The main challenges of doing business in Indonesia are layered licensing, changing regulation, capital and investment minimums, work-permit rules, language and culture, uneven infrastructure, local competition and compliance workload. Most can be managed with early structuring, a compliance calendar and local advisers who track rule changes.
What are the main challenges of doing business in Indonesia?
Ten challenges recur for foreign companies. The table summarises each, with the practical response covered in the sections below.
| # | Challenge | Practical response |
|---|---|---|
| 1 | Licensing and bureaucracy | Map licences per KBLI code before filing |
| 2 | Regulatory change | Compliance calendar and annual rule review |
| 3 | Foreign ownership limits | Check open, conditional and closed fields first |
| 4 | Capital and investment minimums | Budget to the floors plus working capital |
| 5 | Foreign worker permits | Plan RPTKA and stay permits early |
| 6 | Labour rules | Align contracts and payroll with current law |
| 7 | Language and culture | Local-language contracts and local staff |
| 8 | Infrastructure and logistics | Choose location and logistics partners carefully |
| 9 | Local competition | Test pricing and distribution locally |
| 10 | Tax and reporting workload | Set up bookkeeping and filings from day one |
How do licensing and bureaucracy affect a new company?
Licensing is centralised on OSS, but each activity still needs the right business code and, for higher-risk activities, extra certificates or licences.
Under Government Regulation 28 of 2025 on risk-based licensing (JDIH BPK), low-risk activities need only an NIB, while higher-risk activities need further approval. Delays usually come from a mismatched KBLI code or incomplete documents. Response: confirm the code and licence level before incorporation. See company registration in Indonesia.
Why does regulatory change matter?
Rules and classifications change, so a plan that was compliant at incorporation can need updates later.
A current example is the move to KBLI 2025 under BPS Regulation 7 of 2025. BPS states that existing licences remain valid and that adjustment is needed only where the business purpose changes (BPS). Response: keep a compliance calendar and review licences annually.
What limits apply to foreign ownership and capital?
Some fields restrict foreign ownership, and a PT PMA must meet capital and investment minimums.
Investment fields are classified by Presidential Regulation 10 of 2021 as amended by Presidential Regulation 49 of 2021. Under BKPM Regulation 5 of 2025 a PT PMA needs at least IDR 2.5 billion in issued and paid-up capital and total investment above IDR 10 billion excluding land and buildings, per five-digit KBLI per location, with exceptions for some activities (regulation text). Response: check the field first and size the budget above the floors. Our guide to start a business in Indonesia walks through this.
How should you handle foreign worker permits and labour rules?
Employers of foreign workers generally need an approved manpower plan (RPTKA) before the worker starts, and local staff require compliant contracts and social security enrolment.
The Ministry of Manpower (kemnaker.go.id) administers RPTKA approval, and enforcement against employers using foreign workers without approval has been publicised. Requirements have been revised in recent years, so check the current implementing rule before filing. Response: plan permits before the start date. See our RPTKA guide and investor KITAS guide.
What about language, culture and local competition?
Contracts and corporate deeds are in Indonesian, relationships matter commercially, and local competitors know their customers.
A PT is established by a notarial deed in Indonesian under Law 40 of 2007. Response: use certified bilingual drafts, hire local managers who understand your channel, and pilot pricing and distribution before scaling. Our pros and cons guide puts these trade-offs in context.
How do infrastructure and logistics affect operations?
Infrastructure and logistics quality varies across islands and cities, which affects lead times and costs outside major hubs.
Response: model logistics cost and lead time for each location before choosing where to register your project location, because investment rules apply per project location. Use data from BPS to compare regions.
How heavy is the tax and reporting workload?
It is significant: tax filings, withholding, social security, manpower and investment reports continue after registration.
The general corporate income tax rate is 22 per cent per the Directorate General of Taxes. Response: engage bookkeeping and tax support at incorporation. Our PT PMA setup service covers incorporation and the first compliance steps.
Frequently asked questions
What is the biggest challenge of doing business in Indonesia?
For many foreign companies it is aligning the business activity with the right KBLI code, licence level and capital minimums at the start. A mistake there delays OSS approval and can restrict what the company may legally do or invoice.
Is it hard for foreigners to start a business in Indonesia?
It is manageable with preparation. Licensing is online through OSS, but foreign ownership limits, capital minimums and permit requirements add steps. Foreigners can use a PT PMA in many fields, subject to Presidential Regulation 10 of 2021 as amended.
Do I need Indonesian-language contracts?
A PT's deed of establishment must be in Indonesian under Law 40 of 2007. Commercial contracts can often be bilingual, but have key documents reviewed by qualified Indonesian counsel, who can advise on language requirements for each contract type.
How do I reduce regulatory risk in Indonesia?
Maintain a compliance calendar, review licences against current rules at least annually, and monitor changes such as KBLI 2025. Use adviser support for filings. Keep records of each approval so you can show the basis for your licences.
Which Indonesian agencies should I follow for rule changes?
Follow OSS for licensing, BKPM for investment rules, the Directorate General of Taxes for tax, the Ministry of Manpower for work permits and BPS for business classification. The JDIH BPK portal records the legal status of regulations.
General information only; not legal or tax advice. Confirm current rules before acting.
General information only, not legal or tax advice for your specific facts. Regulations change; confirm the current position with JCSS Indonesia before acting.