Foreign Ownership Restrictions by Business Sector in Indonesia

Where Foreign Ownership Restrictions Arise in Indonesia

A foreign founder planning a client-support consultancy and an investor buying into a neighbourhood laundry may both describe their plans as service businesses. That description is of little use when assessing shareholding rights. One operation might fall within a generally accessible activity, while the other could be subject to an allocation or sector condition. Neither outcome follows from the marketing label alone.

Indonesia asks several distinct legal questions. Is foreign investment allowed in the activity? If it is, how much of the equity can foreign investors hold, and are any further conditions attached? Finally, what must the operator be authorised to do before it can serve customers? Corporate eligibility, ownership percentages and permission to trade are separate matters.

Presidential Regulation 10/2021, as amended by Regulation 49/2021, provides the investment-list framework. Its broad opening principle is qualified by detailed annex entries, rules concerning cooperatives and MSMEs, and legislation governing individual sectors. A foreign-owned consultancy therefore needs its precise activity assessed, just as an acquisition of a small local business does. The existence of an Indonesian company is not itself evidence that a proposed transaction is permitted.

These are national rules. Running the business from Bali introduces possible premises, zoning and operational questions, but Bali does not create a separate foreign-equity regime.

Find the Right KBLI 2025 Code Before Checking Ownership

Consider a company described in a sale memorandum as a “villa management business.” Its contracts might include collecting management fees from owners, taking bookings in the company’s own name, arranging cleaning or earning commissions for introducing tenants. The property is the same, yet the legal activities may differ. Buying the shares before identifying those revenue streams leaves a basic ownership question unanswered.

The useful evidence is operational. Who contracts with the guest? Which entity issues invoices? Does the company supply accommodation, manage facilities for another owner, or simply introduce customers? A software platform poses a similar classification challenge when it combines technology development with regulated transactions carried out through the platform. Classification should follow the services actually delivered, including those planned for the first trading period.

Indonesia identifies economic activities through five-digit KBLI codes. BPS Regulation No. 7 of 2025 established KBLI 2025, and OSS provides the current code descriptions and activity scope. Search results can be a starting point, but the full descriptions and exclusions matter. Two categories with similar titles can have different investment or licensing consequences because they cover different work.

The legal history creates another layer. Investment annexes issued in 2021 refer to an older KBLI system. OSS now offers a KBLI 2020-to-2025 conversion facility, identifying codes that were retained, renumbered, split or consolidated. Even an unchanged number can carry amended wording. The conversion is a classification aid, not a certificate that every historical investment condition continues unchanged.

For a transaction file, the strongest working record lists each actual activity, the current code and its scope, the older code if one appears in the regulation, and any ambiguity that counsel must resolve. The purpose is to test foreign investment eligibility; a full KBLI selection exercise belongs to the separate registration planning process.

The Main Types of Foreign Investment Conditions

“Open to investment” is a starting proposition under Indonesia’s investment list, not an unconditional right to own every business outright. Article 2 of Presidential Regulation 10/2021, as amended by Regulation 49/2021, sets out a broad opening rule for commercial activities with defined exclusions. The annexes and sector legislation establish the detail that a purchaser needs.

Some activities have no identified foreign-equity restriction in the relevant investment-list entry. That still leaves licensing, eligibility and scope questions. Others are subject to domestic-capital requirements or caps on the foreign percentage. Separate provisions allocate particular activities to cooperatives and micro, small and medium enterprises, known as MSMEs or UMKM, or allow certain activities subject to genuine partnerships with them. These categories do not grant the same rights to a foreign shareholder.

There is also a distinction between an investment prohibition and a special operating permission. Certain activities are closed to investment or performed exclusively by central government. The amended Regulation 49/2021 expressly addresses particular alcoholic-beverage manufacturing categories, for example; that does not establish a blanket ban on restaurants or hospitality businesses. Regulated sectors may have ownership conditions and additional approvals at the same time.

