Investment Limitation in Indonesia for Foreign Investors

Indonesia adopts an open investment policy in principle. Almost all commercial business sectors are open to both foreign investment (PMA) and domestic investment (PMDN), unless a sector is explicitly restricted or closed by law.

These rules are mainly governed by Presidential Regulation No. 10 of 2021, as amended by Presidential Regulation No. 49 of 2021, and the Job Creation Law.

Business Fields Open to Investment

As a general rule, all commercial business fields are open to investment, except for:

• Business sectors that are explicitly closed
• Business activities that can only be carried out by the Central Government
• Strategic sectors related to defense and national security

For business fields that are open, Indonesia further classifies them into several categories:

Priority Business Fields (Incentive-Based Sectors)

Priority business fields are sectors that support Indonesia’s long-term economic and strategic goals.

These typically include businesses that are:

• Part of national strategic projects or programs
• Capital-intensive or labor-intensive
• High-technology based
• Considered industry pioneers
• Export-oriented
• Focused on research, development, and innovation

Incentives for Priority Sectors

Investors operating in priority business fields may receive fiscal and non-fiscal incentives, including:

Fiscal incentives, such as:

• Tax allowance (income tax reduction for specific sectors or regions)
• Tax holiday (corporate income tax reduction or exemption)
• Investment allowance, including:
  • Corporate tax deductions for labor-intensive industries
  • Gross income deductions for training, apprenticeships, and workforce development

Customs incentives, such as:

• Import duty exemptions for machinery, equipment, and materials used in business development

Non-fiscal incentives, including:

• Simplified business licensing
• Supportive infrastructure access
• Raw material availability guarantees
• Immigration facilitation, such as:
  • Recommendations to convert a Visitor Visa into a Limited Stay Permit (KITAS)
  • Recommendations to upgrade a Limited Stay Permit into a Permanent Stay Permit (KITAP)

Learn more: All You Need to Know about Investor KITAS

Business Fields Reserved for Cooperatives & UMKM (MSMEs)

Certain business sectors are allocated exclusively to cooperatives and UMKM (Micro, Small, and Medium Enterprises) to protect local businesses.

These sectors usually involve:

• Simple or low-technology operations
• Labor-intensive or traditional processes
• Businesses with strong cultural or hereditary value
• Business capital of no more than IDR 10 billion, excluding land and buildings

Partnership-Based Business Fields

Some business sectors are open to large companies, but only through partnerships with cooperatives or UMKM. These are typically:

Sectors largely dominated by UMKM

Businesses encouraged to be integrated into large company supply chains

Business Fields with Specific Requirements

Some business sectors are open to all investors but subject to specific conditions, including:

a. Domestic Investment Requirements

Such requirements may include:

• Minimum investment value
• Restrictions on certain business entity types
• Paid-up capital or asset requirements

b. Foreign Ownership Restrictions

Certain sectors limit foreign shareholding percentages. However, these restrictions do not apply to:

• Investments approved before Presidential Regulation No. 10 of 2021
• Investments protected under international agreements or treaties, unless the new regulation is more favorable

Foreign ownership limits also apply to companies formed through mergers, acquisitions, or consolidations in the same business field.

c. Special Licensing Requirements

Some sectors require additional sector-specific licenses beyond standard OSS registration.

d. Strictly Regulated Sectors (Alcoholic Beverages)

Business activities involving alcoholic beverages are closely supervised, including:

• Wholesale alcoholic beverage trade (KBLI 46333)
• Retail alcoholic beverage trade (KBLI 47221)
• Street retail alcoholic beverage trade (KBLI 47826)

These sectors require special approvals and compliance with separate regulations.

Read more: Challenges When Starting a Business in Indonesia for Foreigners and How to Overcome Them

Business Fields Fully Open to All Investors

Any business sector not classified as priority, restricted, partnership-based, or conditional is generally open to all investors, both foreign and domestic, without additional limitations.

Business Fields Closed to Investment

Certain business fields are completely prohibited for both foreign and domestic investors under the

Job Creation Law, including:

• Cultivation or production of Class I narcotics
• Gambling and casino activities
• Fishing of species protected under CITES Appendix I
• Extraction or use of natural coral for construction, souvenirs, or jewelry
• Chemical weapons manufacturing
• Industries producing substances that damage the ozone layer

These sectors cannot be licensed or operated under any circumstances.

Special Business Fields (Single Purpose & Single Majority)

Single Purpose Business Fields

These are sectors that cannot be combined with other business activities within the same company, such as:

• Hospitals
• Shipping and water transportation services
• Private and subscription broadcasting
• Transportation management services
• Warehousing and storage services

Single Majority Business Fields

In these sectors, domestic ownership must remain higher than foreign ownership.

For example:

Air transportation for passengers (KBLI 51109) allows a maximum of 49% foreign ownership

Special Rules for Technology-Based Startups

Foreign technology startups operating within Special Economic Zones (KEK) may invest with a value of up to IDR 10 billion, excluding land and buildings.

This exception supports innovation-driven businesses entering Indonesia at an early stage.

How Visa BaliEasy Helps

Understanding Indonesia’s investment limitations can be complex, but you don’t have to navigate it alone.

Visa BaliEasy supports foreign and local investors by:

• Identifying permitted and restricted business sectors
• Advising on foreign ownership limits
• Structuring compliant PMA and partnership models
• Providing 24/7 human customer support, not bots

With Visa BaliEasy, your investment starts legally, clearly, and with confidence in Indonesia.