[Indonesia] Minimum foreign capital requirement lowered to 2.5 billion rupiah - BKPM Regulation No. 5 (effective October 2, 2025) makes it easier for foreign investors to establish businesses -

👉️Roughly speaking

Introduction

This time, I will explain the changes to Indonesia's foreign investment regulations, which are likely to have a significant impact.

In Indonesia, the minimum paid-in capital for foreign investment companies (PT PMA) was previously required to be 10 billion rupiah, but BKPM Regulation No. 5/2025 , which came into effect on October 2, 2025, significantly reduced this to 2.5 billion rupiah.
This change is seen as a clear indication of the Indonesian government's intention to further promote foreign investment, and is positioned as part of an overall restructuring of the investment environment.
In recent years, Indonesia has achieved rapid economic growth among ASEAN countries, but administrative procedures and high minimum capital requirements have been barriers to entry.
In fact, without exception, many of the people who have consulted us about investing in Indonesia have expressed concerns about the high minimum capital requirement.
This amendment could be a turning point in overcoming these challenges and attracting more widespread foreign investment.

Background – Revision of the risk-based business licensing system

Based on Government Regulation No. 28 of 2025 on the Implementation of Risk-Based Business Licensing, promulgated in June 2025, the Indonesian government has restructured its entire business licensing system (OSS) to be "risk-based."
The aim of this is to accelerate investment attraction by reforming the previous formal licensing system based on industry type and simplifying procedures according to the risk level of the business.

BKPM Regulation No. 5/2025 was formulated as the implementing regulations, and it comprehensively stipulates investment permits, tax incentives, industry-specific requirements, foreign capital ratios, etc. in a total of 400 articles (long!).
Among these, the revision of capital requirements is the amendment that will have the greatest practical impact on foreign companies, and will significantly lower the barriers to entry for small and medium-sized investors in particular.

The government's policy intention is also to promote domestic job creation while striking a balance between protecting domestic small and medium-sized enterprises and encouraging foreign capital inflows.
This relaxation is not merely a numerical relaxation, but can be seen as part of a systemic reform aimed at creating a more sustainable investment structure.

Key point of the amendment: Significant reduction in capital requirements

Article 26 (Pasal 26) of BKPM Regulation No. 5/2025 stipulates the minimum capital and minimum investment amount for a Foreign Direct Investment Company (PT PMA) as follows:

Article 26 paragraph (10)
"The minimum capital requirements for PMA as referred to in paragraph (9) are issued/paid-up capital of at least IDR 2,500,000,000.00 (two billion five hundred million Rupiah) per limited liability company, unless otherwise determined based on statutory provisions."

(The minimum amount of issued and paid-up capital for a foreign investment company (joint stock company: PT PMA) is 2.5 billion rupiah, unless otherwise provided for in other laws and regulations.)

Article 26 paragraph (2)
“The minimum investment value is IDR 10,000,000,000.00 (ten billion rupiah) excluding land and buildings for each 5-digit KBLI code at each project location.”

(The minimum investment amount, excluding land and buildings, for each five-digit business classification code (KBLI) and each project location is 10 billion rupiah.)

In this way, the minimum paid-up capital and the minimum investment amount are defined as separate concepts.
The paid-up capital is a requirement to ensure financial credibility at the time of company establishment, and the minimum investment amount is the standard for the total business scale to be recognized as foreign investment.
Therefore, in order to register as a PT PMA,Capital of 2.5 billion rupiah or moreandTotal investment of over 10 billion rupiahA double standard must be met.
Compared to the provisions applicable since 2021, this provision clearly distinguishes between the minimum paid-up capital and total investment amount requirements, providing greater flexibility in foreign investment practice.

Relationship between capital and total investment amount

Just to be sure, here is a brief explanation of the minimum capital and minimum paid-in capital.
Capital refers to the "equity capital" that shareholders must actually contribute when establishing a company.
On the other hand, the minimum investment amount refers to the "total business investment amount" including capital investment and working capital.
In other words, the capital is part of the 10 billion rupiah investment plan, and the remainder can be supplemented by loans or additional investments, etc., and is not required at the time of company establishment.
This two-tiered structure allows BKPM to ensure both business scale and financial soundness.

Impact on Japanese companies

It is expected that this will have a significant positive impact on Japanese companies wishing to expand into Indonesia.
I will also explain my areas of focus, renewable energy and ESG.

Significant reduction in new market entry costs and the possibility of flexible market testing

The minimum paid-in capital required to establish a foreign company (approximately 91.8 million yen, exchange rate as of October 10, 2025) has been reduced to approximately 22.95 million yen, significantly reducing the cost of entry for Japanese companies.
In particular, for companies that want to test the potential of the Indonesian market in medium-sized businesses such as manufacturing, logistics, and services, it seems that the option of "just setting up a local subsidiary" has become feasible.

Increased flexibility in capital policy and group structure

The new framework also provides flexibility in the design of joint ventures and holding companies.
Lower capital requirements will make it easier to make incremental investments and follow-on investments, making it easier to develop investment plans based on the financial strategy of the entire group.
It will also provide greater scope for strategic entry by minority shareholders and for designing collaborative schemes with partner companies.

Practical effects in the renewable energy and ESG fields

In the renewable energy sector, capital requirements are unlikely to have much of an impact on businesses that require equipment, as the initial investment is large. However, it is expected that there will be a significant positive impact on industries that require smaller initial investments, such as consulting and advisory.
In these industries, reduced costs of incorporation will encourage entry, and it is expected that the number of companies considering expanding their business locally will increase.
In particular, it is expected that Japanese companies that have bases in Malaysia and Singapore will increasingly consider Indonesia as their next base of operations.

International comparison – Position within ASEAN

With this revision, Indonesia's capital requirements are now in the "middle ground" among major ASEAN countries.
In Malaysia, it is possible to set up a company with as little as RM1 (approximately 35 yen), and there is a high degree of freedom for foreign capital to enter the market. However, there are certain restrictions on actual operations due to local partner and bank requirements.
In Thailand and the Philippines, restrictions on the ratio of foreign capital in certain industries remain strict, and there is a difference between the degree of formal freedom and the practical constraints.

In contrast, Indonesia has taken a turn in the direction of lowering formal barriers, while still requiring a certain level of real capital.
It seems that Indonesia is trying to re-brand itself as an emerging powerhouse open to foreign investment.

summary

BKPM Regulation No. 5/2025 significantly reduced the minimum paid-up capital of foreign investment companies (PT PMA) from IDR 10 billion (approximately JPY 91.8 million) to IDR 2.5 billion (approximately JPY 22.95 million).
This change is not just a relaxation of the figures, but can be seen as a change in the direction of Indonesia's investment policy itself.
As part of future government policy, it is expected that further progress will be made in establishing systems that balance the introduction of foreign capital with support for domestic small and medium-sized enterprises.

For Japanese companies, this will enable them to establish local subsidiaries while minimizing risk and assess market trends, further enhancing Indonesia's position within the ASEAN regional strategy.
There is no doubt that this amendment will attract new entrants, particularly in businesses such as consulting, which require little capital investment, and in growth areas such as digital services.
We look forward to future practical developments, with a view to stabilizing system operation and following up on tax matters.

I would also like to work hard on my business and aim to establish a corporation in Indonesia.