New Investments vs. Business Expansions


Minister of Investment and Downstream Industry / Head of BKPM Regulation No. 5 of 2025 explains the requirements for businesses that want to start a new operation or expand an existing one. It covers the permits businesses need, the minimum investment required, and the incentives they may receive from the government. In simple terms, the regulation distinguishes between starting a new business and growing an existing business. The requirements are different depending on which one you plan to do.


Starting a New Business (New Investment)

If you want to establish a new company or start a new investment project in Indonesia, you must complete several steps before you can operate commercially. First, you need to register your business and obtain the necessary permits. Under Articles 11–14, the process begins with establishing and verifying your company's legal status, meeting basic requirements such as land-use and environmental approvals, and obtaining a Business Identification Number (NIB) through Indonesia's Online Single Submission (OSS) system. After registration, you move to the preparation stage. This may include acquiring land, constructing facilities, purchasing machinery, and conducting trial production. Once the relevant requirements have been met, you can proceed to full commercial operations, including production, distribution, and sales.

How much investment is required?

The minimum investment requirements depend on whether the company is domestically or foreign-owned. For a domestic investment company (PMDN), the regulation classifies businesses according to their capital, excluding land and buildings:

  • Micro businesses: up to IDR 1 billion.
  • Small businesses: more than IDR 1 billion up to IDR 5 billion.
  • Medium businesses: more than IDR 5 billion up to IDR 10 billion.
  • Large businesses: more than IDR 10 billion.

For a foreign investment company (PT PMA), the general rule is that the total investment must exceed IDR 10 billion, excluding land and buildings, for each five-digit business classification (KBLI) at each project location. Special rules may apply to certain sectors, such as wholesale trade, food and beverage, and construction. A PT PMA must also have at least IDR 2.5 billion in paid-up capital. Under the regulation, this capital must remain in the company's bank account for at least 12 months, subject to the applicable conditions.

What permits do you need before operating?

Under Article 40, businesses must meet the applicable basic requirements before beginning operations. These may include:

  • Land-use approval (KKPR): Confirms that the business location is suitable for the planned activity.
  • Environmental approval: Confirms that the business has met the applicable environmental requirements.
  • Building approval (PBG) and building-worthiness certificate (SLF): Confirm that the building meets the relevant construction and use requirements, where applicable.

In short, registering a company is only the beginning. You must also meet the requirements that apply to your business location, activities, and facilities.


Expanding an Existing Business

If your company is already operating and you want to grow, the regulation provides a separate set of rules. An expansion does not necessarily mean building an entirely new factory. It can involve increasing production, moving to another location, or adding a new business activity. Under Article 1, point 44, business expansion generally refers to increasing the annual production capacity of goods or services, adding business locations, or introducing additional business activities.

What counts as a business expansion?

Article 232 recognizes five common situations:

  • Increasing production capacity at your current location.
  • Increasing production capacity by using additional land next to your existing site.
  • Opening another location to carry out the same business activity.
  • Adding a different business activity at your current location.
  • Opening a new location for a different business activity.

For example, a manufacturer that wants to produce more goods at its existing factory is expanding its business. The same applies to a company that opens another factory or starts a new line of business.

Do you need a new business license?

Not always. In general, an expansion requires a new Business License (PB). However, there is an exception for manufacturing or industrial businesses that increase production capacity for the same activity at the same location. In that case, the company generally does not need a new license; it only needs to update the relevant attachment to its existing Business Identification Number (NIB). The company's business risk classification may also change if the expansion increases its production capacity enough to affect its risk level. The OSS system assesses the combined capacity of the existing business and the expansion to determine the applicable classification.

Do you need new land-use or environmental approvals?

That depends on the type of expansion. If you only increase production capacity or add supporting facilities on the same plot of land, you may not need a new land-use approval (KKPR), provided you meet the conditions in Article 43. If you expand onto adjacent land, Article 63 provides a simplified approval process in certain cases, particularly where the additional land is smaller than the original site and has the same zoning designation. The relevant requirements must still be met. Environmental approval is another consideration. Under Article 168, companies expanding their production capacity or land area may need to update their existing environmental approval to reflect the changes. The main takeaway is that expanding an existing business can involve fewer steps than establishing a new one, but the company must still check whether its licenses and approvals need to be updated.