing businesses in Indonesia.
From license research, documentation, and OSS registration to full legal compliance and ongoing advisory, our experts ensure that your incorporation process is efficient, compliant, and stress-free.
With our deep understanding of Indonesian investment law and administrative processes, we help you save time, reduce risk, and start operating with confidence under the new regulation framework.
Contact Watershore to get end-to-end assistance with Indonesia’s company registration and investment licenses!
Sources:
https:// kontrakhukum.com/ article/bkpm-umumkan-kabar-baik-modal-minimal-pt-pma-turun-drastis-dari-rp10-miliar-ke-rp25-miliar/#:~:text=BKPM%20No.%205%20Tahun%202025%20membawa%20perubahan%20besar%20pada%20ketentuan,setiap%20kegiatan%20usaha%20(KBLI).
https:// andzaribrahim. com/ analisis-hukum-peraturan-menteri-investasi-dan-hilirisasi-no-5-tahun-2025-serta-memorandum-hukum-trilingual-en-id-ch/#:~:text=Indonesia%20Nomor%207115).-,Peraturan%20Menteri%20Investasi%20dan%20Hilirisasi%2FKepala%20Badan%20Koordinasi%20Penanaman%20Modal,Elektronik%20(Online%20Single%20Submission).
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https://pixabay. com/illustrations/ business-meeting-office-people-8941855/