Billions in Foreign Investment at Risk Under Indonesia’s New Licensing Rules

Indonesia’s revised licensing framework, introduced under Government Regulation No. 28 of 2025 (GR 28/2025), was designed to accelerate approvals and strengthen compliance. But experts warn that misunderstandings and missteps by foreign investors could put billions in planned investment at risk.

The new system builds on the country’s Online Single Submission (OSS) platform, tightening timelines while integrating more processes into the Indonesian National Single Window (INSW). For investors, the changes mean both efficiency gains and higher compliance stakes.

“Foreign companies often underestimate the complexity of risk-based licensing, from KBLI classifications to capital thresholds. Errors can cost millions in delays,” said a senior consultant at CPT Corporate, which advises multinationals on company registration and licensing compliance.

Foreign companies commonly stumble in several areas under Indonesia’s new licensing framework. One frequent error is overestimating the role of the NIB (Nomor Induk Berusaha). While it acts as a universal business ID, many firms wrongly assume it replaces all other permits, overlooking the fact that medium- and high-risk sectors still require additional approvals. Another common pitfall involves capital shortfalls. Indonesia enforces strict minimum investment requirements of IDR 10 billion, and companies that fail to meet them often face the costly need for recapitalization. Investors also continue to take risks with nominee shareholder arrangements, despite such structures being explicitly prohibited; these not only violate the law but also render contracts unenforceable. Finally, some firms misuse representative offices (KPPAs) by engaging in sales activity, even though these entities are legally restricted to non-commercial functions such as market research and promotion.

Unlike under the previous GR 5/2021, the new regulation introduces “deemed approvals,” meaning applications can proceed if agencies miss deadlines. While this can speed up investment projects, it also creates a risk: companies not tracking deadlines may forfeit rights without realizing it.

Industry observers note that the implications are significant. With Indonesia continuing to attract large-scale FDI in sectors such as manufacturing, energy, and digital infrastructure, even small compliance errors can jeopardize projects worth hundreds of millions.

Indonesia’s reforms underscore a delicate balance: they seek to streamline investment, but they also demand sharper compliance from foreign entrants. For companies eyeing Southeast Asia’s largest market, understanding the nuances of GR 28/2025 is no longer optional—it is a prerequisite for safeguarding investment.