The Government of Bali Province has entered a new phase in regulating foreign investment. Through an official letter issued by the Governor of Bali to the Ministry of Investment/BKPM, combined with public policy statements, the Provincial Government has clearly reaffirmed one core principle: investment in Bali must be high quality, provide real benefits to local communities, and must not damage Bali’s natural, social, and cultural order.
This policy direction should not be interpreted as anti-foreign investment. Rather, it represents a regulatory realignment to ensure that foreign investment in Bali is genuine, responsible, and sustainable.
Why This Policy Shift Matters
In recent years, Bali has seen rapid growth in the number of Foreign-Owned Companies (PMA), particularly in low-risk and medium-low risk business activities. A significant portion of these PMA structures were identified as having minimal operational substance, limited economic contribution, and in some cases were established primarily for administrative or immigration-related purposes rather than genuine business operations.
These developments prompted the Provincial Government of Bali to conduct a comprehensive evaluation of foreign investment patterns—especially those that:
- Do not meaningfully employ local workers
- Lack clear and ongoing business activities
- Provide limited long-term economic value to Bali
Key Points of the Governor of Bali’s Official Letter
Through the official correspondence addressed to the Ministry of Investment/BKPM, the Governor of Bali submitted several key requests that now form the foundation of the current regulatory approach:
1. Closure of Low Risk and Medium Low Risk PMA in Bali
The Provincial Government requested that Foreign-Owned Companies (PMA) operating under low-risk and medium-low risk classifications in Bali be closed through the OSS system. The rationale behind this request is that such business categories generally require minimal barriers to entry and, in practice, often fail to deliver meaningful contributions to local economic development.
2. Restriction on the Use of Virtual Offices for PMA
The letter also emphasizes that virtual offices in Bali should no longer be used as registered business addresses for PMA. Virtual office arrangements are considered insufficient to demonstrate genuine business presence and complicate effective monitoring and supervision of investment activities.
3. Prevention of PMA Misuse for Immigration Purposes
A central concern highlighted in the letter is the misuse of PMA structures by foreign nationals solely to obtain stay permits. PMA entities without real investment, operational activity, or economic contribution are viewed as inconsistent with the true objectives of foreign investment in Indonesia.
Bali’s Investment Policy Direction: Quality Over Quantity
Consistent with the Governor’s public statements, Bali’s investment policy is now firmly oriented toward quality investment. This includes investment that:
- Generates tangible benefits for local communities
- Creates employment opportunities for Balinese workers
- Respects Bali’s cultural values and social structure
- Preserves environmental sustainability and spatial planning
This approach aligns with Bali’s long-term development vision, Nangun Sat Kerthi Loka Bali, which prioritizes harmony between economic growth, culture, and environmental protection.
Implications for Foreign Nationals and Business Owners in Bali
For foreign nationals and foreign investors currently operating—or planning to operate—in Bali, this regulatory shift carries several important implications:
- PMA structures lacking real operational substance may face restrictions within the OSS system
- Virtual office-based PMA registrations now present heightened legal risk
- Immigration status linked to PMA (such as investor or director stay permits) may require careful review
It is important to note that not all PMA will be affected automatically. The impact depends heavily on how each business is structured, its risk classification, and the presence of genuine, ongoing business activities.
Conclusion
The reorganization of PMA regulation in Bali reflects a broader transformation from investment volume toward investment integrity and sustainability. Bali continues to welcome foreign investors who demonstrate long-term commitment, respect local values, and contribute meaningfully to the local economy and environment.
For foreign business owners, this period represents a critical opportunity to reassess existing structures and ensure compliance with the evolving regulatory landscape. Early awareness and informed decision-making can significantly reduce future legal and operational risks.
Consultation and Next Steps
Need clarity on how this policy affects your business?
Each PMA structure is unique, and the implications of this regulatory shift depend on how your company is established and operates.
If you are a foreign investor or business owner in Bali and would like to understand your position and explore compliant options aligned with current policy direction, professional consultation is available.
This article is provided for general informational purposes only and does not constitute legal advice. Specific circumstances may require individual assessment.
