Indonesia has taken a decisive step to attract foreign capital by dramatically reducing the minimum paid-up capital requirement for foreign-owned companies. Under Minister of Investment Regulation No. 5 of 2025 (MOID Reg 5/2025), the threshold has dropped from IDR 10 billion (approximately USD $640,000) to IDR 2.5 billion (approximately USD $160,000)—a 75% reduction that fundamentally reshapes the investment landscape for foreign entrepreneurs and real estate developers eyeing opportunities in emerging markets like Lombok.
This regulatory shift arrives as part of Indonesia’s broader effort to streamline its investment framework and compete more effectively for foreign direct investment across Southeast Asia. The new regulation works in tandem with Government Regulation No. 28 of 2025, which addresses risk-based business licensing procedures, creating a more transparent and accessible pathway for international investors to establish legal entities in Indonesia.
What Changed and Why It Matters
Previously, foreign investors seeking to establish a PT PMA (foreign-owned limited liability company) faced a substantial capital barrier of IDR 10 billion. This requirement effectively locked out smaller investors and made property acquisition and business establishment prohibitively expensive for many potential entrants. The new IDR 2.5 billion threshold—while still significant—brings Indonesia more in line with regional competitors and opens the door to a broader spectrum of foreign investment.
For Lombok’s real estate market specifically, this change represents a watershed moment. The island has long attracted international interest for its pristine beaches, developing infrastructure, and proximity to Bali, but regulatory complexity and high capital requirements have historically slowed foreign participation. With these barriers substantially reduced, foreign buyers and developers can now more affordably establish the legal entities required to own property and operate businesses in Indonesia.
The regulation maintains important protections for domestic entrepreneurs by continuing to classify foreign-owned companies as large enterprises, ensuring that micro, small, and medium enterprises remain reserved for Indonesian nationals. Certain sectors remain closed to foreign ownership entirely, while others require partnerships with local MSMEs or cooperatives, documented through the Online Single Submission (OSS) risk-based approach system.
Implications for Lombok’s Development Trajectory
The timing of these regulatory changes coincides with Lombok’s emergence as a priority destination for both tourism infrastructure and residential development. The reduced capital requirements are expected to accelerate several key trends:
- Increased villa and resort development: Foreign developers who previously found the capital requirements prohibitive can now more feasibly establish legal entities to develop boutique properties, particularly in high-demand coastal areas.
- Expanded property management services: International property management companies can enter the market with lower initial capital outlays, potentially improving service standards and operational efficiency across the hospitality sector.
- Diversified investment profiles: The lower threshold attracts not just large institutional investors but also high-net-worth individuals and smaller development groups, creating a more diverse and resilient investment ecosystem.
- Enhanced legal compliance: By making legal ownership structures more affordable, the regulation may reduce informal or grey-market property arrangements, strengthening property rights and market transparency.
Timeline and Implementation
MOID Reg 5/2025 entered into force in 2025, with the Online Single Submission system serving as the primary platform for business licensing and compliance documentation. The regulation also introduces a new lock-up period for paid-up capital, reflecting the government’s intent to ensure committed, long-term investment rather than speculative capital flows.
Foreign investors establishing PT PMAs under the new framework must still navigate Indonesia’s negative investment list (which specifies sectors closed or restricted to foreign ownership) and comply with sector-specific regulations. For real estate and hospitality ventures in Lombok, this typically involves coordination with local authorities, environmental assessments, and adherence to zoning regulations that vary by regency.
The conversion requirement remains in place: any domestic investment company (PMDN) that brings in foreign shareholders must convert to PMA status and comply with all applicable foreign investment regulations, including the new capital requirements.
Risks and Considerations
While the regulatory changes create significant opportunities, several factors warrant careful attention:
- Regulatory interpretation: Implementation of new investment regulations can vary across regions and government offices. Investors should work with experienced local legal counsel to ensure compliance and navigate any interpretive ambiguities.
- Sector-specific restrictions: The reduced capital threshold does not apply uniformly across all industries. Highly regulated sectors maintain higher requirements, and certain activities remain closed to foreign ownership or require local partnerships.
- Infrastructure readiness: While regulatory barriers have decreased, physical infrastructure development in some parts of Lombok continues to lag behind demand, potentially affecting project timelines and operational costs.
- Market absorption capacity: A rapid influx of foreign capital and development could outpace local market absorption, particularly in the residential and hospitality sectors, requiring careful market analysis and phased development approaches.
What to Watch Next
The success of these regulatory reforms will become evident over the next 12 to 24 months as foreign investment flows respond to the new framework. Key indicators to monitor include the number of new PT PMA registrations, the volume and scale of foreign-backed real estate projects breaking ground in Lombok, and any refinements to implementation procedures as the government gains experience with the new system.
Investors should also track potential adjustments to sector-specific regulations, particularly in tourism and real estate, as Indonesia continues to balance foreign investment attraction with domestic economic protection. The government’s ongoing commitment to streamlining the OSS system and reducing bureaucratic friction will be critical to realizing the full potential of these capital requirement reductions.
For foreign investors considering Lombok real estate opportunities, the regulatory environment has never been more favorable. The combination of reduced capital barriers, clearer licensing procedures, and Lombok’s strong fundamentals as a tourism and lifestyle destination creates a compelling investment thesis—provided investors approach the market with thorough due diligence, local partnerships, and realistic timelines for navigating Indonesia’s evolving regulatory landscape.
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