The Provincial Government of Bali has officially restricted new foreign direct investment (PMA) licences in 18 business sectors, marking one of the island’s most significant investment policy changes in recent years. The move aims to strengthen protections for local micro, small, and medium-sized enterprises (MSMEs), following concerns that some foreign investors had entered sectors traditionally reserved for community-based businesses.
The policy, which took effect in the third week of May 2026 after receiving approval from Indonesia’s Ministry of Investment and Downstream Industry (BKPM), prevents new PMA applications for the affected sectors through Indonesia’s Online Single Submission (OSS) system.
Why Has Bali Restricted Foreign Investment?
Stated in the recent news of Bali Governor website, Wayan Koster, the provincial government conducted an extensive review of foreign investment licences and identified indications that some foreign investors were using Indonesia’s risk-based licensing framework to enter sectors intended primarily for local businesses.
Under Indonesia’s OSS system, businesses classified as low-risk generally require only a Business Identification Number (NIB) to begin operations. The provincial government believes some foreign-owned companies utilised this simplified process to establish businesses in sectors closely linked to local MSMEs without undergoing additional licensing requirements.
Authorities also noted that some businesses were operating using virtual office addresses, raising concerns over regulatory oversight and fair competition.
The provincial government stated that these practices created an uneven competitive environment for local entrepreneurs and could undermine Bali’s long-term strategy of strengthening its community-based economy.
Which Business Sectors Are Affected?
The restriction applies to 18 Indonesian Standard Industrial Classification (KBLI) codes categorised as low-risk or medium-low-risk business activities.
Among the affected sectors are:
- Star-rated hotels with a total building area of less than 6,000 square metres
- Budget hotels (hotel melati)
- Owner-occupied or leased real estate businesses
- General management consultancy services
- Car, bus, truck, and similar vehicle rental services
- Motorcycle rental services
- Retail clothing businesses
- Retail textile businesses
- Retail food businesses
- Mobile agricultural produce trading
- Other accommodation service providers
- Cafés and beverage establishments
- Traditional medicine shops
- Tailoring and made-to-order garment businesses
- Stadium facilities
- Fitness centres
- Sports event promotion services
- Industrial management consultancy services
New foreign-owned companies will no longer be able to register these business activities through the OSS platform until further policy changes are introduced.
Existing Foreign Companies Can Continue Operating
The new policy applies only to new foreign investment applications within the restricted sectors.
Foreign-owned companies that have already obtained the necessary licences before the OSS restrictions came into force may continue operating. However, they remain subject to their ongoing regulatory obligations, including the submission of Investment Activity Reports (LKPM) and compliance with Indonesian corporate and investment regulations.
Failure to maintain these compliance requirements may still result in administrative sanctions.
What Does This Mean for Foreign Investors?
The announcement reflects Bali’s broader effort to encourage investment that complements, rather than competes directly with, local businesses.
While certain sectors are now closed to new PMA applications, the provincial government has emphasised that Bali remains open to high-quality foreign investment, particularly projects that:
- create employment opportunities;
- support sustainable economic development;
- respect Balinese culture and local wisdom; and
- encourage partnerships with Indonesian businesses and MSMEs.
For foreign investors considering Bali as an investment destination, the announcement highlights the importance of conducting thorough regulatory due diligence before selecting a business sector or corporate structure.
Navigating Indonesia’s Changing Investment Landscape
Indonesia’s investment regulations continue to evolve at both the national and regional levels. While the OSS system has streamlined many licensing procedures, regional governments retain the ability to introduce policies that affect specific industries within their jurisdictions.
As a result, investors should carefully assess whether their proposed business activities remain open to foreign ownership and whether any additional regional restrictions apply before commencing the company registration process.
Working with experienced legal and business consultants can help investors identify suitable investment structures, select the appropriate KBLI classification, and ensure compliance with both national regulations and regional policies.
Stay Updated with LMI Consultancy
As Indonesia’s regulatory landscape continues to develop, foreign investors should monitor changes that may affect company formation, licensing, and investment eligibility.
At LMI Consultancy, our corporate and legal specialists provide comprehensive support for PT PMA incorporation, OSS registration, investment licensing, KBLI assessments, legal compliance, and immigration services for foreign investors. Whether you are establishing a new business in Bali or expanding elsewhere in Indonesia, our team helps ensure your investment strategy aligns with the latest national and regional regulations.
Speak to our consultants and claim your 1-hour FREE consultation
Stay informed with LMI Consultancy for the latest updates on Indonesia’s immigration, investment, legal, and business regulations.
