INTRODUCTION

In a bold step to boost foreign direct investment (FDI) and streamline business licensing, Indonesia’s Investment Coordinating Board (Kementerian Investasi dan Hilirisasi/Badan Koordinasi Penanaman Modal or “BKPM”) issued BKPM Regulations No. 5 of 2025 on Guidelines and Procedures for the Implementation of Risk-Based Business Licensing and Investment Facilities through the Electronically Integrated Business Licensing System (Online Single Submission) (or “BKPM Reg. 5/2025”) on October 2025. This Reform significantly lowers capital entry barriers for foreign-owned companies eyeing the Indonesian market.

CONCLUSION

BKPM Reg 5/2025 marks a pivotal development in Indonesia’s Investment landscape. By lowering the entry barriers, expanding the definition of capital contributions, and simplifying licensing through the OSS System, the regulation makes Indonesia a far more attractive and accessible destination for foreign investors.

However, this newfound flexibility is balanced by a stronger emphasis on accountability and compliance. BKPM Reg 5/2025 introduces a more structured and transparent compliance framework that demands careful attention, proper documentation, and continuous monitoring from investors.

In this evolving environment, companies are encouraged to reassess their investment structures, ensuring that they not only capture the opportunities presented by the new regime but also maintain robust compliance mechanisms that stand up to regulatory scrutiny. To conclude, several important points should be noted regarding the application of BKPM Reg 5/2025 as the key takeaways and practical implications for PRS clients and investors.

     (i) Foreign Investment Structure:

While the paid-up capital requirement has been lowered (a welcome development for foreign investors), the minimum total investment threshold of IDR 10 billion remains in place. Accordingly, companies must carefully plan their capital structure to ensure compliance while maintaining commercial efficiency.

    (ii) LKPM Reporting Obligations:

Businesses that were previously exempt from LKPM (Investment Activity Report) requirements should verify whether they are now included under the updated regime. Non-compliance may result in administrative sanctions, so a prompt compliance review is strongly advised.

   (iii) Investment Incentives and OSS System Integration:

The process for applying for investment facilities and incentives has become more formalised, including submission, verification, and approval through the OSS System. Companies should ensure that their internal workflow and documentation align with the OSS System’s Framework and service-level agreement (SLA) requirements to avoid procedural delays.

   (iv) Transition and System Alignment:

Existing licences and approvals remain valid. However, companies may need to update access rights within the OSS System and ensure consistency with the new regulatory platform. A transition audit can help identify potential gaps in system integration or reporting.

   (v)  OSS System Upgrade:

With the upgraded OSS System now in effect, businesses must ensure their data, access credentials, and reporting mechanisms are properly aligned. Proactive system compliance will help avoid disruptions in future filings and approvals.

In summary, while BKPM Reg 5/2025 brings greater flexibility and opportunities for investors, it also introduces a more structured and transparent compliance environment. Companies are encouraged to review their current investment frameworks, update their internal systems, and ensure readiness under Indonesia’s evolving regulatory regime.

Regards, 

Pasaka Rievan Smith
Counsellors at Law


Download to read the full article.