For decades, Bali has been one of Indonesia’s most attractive destinations for foreign investment, drawing entrepreneurs to sectors ranging from hospitality and tourism to retail and professional services. However, the regulatory landscape is now shifting. The Bali Provincial Government has introduced restrictions on new foreign-owned companies (PT PMA) operating under selected low-risk and medium-low-risk business classifications. Implemented through Indonesia’s Online Single Submission (OSS) system, the policy limits foreign investment in certain sectors that have traditionally been popular among small-scale business operators.
For foreign investors considering company incorporation in Bali, the measure represents a significant regulatory development and underscores the growing emphasis on compliance, investment quality, and sustainable economic contribution.
Bali Tightens Control Over Foreign Investment
The policy stems from growing concerns within the Bali Provincial Government regarding the rapid increase of foreign-owned companies operating in sectors traditionally dominated by local small and medium-sized enterprises (SMEs). In January 2026, Bali Governor Wayan Koster formally proposed tighter controls on certain business classifications commonly used by PT PMA entities.
According to provincial data, Bali accounted for nearly 40% of all PT PMA registrations issued nationwide between 2021 and 2025. More than 19,000 foreign-owned companies launched over 55,000 registered projects during that period, many of them within low-risk sectors requiring only a Business Identification Number (NIB).
Officials argue that the accessibility of this framework has, in some cases, enabled company structures that served primarily as residency vehicles rather than genuine commercial enterprises.
Concerns have also emerged regarding increasing competition between foreign-owned entities and local businesses operating within the SME segment. As part of its response, the Bali Government has proposed the closure of seven low-risk and medium-low-risk business classifications (KBLI) for new PT PMA registrations.
Why Is Bali Taking This Approach?
Through this approach, Bali’s government states its clear statement: Future foreign investment in Bali should generate measurable economic contribution, meaningful capital commitment, and stronger regulatory accountability.
Several concerns influenced the decision:
- Rapid growth of dormant or inactive PT PMA entities
- Misuse of company registrations for residency purposes
- Limited investment realisation
- Non-compliance with licensing requirements
- Weak regulatory oversight in low-risk sectors
Throughout 2025 and early 2026, authorities conducted extensive compliance investigations involving hundreds of foreign-owned businesses across Bali. According to official data, 423 companies received sanctions following licensing violations, including non-compliance with investment requirements and operating outside approved business activities.
To strengthen future supervision, the Ministry of Investment also established a dedicated Investment Desk in Bali to coordinate monitoring and enforcement activities. The Governor has subsequently issued a Circular Letter specifically addressing this sector, introducing a transition period of three months for existing businesses operating under the classification.
What Has Changed in the OSS System?
Under Indonesia’s Risk-Based Business Licensing framework, every business activity is assigned a specific risk classification. That classification determines the level of licensing and regulatory oversight required before operations can commence.
The latest policy change means that new PT PMA applications registered with a Bali business address can no longer obtain approval for activities categorised as low-risk or medium-low-risk through OSS. Applications submitted under these classifications will automatically receive a rejection notice stating that the application cannot proceed.
Understanding Indonesia’s Risk-Based Licensing System
| Risk Category |
Licensing Requirement |
| Low Risk | NIB only |
| Medium-Low Risk | NIB + Self-Declared Standard Certificate |
| Medium-High Risk | NIB + Government-Verified Standard Certificate |
| High Risk | NIB + Full Business Permit (Izin) |
Under the previous framework, many foreign-owned businesses could establish operations with minimal regulatory scrutiny. The new restriction effectively closes that pathway within Bali Province.
Which Business Activities Are Most Affected?
Although the restriction applies broadly to all low-risk and medium-low-risk classifications, government officials identified several business sectors that contributed significantly to the policy review.
Commonly Affected KBLI Categories
|
KBLI Code |
Business Activity |
| 68111 | Self-Owned or Leased Real Estate |
| 70209 | Management Consulting Services |
| 77311 | Motorcycle Rental |
| 77100 | Vehicle Rental Services |
| 79121 | Travel Agency Activities |
| 47711 | Clothing Retail Trade |
| 47511 | Textile Retail Trade |
| 47249 | Food Retail Trade |
| 47991 | Mobile Retail Food Trade |
Many of these sectors became particularly popular among foreign investors due to their relatively simple licensing requirements and low compliance burden.
