By Faraz Almira Arelia | Associate

The Indonesian government has taken another significant step to strengthen its investment climate by issuing Ministry of Investment and Downstream Industry/Investment Coordinating Board (“BKPM”) Regulation No. 5 of 2025, which came into effect on 2 October 2025. Enacted by BKPM, this regulation replaces 3 (three) previous investment regulations: No. 5/2021, No. 3/2021, and No. 4/2021, and forms part of the broader structural reform agenda launched under the Job Creation Law.

The new regulation is closely linked to Government Regulation No. 28/2025, which mandates the enhancement of Indonesia’s Online Single Submission (OSS) system. In line with this mandate, BKPM Regulation No. 5/2025 introduces 3 (three) new core subsystems within the OSS framework: basic requirements, investment facilities, and partnership mechanisms. The reform aims to streamline investment procedures, reinforce legal certainty, and minimize regulatory overlap that has previously created confusion for foreign and domestic investors.

A key highlight of the regulation is the substantial reduction in minimum paid-up capital for Foreign Investment Companies (PT PMA). Under earlier rules, PT PMA were required to have at least IDR 10 billion in paid-up capital. The new regulation lowers this amount to IDR 2.5 billion, making Indonesia more accessible for small- and medium-scale foreign investors. However, the regulation introduces a safeguard: the paid-up capital must remain in the company’s account for at least 12 (twelve) months, except when used for asset purchases, development activities, or operational expenses.

Furthermore, the regulation introduces streamlined licensing procedures for certain business activities. Under Article 41, trading or service businesses operating in shared commercial spaces, such as malls, office buildings, or commercial complexes, may utilize the basic licensing approvals already obtained by the building owner or manager. As a result, business applicants can submit their PB or PB-UMKU applications by relying on the building’s existing permits, eliminating the need to secure the same foundational approvals independently.

Article 43 further simplifies requirements for business expansion projects. Specifically, companies are exempt from obtaining a new Spatial Suitability Approval (KKPR) when their expansion only increases production capacity, adds supporting facilities on the same site, or integrates new activities either vertically within the supply chain or horizontally within the same business group. This exemption applies as long as the business has existing KKPR and land-use rights, and the expansion occurs within the same land area by the same legal entity.

Finally, Article 44 provides additional flexibility for supporting or ancillary business activities located at the same site as the primary operation. These supporting activities may rely on the main business’s KKPR and environmental approvals, provided they remain covered within the existing environmental documents. Where new construction is required to support these activities, the regulation allows businesses to obtain a Building Approval (PBG) and subsequently secure a Certificate of Building Worthiness (SLF), ensuring procedural clarity and regulatory efficiency.

The Ministry of Investment and Downstream Industry expects the revised capital policy to encourage greater investment participation and support Indonesia’s ambitious plan to achieve 8% (eight percent) economic growth over the coming years. To reach this target, the government aims to attract approximately IDR 13,032.8 trillion in combined foreign and domestic investment within the next 5 (five) years.

Overall, BKPM Regulation 5/2025 reflects Indonesia’s ongoing commitment to improving the ease of doing business and creating a more transparent and predictable investment environment. As the country continues to refine its regulatory framework, both established and emerging investors may find new opportunities to participate in Indonesia’s rapidly developing economy.

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