Enhancing Foreign Investment Standards: Insights into BKPM Regulation No. 5 of 2025

On October 2, 2025, Indonesia's Investment Coordinating Board (BKPM) issued Regulation No. 5 of 2025, which outlines protocols for investment approvals, risk-oriented business permits, and support services for investors. This update replaces earlier frameworks from 2021—specifically Regulations Nos. 3, 4, and 5—streamlining the digital licensing process while imposing stricter guidelines. For international stakeholders, the most critical shifts involve elevated financial benchmarks and compliance measures, designed to promote robust economic contributions and operational stability.

Establishing Baseline Investment Levels for Foreign Entities

Indonesia maintains a longstanding emphasis on substantial foreign direct investment (PMA) to drive large-scale economic activities. Under the new rules, entities qualifying as PMA must surpass a foundational investment amount, barring exemptions outlined in sector-specific legislation. This baseline stands at more than IDR 10 billion for each distinct business category, defined by the five-digit Indonesian Standard Business Field Classification (KBLI) code, and applies to individual project sites. Notably, calculations typically omit expenses related to land acquisition and construction, focusing instead on core operational expenditures.

Capitalization Mandates for Corporate Structures

Beyond overall investment volume, foreign investors forming a limited liability company (PT PMA) face a dedicated capitalization requirement. Each such entity must secure at least IDR 2.5 billion in fully paid or committed share capital, subject to any overriding statutory provisions. This stipulation underscores the government's priority on ensuring that incoming ventures possess sufficient fiscal resilience to support long-term viability and growth.

Safeguarding Capital Through Time-Bound Restrictions

To bolster trust in these financial pledges, the regulation enforces a 12-month retention policy on deposited capital funds. Withdrawals from the company's designated account are prohibited during this window, except for expenditures tied to acquiring assets, erecting facilities, or conducting routine operations. Investors formalize this obligation via a sworn statement submitted during the Online Single Submission (OSS) application phase, following a prescribed template in the regulation's appendix. Violations trigger formal penalties, embedding accountability into the approval workflow.

Tailored Thresholds Across Key Industries

The standard investment criteria adapt to the unique demands of various sectors, adjusting classification granularity and inclusions as needed. In wholesale distribution, thresholds align with four-digit KBLI codes. Food and beverage outlets aggregate investments across two-digit KBLI categories within a single municipal jurisdiction, streamlining multi-site evaluations. Similarly, construction ventures adhere to four-digit classifications, while manufacturing operations spanning multiple product lines under one facility must collectively exceed the IDR 10 billion mark, again excluding real estate costs.

For precision in the hospitality domain, a "single location" equates to an entire administrative district or municipality, fostering consistent permit assessments.

Adjusting for Asset-Intensive Fields

In contrast to the norm, certain industries incorporate land and building valuations into the investment tally, reflecting their inherent resource demands. This applies to real estate development and management (whether for resale or rental), hospitality services spanning short- and long-term stays, and primary production areas such as farming, plantations, animal husbandry, and fisheries. Such inclusions highlight the scale required for sustainable expansion in these domains.

Within real estate, a bifurcated approach governs thresholds: comprehensive projects encompassing unified structures or residential clusters factor in land and building costs to reach beyond IDR 10 billion. Standalone unit developments, however, revert to the exclusionary model, emphasizing operational investments over property holdings.

Niche Provisions for Emerging Sectors

The electric vehicle infrastructure sector receives targeted guidance, mandating investments exceeding IDR 10 billion—net of land and buildings—for public charging networks, assessed on a provincial basis to encourage widespread deployment.

Operations within Special Economic Zones (KEKs), encompassing manufacturing, supply chain, leisure, tech innovation, power generation, and R&D hubs, defer to bespoke presidential directives. This provision enables adaptive policies attuned to strategic national objectives.

Final Observations

This regulatory evolution fortifies Indonesia's appeal as a destination for meaningful foreign capital, balancing accessibility with rigorous oversight. By codifying investment minima, retention protocols, and adaptive exemptions, BKPM Regulation No. 5 of 2025 cultivates an environment of transparency and accountability. Investors are advised to meticulously align their plans with these parameters, consulting legal experts to mitigate risks of procedural hurdles or enforcement actions.

Frequently Asked Questions (FAQs)

Q: When does BKPM Regulation No. 5 of 2025 take effect, and what prior rules does it replace?

A: The regulation became effective immediately upon issuance on October 2, 2025, and supersedes BKPM Regulations Nos. 3, 4, and 5 from 2021, which addressed electronic licensing, procedural standards, and oversight mechanisms.

Q: Are there any exemptions from the IDR 10 billion minimum investment for PMA?

A: Yes, exemptions may apply under sector-specific laws, and thresholds vary by industry (e.g., four-digit KBLI for wholesale or construction). Special Economic Zones follow separate presidential guidelines.

Q: How is the 12-month capital lock-up enforced?

A: It is upheld through a mandatory self-declaration in the OSS system, with breaches leading to administrative sanctions. Funds can only be used for approved business purposes during this period.

Q: Does the minimum paid-up capital of IDR 2.5 billion apply to all PT PMA entities?

A: Generally yes, but exceptions exist where prevailing laws dictate otherwise, ensuring flexibility for unique corporate setups.

Q: How are investments calculated for multi-product manufacturing or food service chains?

A: For manufacturing, a single production line's total investment must exceed IDR 10 billion (excluding land/buildings). Food services aggregate across two-digit KBLI codes per district or city.

Q: In property development, when are land and building costs included in the threshold?

A: They are included for integrated complexes or housing projects but excluded for isolated unit developments, aligning with the project's scope and scale.