Indonesia has introduced a major reform to its foreign investment framework through BKPM Regulation No. 5 of 2025, issued by the Ministry of Investment on 2 October 2025. The regulation, effective immediately and integrated into the Online Single Submission (OSS) system by 5 October 2025, marks one of the most significant policy shifts in Indonesia’s investment landscape in recent years.

At the core of the reform is a sharp reduction of the minimum paid-up capital requirement for foreign-owned limited liability companies (PT PMA) from IDR 10 billion to IDR 2.5 billion per business activity, or KBLI. While the overall investment value threshold of IDR 10 billion per KBLI remains unchanged, only IDR 2.5 billion now needs to be deposited in cash as paid-up capital. The balance, IDR 7.5 billion, can consist of qualifying assets and expenditures, including machinery, equipment, vehicles, feasibility studies, permits, construction, and operational expenses. The deposited capital must remain in the company’s bank account for at least 12 months unless used for legitimate business purposes such as working capital or capital expenditure.

Another important innovation under Regulation 5/2025 is the ability to consolidate related business activities within a single investment plan. Previously, investors with multiple KBLIs, such as those spanning wholesale, food and beverage, or manufacturing, had to allocate IDR 10 billion for each KBLI. Now, these may be grouped under one consolidated investment value, easing administrative burdens and expanding operational flexibility.

The regulation also recognises land and building costs as part of the investment value for certain sectors, including property, accommodation, agriculture, plantation, farming, and aquaculture, an adjustment long requested by sectoral investors. These provisions are expected to improve the capital efficiency of large-scale and asset-intensive projects.

For foreign investors, the reduction of the paid-up capital threshold is a significant breakthrough. The previous IDR 10 billion cash requirement (around USD 640,000) was widely regarded as a disproportionate barrier for small and mid-sized enterprises (SMEs), start-ups, and service-based companies, particularly those using “capital-light” models or holding structures based in Singapore. By recognizing tangible assets and expenditures as valid capital contributions, the reform frees up liquidity, allowing investors to channel funds into productive uses rather than idle bank deposits.

Industry analysts and legal experts view BKPM Reg. 5/2025 as a clear signal of Indonesia’s intent to align its FDI regime with regional standards and enhance competitiveness in attracting new capital inflows. The reform also strengthens the risk-based licensing framework within the OSS system, promising faster and clearer approvals for compliant investors.

Existing foreign-owned companies may now revisit their capital structures to consolidate activities, optimize compliance, and leverage the new flexibility offered by the regulation. Meanwhile, new entrants, especially those in manufacturing, agribusiness, real estate, or renewable sectors, are expected to find Indonesia a more accessible and attractive market destination.

In summary, BKPM Regulation No. 5 of 2025 reduces financial entry barriers, broadens investment opportunities, and reaffirms Indonesia’s commitment to improving ease of doing business. If consistently implemented, it could stimulate a new wave of diversified foreign investment and reinforce Indonesia’s position as a leading destination in Southeast Asia.

          

 Sources:

• Business-Indonesia. “Indonesia Reduces Minimum Paid-Up Capital Requirement for PT PMAs – A Long-Awaited Move Back to Past Openness.” October 13, 2025. https://business-indonesia.org/legal_insights/indonesia-reduces-minimum-paid-up-capital-requirement-for-pt-pmas-a-long-awaited-move-back-to-past-openness
• Indonesia Expat. “BKPM Sets Minimum Paid-Up Capital Commitment of Rp 2.5 Billion for Foreign Investment Companies.” October 14, 2025. https://indonesiaexpat.id/business-property/bkpm-sets-minimum-paid-up-capital-commitment-of-rp2-5-billion-for-foreign-investment-companies
• LMI Consultancy. “Indonesia Lowers Paid-Up Capital Requirements for Foreign Companies to IDR 2.5 Billion.” October 15, 2025. https://www.lmiconsultancy.com/indonesia-lowers-paid-up-capital-requirements-for-foreign-companies-to-idr-2-5-billion/
• UNCTAD Investment Policy Monitor. “Indonesia Lowers Paid-Up Capital Requirement for Foreign-Owned Limited Liability Companies.” October 2, 2025. https://investmentpolicy.unctad.org/investment-policy-monitor/measures/5131/indonesia-lowers-paid-up-capital-requirement-for-foreign-owned-limited-liability-companies
• Withers World Wide. “Indonesia Eases Foreign Capital Rules: Key Takeaways from BKPM Regulation No. 5 of 2025.” October 10, 2025. https://www.withersworldwide.com/en-gb/insight/read/indonesia-eases-foreign-capital-rules-key-takeaways-from-bkpm-regulation-no-5-of-2025