New Financial Baselines for Foreign Investment: Navigating BKPM Regulation 5/2025

Executive Summary

Effective October 2, 2025, the Indonesian government has overhauled the regulatory landscape for Foreign Direct Investment (PMA) through the enactment of BKPM Regulation No. 5 of 2025. This regulation supersedes the previous 2021 frameworks (Regulations No. 3, 4, and 5), introducing stricter financial prerequisites designed to ensure that foreign entities entering the market are financially robust and committed to long-term operations.

The Two-Pillar

The Two-Pillar Financial Structure Under the new regime, foreign investors must distinguish between two separate but mandatory financial thresholds:

• Entry Threshold (Paid-Up Capital): To establish a legal entity (PT PMA), shareholders must now demonstrate a minimum paid-up or subscribed capital of IDR 2.5 billion. This serves as the initial "entry ticket" to verify financial capacity.
• Operational Threshold (Investment Value): Beyond the initial capital, the regulation maintains the "large-scale" business requirement. Investors must commit to an investment value of greater than IDR 10 billion per business line (5-digit KBLI) per project location.

Standard Rule:

• This IDR 10 billion calculation excludes the value of land and buildings.
• The Capital "Lock-Up" Protocol A significant compliance update in Regulation 5/2025 is the introduction of a mandatory retention period. To prevent capital flight immediately after licensing:
• 12-Month Rule: The IDR 2.5 billion paid-up capital must remain in the company’s bank account for at least 12 months from the date of placement.
• Permissible Use: Funds cannot be transferred out for non-business reasons but may be utilized for legitimate operational needs, such as asset acquisition, construction, or daily overheads.
• Enforcement: Investors must sign a legally binding self-declaration via the OSS system. Violating this commitment triggers administrative sanctions.

Sector-Specific Investment Calculations Recognizing that different industries operate under different capital structures, the regulation provides distinct calculation methods for specific sectors:

Sector	Investment Threshold Rules (> IDR 10 Billion)
General Trading	Calculated per 4-digit KBLI (Wholesale).
Food & Beverage	Calculated per 2-digit KBLI per District/City (Kabupaten/Kota).
Property & Hospitality	Includes land and building value for integrated housing complexes, hotels, and accommodation services.
Agriculture	Includes land and building value for plantations, livestock, and aquaculture.
EV Infrastructure	Calculated per Province for public charging stations (Excluding land/building).
Special Economic Zones	Exempt from standard rules; subject to specific Presidential Regulations.

Sector-Specific Exceptions to Investment Thresholds

While the general investment threshold applies per 5-digit KBLI and per project location, Article 26(3) provides notable exceptions for specific sectors. In the wholesale trade sector, the minimum investment of more than IDR 10 billion (excluding land and buildings) applies per 4-digit KBLI. For food and beverage services, the threshold is calculated per 2-digit KBLI and per single location, excluding land and buildings. Construction services are also governed by a 4-digit KBLI threshold, while industrial businesses that produce various types of products within a single production line must exceed IDR 10 billion in investment, excluding land and buildings.

Location Definition for F&B Sector

For clarity, Article 26(4) provides that the definition of “single location” for food and beverage services is to be understood as per district or city (kabupaten/kota), thereby standardizing the interpretation for licensing purposes.

Inclusion of Land and Buildings in Specific Sectors

Article 26(5) introduces an important deviation from the general rule by stating that for several business sectors, the investment value includes land and buildings. These sectors include property development and operations (both for sale and lease), short-term and long-term accommodation services, as well as agricultural, plantation, livestock, and aquaculture activities. The inclusion of land and building values in these sectors underscores the capital-intensive nature of these activities.

Property Development: Two-Tiered Investment Rules

For businesses engaged in the construction and operation of property, Article 26(6) draws a distinction between two models. Where the development involves a fully integrated building or housing complex, the investment threshold of more than IDR 10 billion includes land and building. Conversely, for the development of individual property units not part of a single building or complex, the minimum investment must still exceed IDR 10 billion, but this excludes the value of land and buildings.

EV Charging Stations and Provincial Scope

Investors in the electric vehicle ecosystem must also take note of Article 26(7), which sets a specific minimum investment requirement for the development and operation of public EV charging stations. The threshold is more than IDR 10 billion, excluding land and buildings, and is calculated per province.

Special Economic Zones (KEK) and Presidential Flexibility 

For businesses operating within designated Special Economic Zones (KEK)—including production, logistics, tourism, digital economy, energy, and research zones—Article 26(8) provides that the minimum investment value shall follow the specific provisions stipulated under Presidential Regulations concerning investment fields. This allows for sectoral flexibility based on national strategic priorities.

Frequently Asked Questions (FAQ)

Q1: What is the difference between "Paid-Up Capital" and "Investment Value"?
A: They are two separate requirements. "Paid-Up Capital" (IDR 2.5 billion) is the actual cash equity you must inject into the company bank account to form the legal entity. "Investment Value" (>IDR 10 billion) is your projected spending plan (CAPEX and OPEX) to make the business operational, which usually excludes land and buildings.

Q2: Does the "Lock-Up" rule mean I cannot touch my capital for a year?
A: No. You cannot transfer the money out of the company (e.g., returning it to shareholders), but you can and should use it for business purposes. The regulation explicitly allows the funds to be used for "asset purchases, building construction, or business operations" during that 12-month period.

Q3: I am opening three restaurants in Bali. Do I need >IDR 10 Billion for each one?
A: It depends on the specific location. For the Food & Beverage sector, the investment is calculated per District/City (Kabupaten/Kota).

• Scenario A: Three restaurants in Badung Regency = One investment requirement (>IDR 10 Billion total).
• Scenario B: One restaurant in Badung and one in Denpasar = Two separate investment requirements (>IDR 20 Billion total).

Q4: Does buying land count toward my IDR 10 Billion investment target?
A: For most businesses (like consulting, trading, or industrial), No. The regulation requires you to invest >IDR 10 billion excluding land and buildings. However, if your business is property development (integrated complexes), hotels, or agriculture, the value of land and buildings is included in the calculation.

Q5: What happens if I breach the self-declaration regarding the capital lock-up?
A: The self-declaration is legally binding. If an audit reveals that the capital was withdrawn without underlying business justification within the first 12 months, the company is subject to administrative sanctions, which may include the revocation of business licenses.

Q6: Does this regulation apply to existing companies or only new ones?
A: The regulation was enacted on October 2, 2025. It primarily targets new license applications submitted after this date. Existing companies should consult with a legal professional to review if any changes to their business data (NIB) might trigger these new requirements.