The practical effect becomes clearer in a group that transports goods, manages properties and runs a digital booking service. The company name may be broad enough to describe all three, but each revenue-generating operation could attract different controls. Being eligible to hold shares in one line does not authorise all the others.

A proposed capital structure should therefore be assessed against the precise legal activity and any overlapping sector requirements. A general assurance that Indonesia permits foreign investment does not answer how the particular business can be owned or operated.

How to Read Presidential Regulations 10/2021 and 49/2021

A diligence pack occasionally contains a single-page “positive list” reproduced from an agent’s slide deck. It may be accurate as a historical summary and still be unsuitable for the acquisition being proposed. Regulation 49/2021 amended Articles 2 and 6 of Regulation 10/2021 and replaced the relevant annex material. The operative reading must account for those amendments, not whichever earlier table is easier to find.

Article 2 describes the basic opening rule and activities excluded from investment. Article 6 and Annex III address specified conditions, including foreign-equity restrictions and domestic-capital treatment. Annex II distinguishes businesses allocated to cooperatives or MSMEs from eligible partnership arrangements. Annex I identifies priority investment fields. Priority status should not be confused with an unrestricted shareholder register or an operating licence.

A defensible reading starts with the exact entry: the activity description, the KBLI reference used in that legal text and the condition attached. It then considers the currently applicable KBLI classification and legislation from the responsible sector authority. The wording can be narrower than the category heading. An activity described as a manufacturing process should not silently be expanded to cover all retail, online or consulting work connected with the same product.

Acquisitions need a further layer of evidence. A target company may hold approvals issued under earlier rules, sometimes with transitional consequences. Whether those rights survive the proposed transaction can depend on their scope, the identity of the licence holder, a change of control and any planned expansion. “Established years ago” is not a regulatory exemption in itself.

Legal counsel should be able to present a dated trail from actual operations to the amended investment-list provision, any code conversion and the applicable sector rule. That allows the investor and the notary to assess an identified structure, not an unsupported promise about an entire industry.

Restricted-Sector Examples—and Why Labels Can Mislead

Annex III to Presidential Regulation 49/2021 is a useful antidote to sweeping claims about “restricted industries.” Its 2021 classifications require wholly domestic capital for coffee processing with a registered geographical indication (listed KBLI 10761), the specified stamped-batik manufacturing activity (13134), and traditional-cosmetics manufacturing (20232). These are the code references printed in that annex, examined as of 9 November 2026. They are not presented as automatically equivalent to today’s KBLI 2025 entries.

None of those entries means that every café, clothing retailer or cosmetics shop is closed to a foreign investor. Production and resale are different operations; processing protected-origin coffee is narrower than simply serving coffee. An investor planning to manufacture a branded product and distribute it through shops may need to examine two activities separately. The legal scope matters more than the product category shown in an investor presentation.

Ownership caps provide a different illustration. Annex III states a 49% foreign-equity maximum for the 2021 entry on domestic maritime tourism transport, KBLI 50113, and also lists 49% for the courier activity under KBLI 53201. Those figures describe specific historical entries, not a clearance or refusal for a proposed 2026 operator. Code conversion, the precise services delivered and current transport or postal-sector rules all need to be considered before a cap is applied to a transaction.

Media entries can be even more conditional. For newspapers, magazines and bulletins, the annex distinguishes domestic-capital treatment on establishment from restricted foreign participation through the capital market for expansion. That is not a general rule for every marketing platform, content studio or online publisher. The business description, stage of investment and governing sector legislation can change the outcome.

Bali investors encounter the same classification problem when several services surround one villa. Accommodation sold to guests, property management for an owner and rental brokerage should not be treated as interchangeable for foreign-ownership purposes. Local land-use or operating requirements may constrain the site, but they do not create a separate Bali-wide shareholding percentage.

MSME Reservation and Partnership Are Not Shareholder Workarounds

Annex II of Indonesia’s investment list draws a distinction that deal structures often blur. Some activities are allocated to cooperatives or micro, small and medium enterprises. Others are available under specified partnership arrangements with those businesses. A foreign investor cannot assume that inviting an Indonesian acquaintance onto the cap table satisfies either condition.