Real estate and consulting activities were among the most heavily concentrated categories in Bali, accounting for a disproportionately large share of national registrations.
What Does This Mean for Foreign Investors?
For prospective investors, the key takeaway is simple: business planning in Indonesia should begin with a thorough assessment of the intended business activity and its corresponding KBLI classification before any incorporation steps are taken.
Under Indonesia’s risk-based licensing system, the business sector selected at the outset determines not only the licences required but also whether foreign ownership is permitted, the level of regulatory oversight involved, and, increasingly, whether the activity remains open for foreign investment in certain regions such as Bali.
Investors planning to establish businesses listed above may discover that their preferred business activities are no longer eligible for PT PMA registration in Bali if they fall under the newly restricted low-risk or medium-low-risk categories.
Before Registering a PT PMA, Investors Should Verify:
- Current KBLI classification
- Risk category assignment
- Foreign ownership eligibility
- Licensing requirements
- Local operational requirements
- Minimum investment obligations
- Operational substance requirements
Conducting this assessment early can help prevent costly mistakes, such as signing long-term lease agreements, purchasing commercial assets, or committing capital before confirming that the proposed business activity is legally permissible.
Use the Right Procedure for the Right Purpose
The latest policy also serves as a reminder that foreign nationals must comply with the intended purpose and regulatory framework of each legal structure available in Indonesia.
A PT PMA is designed for genuine foreign investment activities and commercial operations. Establishing a company should be driven by legitimate business objectives, operational plans, and investment commitments, not solely as a pathway to obtaining immigration benefits.
Selecting the appropriate pathway is essential to maintaining compliance with Indonesian immigration and investment regulations. Attempting to use a company structure for purposes unrelated to actual business operations may expose individuals and businesses to future regulatory scrutiny, licensing complications, or immigration risks.
Are Existing PT PMA Companies Affected?
The answer is no. Businesses that successfully obtained their NIB and business licences before the restriction took effect may continue operating under their existing approvals. Their licences remain valid and legally recognised.
However, existing companies should not assume they are immune from scrutiny.
The Bali Investment and One-Stop Integrated Service Agency (DPMPTSP) has indicated that active companies operating under affected classifications may face stricter inspections, audits, and compliance reviews moving forward.
Companies should therefore ensure that:
- Investment commitments are fulfilled
- Tax obligations remain current
- Operational activities match registered business classifications
- Required permits and certificates are maintained
Can Investors Register a Company Outside Bali?
Some investors have considered registering a PT PMA in Jakarta while conducting business activities in Bali.
In practice, this option is extremely limited.
A Jakarta-registered company may be appropriate where the business genuinely operates outside Bali or functions as a holding company without commercial activity on the island. However, operating a restaurant, retail business, villa rental operation, or tourism service in Bali through an entity registered elsewhere is unlikely to satisfy regulatory requirements.
Each structure must be assessed carefully based on actual business activities and operational realities.
Higher-Risk Business Activities Remain Open
Importantly, Bali has not closed the door on foreign investment entirely. Business activities categorised as medium-high-risk and high-risk remain available for PT PMA registration, provided investors comply with the additional licensing, certification, and regulatory requirements.
These sectors typically involve:
- Larger capital commitments
- Greater regulatory oversight
- Government verification processes
- Enhanced compliance obligations
The policy therefore signals a shift toward attracting investment that demonstrates stronger economic substance and long-term commitment.
Streamline Your PT PMA Registration with LMI Consultancy
It is imperative for investors to ascertain the regulatory standing of their prospective business undertakings under Indonesia’s current laws before making any capital investments, lease commitments, or commencing operations. By combining thorough planning with professional guidance, companies can approach these transitions with assurance and create a regulatory framework for enduring prosperity in Indonesia.
At LMI Consultancy, we assist foreign investors through every stage of establishing a PT PMA in Indonesia, from selecting the correct KBLI classification and reviewing foreign ownership eligibility to securing licences, permits, and regulatory approvals.
