Key Takeaways
- Bali recorded Rp 42.8 trillion (USD 2.7 billion) in investment in 2025, but authorities found widespread misuse of permits and business classifications.
- The Indonesian government is preparing to tighten foreign investment rules in Bali to protect local MSMEs, prevent permit abuse, and promote sustainable development.
- Major violations include:
- Misuse of KBLI 68111 (Real Estate) for short-term villa rentals
- Foreign nationals entering MSME sectors (motorbike rentals, salons, retail, etc.)
- Failure to meet the Rp 10 billion minimum capital requirement
- Nominee shareholder practices
- Abuse of virtual office addresses
- Development in protected or sacred zones
- The Ministry of Investment proposed four key actions, including a KBLI moratorium, banning virtual offices for PMA, strict capital verification, and mandatory compliance documentation before commercial operations.
- For foreign investors, this signals a shift toward stricter compliance, tighter oversight, and higher regulatory standards — not a closure of Bali’s investment market.
Bali has long been one of Indonesia’s strongest magnets for foreign capital. In 2025 alone, the island recorded Rp 42.8 trillion (around USD 2.7 billion) in realized investment between January and December.
However, widespread misuse of villa permits has raised concerns about potential harm to the region. To protect local businesses and ensure long-term sustainability, the government is preparing to tighten foreign investment rules in Bali.
So how will this affect foreign investors? Here’s a clear breakdown to help you better understand the situation.
Why Is the Government Limiting Foreign Investment in Bali?
The proposed restrictions come after repeated findings of misuse in foreign direct investment (FDI), especially under the PMA (Foreign Investment Company) scheme.
According to Vice Minister of Investment and Downstreaming Todotua Pasaribu, several serious issues have emerged behind Bali’s strong investment numbers. These include:
- Misuse of business classifications (KBLI)
- Foreign nationals entering sectors meant for local MSMEs (UMKM)
- Failure to meet minimum capital requirements
- Use of nominee structures
- Abuse of virtual office addresses
- Development in protected or sacred zones
Officials argue that without stronger enforcement, local communities risk becoming “spectators in their own land.”
Misuse of KBLI 68111 (Real Estate) for Villas
One of the biggest concerns involves KBLI 68111 (Real Estate). Under this classification, foreign investors can develop real estate (villa) on leased land.
However, authorities found that many projects built under this category were later used as:
- Short-term tourist accommodations
- Private residences
- Commercial hospitality operations
In short, permits issued for “real estate development” were often used for daily rental businesses, which may require different licenses and regulatory compliance. Officials say this kind of mismatch creates unfair competition and weakens oversight.
Another sensitive issue is foreign nationals entering sectors traditionally reserved for Indonesian small businesses.
Authorities reported cases of foreign nationals operating in motorbike rentals, salons, photography services, and retail trade.
“These should not be controlled by foreigners,” Pasaribu stated, emphasizing that MSMEs are meant to empower local communities. Indonesia’s MSME sector is the backbone of Bali’s economy, especially in tourism-support services.
Read More: Bali Airbnb Ban Canceled, Short-Rental Rules Tightened in 2026
Capital Requirement Violations and Nominee Structures
By law, PMA companies must meet a minimum capital requirement of Rp 10 billion. However, regulators found that many companies:
- Failed to meet the minimum capital threshold
- Operated without proper environmental approvals
- Lacked verified standard certifications
There were also reports of systematic nominee practices, where foreign investors use Indonesian citizens as shareholders to bypass ownership restrictions.
Additionally, some companies used virtual office addresses only for administrative purposes or to obtain residency permits (KITAS), without conducting real business activities.
Four Key Policy Recommendations
To address these issues, the Ministry of Investment proposed four major steps:
- A moratorium on KBLI categories suspected of repeated violations
- A ban on PMA companies using virtual offices as official business addresses in Bali
- Mandatory proof of the Rp 10 billion paid-up capital specifically for PMA operating in Bali
- A requirement to submit full compliance documents before commercial operations begin
These measures aim to shift Bali from “high-volume” investment to higher-quality, regulated investment.
"Policy Is Only as Strong as Its Implementation", Says Economist
Economist Wijayanto Samirin from Paramadina University supports the restriction plan but warns that regulations alone are not enough. According to him, the real challenge lies in enforcement.
He emphasized that:
- Bureaucratic integrity is critical
- Law enforcement agencies must actively supervise
- Regulatory simplification and system reform are needed
“If implementation is weak, even the best policies will fail,” he said.
His concern reflects a long-standing issue in Indonesia, where regulations may be strong on paper but monitoring is inconsistent in practice.
Bali Governor Wayan Koster also welcomed the cooperation agreement between the central government and the Bali provincial administration. He stressed that investment in Bali must align with the island’s development vision under “Nangun Sat Kerthi Loka Bali.”
This philosophy emphasizes environmental balance, cultural preservation, and spiritual and social harmony. Koster also pointed to Government Regulation No. 28 of 2025, which replaces PP No. 5 of 2021 and grants greater authority to local governments in supervising risk-based investments.
Read More: New Bali Construction Ban Explained (And Why It’s Not All Bad)
What This Means for Foreign Investors in Bali
For foreign investors, this signals a significant shift. Bali is not closing its doors, but the era of loosely supervised expansion appears to be ending.
Going forward, investors should expect:
- Stricter compliance checks
- Higher documentation standards
- Stronger scrutiny of business classifications (KBLI)
- Greater enforcement of capital requirements
- Tighter zoning controls
For serious long-term investors who follow the rules, this may actually reduce unfair competition from non-compliant operators.
Read More: Can Foreigners Buy Property in Bali? Full Guide for You
Conclusion
Bali remains a top tourism and property market in Southeast Asia, but rapid growth has prompted new restrictions to restore balance. For now, this issue is still at the proposal stage by the Governor of Bali, and the implementation process will continue to develop over time.
If you need personalized guidance to navigate property investment in Bali safely and legally, contact our senior property specialists and get a free consultation.
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