DENPASAR, DEWATA.NEWS – Bali recorded total investment realization of IDR 42.8 trillion between January and December 2025. Despite the strong figure, Indonesia’s Deputy Minister of Investment and Downstreaming, Todotua Pasaribu, said the data also revealed a range of structural and regulatory issues, particularly involving foreign direct investment.
Pasaribu raised the concerns during the signing of a Memorandum of Understanding between the Ministry of Investment and Downstreaming/BKPM and the Bali Provincial Government on investment control, held in Denpasar on Thursday (January 22, 2026).
According to Pasaribu, authorities identified multiple violations involving foreign-owned companies, including misuse of Indonesia’s business classification system (KBLI). One example involved companies registered under KBLI 68111 (real estate), which are permitted to develop properties on leased land, but were instead operating short-term tourist accommodations or private residences.
“This should not be happening. The MSME sector should primarily be utilized by local residents,” Pasaribu said.
He also highlighted what he described as foreign encroachment into small and medium-sized business sectors, including motorcycle rentals, beauty salons, photography services, and retail trade—areas typically reserved for local entrepreneurs.
In addition to sectoral violations, Pasaribu said many foreign investment companies failed to meet basic legal and administrative requirements. These included not fulfilling the minimum capital requirement of IDR 10 billion, operating without approved environmental permits, and lacking verified standard certification.
Authorities also uncovered widespread manipulation of corporate structures through the use of Indonesian nationals as nominee shareholders, a practice used to conceal foreign ownership. Some companies were found to be using virtual office addresses solely for administrative purposes and residence permits, without conducting actual business activities.
“In reality, there is no genuine business operation at those locations,” Pasaribu said.
He further noted that several foreign-backed projects, including villas and beach clubs, were built in restricted areas such as sacred zones, coastal buffer areas, and protected rice fields.
To address these issues, Pasaribu proposed four policy measures. These include a moratorium on business classifications linked to recurring violations, a ban on the use of virtual offices for foreign investment operations in Bali, strict enforcement of the IDR 10 billion minimum capital requirement with proof of paid-in capital, and mandatory documentation confirming that investment thresholds and commercial readiness requirements have been met before operations begin.
Bali Governor I Wayan Koster said investment on the island must be more tightly regulated and strategically directed to ensure sustainability.
“With integrated and sustainable investment control and supervision, we believe investment in Bali can create broad employment opportunities without damaging the island’s natural and social fabric,” Koster said.
The provincial government said the agreement with the central government aims to strengthen oversight and ensure future investment in Bali aligns with environmental protection, social balance, and long-term economic stability.