Bali's Proposed Tenfold Increase to the Minimum PT PMA Investment Value

While the central government works to attract foreign investment, Bali is moving in an unusual direction: tightening the entry point for investors. A proposed increase in the minimum investment threshold to Rp100 billion raises a significant question — is this a strategic step to protect the local economy, or a policy that risks holding back investment flows?

Foreign direct investment plays an important role in a country's economic development, and the Indonesian government has worked to build a conducive investment climate to attract foreign investors to Indonesia's still under-optimised economic potential. Amid that effort, a new dynamic has emerged that foreign business operators — particularly those investing in Bali — should note. In 2025, the Bali Provincial Government floated a policy shift that could affect how investors enter and operate on the island.

The current legal framework

Investment activity cannot be carried out arbitrarily. Indonesia's applicable regulations safeguard legal certainty and protection to foster a conducive investment climate. Investment is governed by Law No. 25 of 2007 on Investment. The government has also set qualification thresholds for foreign investment value and capital through Government Regulation No. 28 of 2025 on the Administration of Risk-Based Business Licensing, specifically Article 212(2), which requires a minimum investment value for foreign investment (PMA) per five-digit KBLI business field per business location of more than Rp10,000,000,000 (ten billion rupiah), excluding land and buildings.

Also relevant is Minister of Investment and Downstreaming/BKPM Regulation No. 5 of 2025 on Guidelines and Procedures for Risk-Based Business Licensing and Investment Facilities through the Online Single Submission system, whose Article 26(10) sets the minimum paid-up or placed capital for each PT PMA at Rp2,500,000,000 (two and a half billion rupiah).

Why Bali wants a higher threshold

Even though PMA investment and capital value requirements have already been set nationally, the issue has drawn particular attention in Bali. The Governor of Bali considers the current Rp10 billion minimum threshold no longer appropriate to Bali's economic conditions and carrying capacity, particularly for protecting local MSMEs and preserving tourism quality. In practice, some foreign investors are found to meet that figure only on paper, with actual realised investment far smaller — sometimes only around Rp1,000,000,000 (one billion rupiah). This has had real consequences, including a shift in land control and job opportunities away from local communities toward foreign parties, without a proportionate economic contribution to Balinese society in return.

In response, the Bali Provincial Government — through the Regional Secretary, the DPMPTSP across Bali, and an OSS Regulatory Review Team — has proposed raising the foreign investment threshold to a minimum of Rp100,000,000,000 (one hundred billion rupiah). The proposal aims not only to filter investment quality, but also to ensure that incoming investment genuinely benefits the region. It also stems from criticism of the OSS system, seen as still too administrative and not yet backed by rigorous verification of documents or actual conditions on the ground. Without a requirement for physical proof, the system is considered to leave room for investment that doesn't match reality — prompting the Bali government to push for a policy tailored to the region's specific characteristics.

A potential conflict with national law

Legally, a plan to raise the minimum investment standard in Bali risks colliding with higher-level regulation. Indonesia's legal system recognises the principle of lex superior derogat legi inferiori — a higher regulation overrides a lower one in the legal hierarchy — meaning regional rules cannot conflict with central rules, particularly in investment, where many matters are already directly regulated by the central government.

Regions do have authority to regulate their own territory under Law No. 23 of 2014 on Regional Government, but that authority has limits. Regions must still follow centrally set standards and rules, especially for strategic matters such as investment. A regional government cannot simply create a rule that raises investment requirements beyond national provisions. Bali could have a special rule, but it would need approval or stipulation from the central government — for instance, through special-zone status carrying different rules. Without that, a policy raising the investment "entry barrier" risks being seen as breaching nationally applicable rules.

What it would mean for PT PMA capital structuring

If the policy is implemented, its impact will be felt immediately in the capital structure of PMA companies. Raising the minimum investment value to Rp100 billion would automatically require an adjustment to placed and paid-up capital, which must be at least 25% under Article 33(1) of Law No. 40 of 2007 on Limited Liability Companies. In other words, an investor would need to prepare at least Rp25,000,000,000 (twenty-five billion rupiah) in paid-up capital — a figure that would clearly narrow access, since only larger-scale investors could meet it. On one hand, this could improve the quality of incoming investment; on the other, an overly high standard risks reducing Indonesia's competitiveness and pushing investors toward other countries offering more flexible requirements.

A high entry barrier also risks encouraging unlawful workarounds, such as nominee agreements — expressly prohibited for breaching the principle of transparency. As legitimate access for mid-sized investors narrows, shortcuts through unlawful schemes become more likely, particularly where field oversight remains weak. A higher investment standard in Bali therefore cannot be assessed on the headline figure alone — strengthening the oversight system and ensuring regulatory alignment are equally important, so that protecting the local economy doesn't end up encouraging the very legal violations that undermine business certainty in Indonesia.

To date, no dedicated authority actively conducts an in-depth audit to verify the legitimacy of capital ownership. The Ministry of Investment/BKPM itself still tends to be passive, relying on a self-assessment system through the Investment Activity Report (LKPM) filled in by investors without strict factual verification — leaving room for some investors to work around the rules, and making it harder for Bali's goal of protecting regional economic sovereignty to be achieved unless the oversight system is strengthened.

The proposal to raise Bali's foreign investment threshold to Rp100 billion is fundamentally aimed at protecting the local economy. Yet it risks colliding with the centralised licensing system under the Job Creation Law and PP No. 28/2025. On one hand, the policy aligns with efforts to protect MSMEs; on the other, an overly high standard could encourage unlawful practices such as nominee arrangements, particularly where oversight remains largely administrative rather than grounded in real conditions on the ground. A more balanced approach is needed — one that gives regions room to filter investment to their needs while strengthening oversight, with rigorous field verification rather than reliance on self-assessment alone, so that incoming investment is genuinely real, high-quality, and beneficial to the community.

Ultimately, this proposed threshold increase will clearly affect foreign investors, both in terms of a higher entry standard and a changed way of operating in Bali. In a regulatory environment that remains fluid and subject to change, understanding the policy direction early is key to mitigating risk and preserving business certainty. Obtaining the right legal guidance and staying current on developments is no longer optional — it is a strategic necessity for any investor seeking to remain competitive and compliant.