Bali has introduced one of its most significant foreign investment policy changes in recent years by restricting new foreign direct investment (PMA) licences across 18 business sectors. The move, which has already taken effect through Indonesia’s Online Single Submission (OSS) system, is intended to strengthen the island’s micro, small, and medium-sized enterprises (MSMEs) while ensuring foreign investment supports, rather than displaces, the local economy.
The policy follows an evaluation conducted by the Provincial Government of Bali and has received approval from Indonesia’s Ministry of Investment and Downstream Industry (BKPM). Since the third week of May 2026, foreign investors have no longer been able to submit new PMA applications for the affected business sectors through the OSS platform.
The decision represents a notable shift in how Bali intends to balance foreign investment with the preservation of local entrepreneurship, particularly in sectors that have traditionally been dominated by Balinese-owned businesses.
Bali Cites Misuse of Risk-Based Licensing System
According to Bali Governor Wayan Koster, the provincial government’s review found indications that some foreign investors had been using Indonesia’s risk-based licensing framework to establish businesses in sectors closely associated with local MSMEs.
Under Indonesia’s current OSS system, businesses categorised as low-risk generally require only a Business Identification Number (NIB) to begin operating. Provincial authorities believe that some foreign-owned companies utilised this simplified licensing pathway to enter sectors that require little regulatory oversight but directly compete with local entrepreneurs.
The review also identified businesses operating from virtual office addresses, prompting concerns over regulatory supervision and the potential misuse of business licensing mechanisms.
According to the provincial government, these practices risk creating unfair competition and placing additional pressure on Bali’s community-based economy, which relies heavily on the growth and sustainability of local businesses.
18 Business Sectors Now Closed to New PMA Applications
The restriction applies to 18 Indonesian Standard Industrial Classification (KBLI) categories classified as low-risk and medium-low-risk business activities.
The affected sectors include:
- Star-rated hotels with a total building area of less than 6,000 square metres
- Budget hotels (hotel melati)
- Owner-occupied or leased real estate businesses
- General management consultancy services
- Car, bus, truck, and similar vehicle rental services
- Motorcycle rental services
- Retail clothing businesses
- Retail textile businesses
- Retail food businesses
- Mobile agricultural produce trading
- Other accommodation service providers
- Cafés and beverage establishments
- Traditional medicine shops
- Tailoring and made-to-order garment businesses
- Stadium facilities
- Fitness centres
- Sports event promotion services
- Industrial management consultancy services
Foreign-owned companies will not be able to obtain new business licences for these activities through the OSS system unless the policy is amended in the future.
Existing Foreign Businesses Are Not Affected
The restriction does not apply retrospectively.
Foreign-owned businesses that had already secured the appropriate licences before the OSS restrictions took effect may continue operating as normal. However, these companies must continue to fulfil their ongoing legal obligations, including submitting Investment Activity Reports (LKPM) and complying with Indonesia’s corporate, investment, and licensing regulations.
Failure to maintain these compliance requirements may still expose businesses to administrative sanctions or regulatory action.
Bali Remains Open to Responsible Investment
Despite the new restrictions, Bali’s government has reiterated that the island remains open to foreign investment that contributes to sustainable economic growth.
The provincial administration continues to encourage investment that creates employment, supports local supply chains, respects Balinese cultural values, and develops partnerships with Indonesian businesses and cooperatives rather than directly competing with them.
For international investors, the policy serves as a reminder that market entry into Indonesia increasingly requires not only commercial planning but also careful consideration of national and regional regulatory frameworks.
What Foreign Investors Should Consider
Indonesia has made significant progress in simplifying business registration through the OSS platform and its risk-based licensing framework. However, regional governments continue to play an important role in implementing policies that reflect local economic priorities.
As regulations continue to evolve, investors should carefully review whether their intended business activities remain open to foreign ownership, confirm the appropriate KBLI classification, and assess whether additional provincial restrictions may apply before incorporating a company.
Early legal and regulatory planning can significantly reduce delays during company formation and help businesses avoid unnecessary restructuring once operations have commenced.
