INDONESIA LAW AND PRACTICE Contributed by: Agus Ahadi Deradjat (Agung), Gustaaf Reerink, Adri Dharma, Karina Widyaputri and Ilma Sulistyani, ABNR Counsellors at Law
2. Restrictions on Foreign Investments 2.1 Approval of Foreign Investments As a general rule, foreign investors are not required to obtain prior approval to invest in Indonesia. Regardless, every business undertak - ing in Indonesia, whether domestic or foreign- owned, is required to obtain the appropriate licences based on its business activities in order to operate legally in the country. Under the current regulatory framework, busi - ness licensing is processed through the Risk- Based Approach Online Single Submission System (“RBA OSS System”), which is adminis - tered by the Indonesian Investment Coordinat - ing Board (BKPM). The type of licence required depends on the risk level of the business activi - ties, as classified within the RBA OSS System. This risk classification directly affects the scope and complexity of the applicable licensing requirements. Business activities deemed to carry a higher level of risk are subject to more stringent licensing obligations. Conversely, if a business activity is considered low-risk – ie, it does not have a significant impact on health, safety, the environment, or the utilisation of resources – it will generally only require a Busi - ness Identification Number ( Nomor Induk Beru- saha or NIB) to operate, without the need for additional licensing. Business activities classified as medium-low, medium-high, or high risk are subject to addi - tional requirements, which may include standard certifications, business licences, and/or com - mercial or operating licences, depending on the risk level and the nature of the activity.
The applicable licensing requirements for each risk category are detailed in Government Reg - ulation No 28 of 2025 (“GR 28/2025”) on the Implementation of Risk-Based Licensing, which supersedes the previous Government Regulation No 5 of 2021 (”GR 5/2021”). These requirements are further regulated by implementing technical regulations, including ministerial regulations. Foreign Ownership Limitation In addition to the above, businesses must also comply with applicable foreign ownership limita - tions. Pursuant to Presidential Regulation No 10 of 2021 on Investment and Business Lines, as amended by Presidential Regulation No 49 of 2021 (the “Investment List”), all business sectors are generally open to foreign investment, except for those that are: • expressly closed to investment; or • reserved exclusively for the central govern - ment – namely, activities of a service-oriented nature or those related to defence and secu - rity that are considered strategic and can - not be conducted in co-operation with other parties. Although the majority of business sectors permit up to 100% foreign ownership, certain sectors remain subject to foreign ownership restrictions or limitations as set out under the Investment List. 2.2 Procedure and Sanctions in the Event of Non-Compliance Investors seeking to operate in Indonesia may apply for business licences via the RBA OSS System. For businesses categorised as low-risk or medium-low risk, the licensing process is primarily self-assessed. Upon submission of a
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