A New Chapter for Business Licensing in Indonesia
Indonesia has taken another big step toward simplifying investment and business licensing with the issuance of BKPM Regulation No. 5 of 2025. Released by the Ministry of Investment (BKPM) on 1 October 2025 and effective the next day, this regulation brings a series of updates designed to make business establishment in Indonesia faster, more transparent, and more aligned across ministries.
This new regulation is a direct implementation of Government Regulation No. 28 of 2025 (GR 28/2025) on Risk-Based Business Licensing, replacing three older BKPM regulations from 2021. By consolidating and updating these rules, the government aims to ensure that Indonesia remains a competitive destination for both domestic and foreign investors.
For entrepreneurs and foreign investors, this regulation isn’t just a technical change—it’s a signal that Indonesia is becoming more serious about ease of doing business and digital transformation through the Online Single Submission (OSS) system.
Key Highlights of BKPM Regulation No. 5 of 2025
1. Lower Capital Requirements for Foreign Investment Companies
One of the most notable updates is the reduction in minimum capital for foreign-owned companies (PMA). Previously, foreign investors were required to have at least Rp 10 billion in issued and paid-up capital. Under the new regulation, this threshold is now Rp 2.5 billion.
This change is particularly important for smaller foreign investors or startups looking to enter the Indonesian market. It opens doors for innovative businesses and SMEs that previously found the entry capital too high.
However, there’s a key caveat: the injected capital cannot be withdrawn from the company’s bank account within 12 months, unless it’s used for legitimate business activities. This ensures that the funds are genuinely invested and not just placed for formality.
2. A New Approach to Import Licensing
The regulation also introduces a more flexible framework for import licenses. In Indonesia, importers operate under two main licenses:
- API-U (General Import License) — for companies importing goods for resale or trading.
- API-P (Producer Import License) — for companies importing goods for their own use in production.
Under BKPM Regulation No. 5/2025, API-U can now be converted into API-P, aligning import regulations between the Ministry of Trade and BKPM. However, the reverse (API-P to API-U) is not allowed.
This adjustment helps manufacturing and trading companies operate with greater agility and consistency, particularly those whose business models evolve over time.
3. Clearer Timelines for Business Operations
Another positive change is the introduction of defined timelines for when businesses are expected to become commercially operational after obtaining their Business Identification Number (NIB).
For instance:
- Companies in management consultancy can begin commercial operations within one to three years after securing their NIB.
- The timeline varies depending on whether infrastructure development is required.
This provides clarity to both businesses and regulators. Although the regulation uses the phrase “no sooner than one year,” legal analysts interpret this as a guideline, not a strict prohibition—companies can still start earlier if ready.
4. Streamlined Environmental and Spatial Licensing
In the past, business operators often faced delays when dealing with environmental and spatial permits. BKPM Regulation No. 5 aims to fix that by standardizing and digitizing the process through the OSS system.
Key improvements include:
- Spatial Utilization Confirmation (KKPR), Building Approval (PBG), and Certificate of Proper Function (SLF) now have specific deadlines and clear procedures.
- Applications are fully centralized in OSS, with defined steps for document submission, verification, corrections, and compliance checks.
- Environmental approvals such as AMDAL (SKKLH), UKL-UPL (PKPLH), and SPPL are now processed directly through BKPM, on behalf of the Ministry of Environment.
Moreover, the OSS system introduces an integrated environmental screening feature, which automatically identifies the type of environmental documents and technical approvals required for each business activity.
This integration saves time, reduces duplication, and promotes transparency — a much-needed improvement in Indonesia’s regulatory ecosystem.
5. Supporting Activities Can Now Generate Revenue
In the previous regulations, supporting activities (such as warehousing, logistics, or IT support) were not allowed to generate income. Under the new framework, companies can now monetize their supporting activities, as long as:
- These activities are explicitly mentioned in Article 3 of the company’s Articles of Association, and
- They comply with minimum investment requirements for foreign companies.
However, this flexibility comes with responsibility — foreign investors must still maintain compliance with the Rp 10 billion minimum investment rule for core activities, depending on the business classification.
6. Simplified Requirements for the F&B Sector
The Food and Beverage (F&B) industry gets a special exemption in BKPM Regulation 5. Previously, the Rp 10 billion minimum investment applied per location. Now, the rule applies to the entire city or regency, offering more flexibility for multi-outlet or franchise operators.
This update supports the expansion of foreign-owned restaurants and cafés — a growing trend in urban centers like Jakarta, Bali, and Bandung.
7. Digital Businesses and ESOs Must Register
For digital companies, especially foreign private Electronic System Operators (ESOs), the regulation introduces an additional compliance layer.
These businesses are now required to:
- Obtain a Business Identification Number (NIB), and
- Register as an ESO under the Ministry of Communication and Digital (Komdigi) Regulation No. 5 of 2020.
This doesn’t necessarily mean a new license — rather, it formalizes the existing registration system under BKPM’s OSS framework, ensuring that foreign tech firms operating online are properly recorded.
8. Tighter Rules on License Revocation
In sensitive industries like pharmaceuticals, food, and nuclear energy, companies must now provide proof of compliance before voluntarily revoking their business licenses.
This includes evidence of:
- Product recall completion,
- Reporting obligations, and
- Regulatory compliance.
This rule ensures better accountability and prevents companies from simply “walking away” from obligations that could affect public safety or the environment.
9. Stricter Monitoring of LKPM (Investment Reports)
The regulation also enforces stricter reporting obligations through LKPM (Investment Realization Reports). If a company stays in the construction stage without any progress for four consecutive quarters, BKPM may impose administrative sanctions.
This means businesses are now expected to start realizing their investments within one year of obtaining their NIB — promoting active rather than speculative investment.
Why This Regulation Matters for Investors
BKPM Regulation No. 5 of 2025 represents more than bureaucratic reform — it’s a step toward creating a modern, transparent, and digitally connected investment environment.
Here’s why it matters:
- Lower barriers to entry: The reduced minimum capital and simplified permits encourage more SMEs and foreign startups to enter Indonesia.
- Stronger inter-ministerial coordination: The alignment between BKPM, Trade, Environment, and Kominfo ministries creates a more consistent regulatory landscape.
- Digital-first governance: With OSS now handling environmental, spatial, and licensing approvals, red tape and manual errors are minimized.
- Accountability and progress tracking: Companies must stay active, report regularly, and fulfill obligations before closure — enhancing investor confidence.
Conclusion: A More Investor-Friendly Indonesia
BKPM Regulation No. 5 of 2025 sets a clear tone for where Indonesia is heading: toward digital governance, improved compliance, and investment inclusivity.
For businesses — especially foreign investors — this means it’s becoming easier than ever to set up and scale operations in Indonesia, provided they play by the rules. The combination of lower capital thresholds, faster digital licensing, and better transparency marks a major shift in the country’s investment landscape.
As always, companies should seek professional guidance to ensure compliance with the latest licensing and reporting requirements. But one thing is certain: Indonesia’s investment future looks more accessible and transparent than ever before.