A legitimate partnership has an identifiable commercial function. It may involve supply, contracted services or a defined role in production and distribution, supported by agreements and actual performance. The relevant legal framework includes BKPM Regulation 1/2022 as amended by Regulation 3/2025, alongside the investment-list entry governing the activity. A decorative contract does not establish that an eligible partnership exists.

A nominee shareholder is a fundamentally different proposal. The registered shares stand in one person’s name while another claims ownership through side letters, powers of attorney or private assurances. Article 33 of Indonesia’s Investment Law No. 25/2007 prohibits agreements declaring that shares are owned for and in another person’s name and provides that such arrangements are null and void. An investor who depends on those documents may discover that the assumed control cannot be enforced.

An actual MSME collaboration does not automatically remove PT PMA equity conditions, business-scale rules or licences. If an operating group includes an allocated activity, the transaction analysis must identify who performs it and on what basis. Commercial cooperation and foreign shareholding eligibility remain separate tests.

Why PT PMA Incorporation and an NIB Do Not Settle Licensing

An NIB can look conclusive in a data room: it is a recognisable official business identifier, often presented next to the incorporation documents of a PT PMA. Yet neither a corporate record nor an NIB, by itself, establishes that every advertised service is authorised or that the shareholder structure meets each activity’s foreign-equity conditions.

Government Regulation 28/2025 governs Indonesia’s current risk-based business licensing framework and replaced Regulation 5/2021. Requirements differ by activity and risk classification. Depending on the circumstances, an operator may need standard certification, verified compliance, a licence or additional permissions supporting its business operations. BKPM Regulation 5/2025 sets out the OSS procedures within this framework. The relevant documents should correspond to what the company actually sells.

Property-related services on Bali illustrate the gap particularly well. A company may be eligible for foreign investment while the proposed premises cannot lawfully be used for the intended accommodation business. Alternatively, an appropriate site does not establish that a foreign investor may acquire the planned percentage of the operator. Location suitability and shareholding eligibility answer different questions, and each must be evidenced independently.

Personal immigration and employment rights form another boundary. A foreign shareholder is not automatically entitled to work on site, run day-to-day operations or hold any role they choose. Indonesia visas and long-term stay are a separate subject from the foreign-equity test, as are the permissions needed for an individual to perform work.

A particularly revealing case is a company with an NIB for one activity that generates its real revenue from another. The number is genuine; the evidence of authorisation for the actual business may still be missing.

What to Verify Before Incorporation or a Share Purchase

The decisive question before a deposit is not whether Indonesia welcomes foreign investors. It is whether this investor can lawfully acquire the proposed interest in the identified operations. For a new PT PMA, the evidence starts with a description of revenue streams, current KBLI classifications and planned shareholdings. A mixed business may require several separate eligibility assessments even though it will trade through one entity.

A share acquisition brings historical exposure into the picture. The buyer needs the target’s corporate records, current shareholder and beneficial-owner information, its actual OSS permissions and any sector approvals. Particular attention belongs on the effect of a control change and on activities introduced after the original licences were issued. A licence that was valid for a previous business model is not automatically a complete authorisation for its new owner.

A useful legal memorandum makes its reasoning traceable. For each operation it identifies the current KBLI and scope, the older classification where relevant, the amended investment-list entry, any sector-specific ownership condition and the documents supporting operation. It should also distinguish approvals already held from applications still pending. The addresses and premises associated with the licences should match the business being purchased.

Independent Indonesian counsel should review the proposed structure against the law and records available on the intended transaction date. The notarised documents, share purchase agreement and payment conditions can then be aligned with confirmed eligibility. When the seller cannot substantiate a material permission or a nominee arrangement is offered in its place, the absence of evidence is a transaction issue, not a minor filing detail.

This is general information based on rules checked on 9 November 2026. A transaction-specific legal opinion is necessary to determine which ownership limits, approvals and change-of-control requirements apply to the actual investor and business.