Bali Governor Wayan Koster has moved to shut off foreign investment access to a range of small business sectors across the island, including accommodation, rentals, retail trade, consulting services, and other categories closely tied to Bali’s micro, small, and medium enterprises (UMKM).
The measure, announced in a press release on Wednesday, July 22, 2026, follows what officials describe as indications of licensing abuse that allowed foreign investors to enter sectors intended for local small business owners, a trend Koster said risked undermining the survival of Balinese-owned enterprises.
Why the Restriction Was Introduced
“This condition has the potential to create unhealthy business competition and place significant pressure on the survival of local business operators,” Koster said.
According to Koster, the restriction was introduced after it became clear that foreign investors could easily register businesses under Indonesia’s low-risk business classification codes (KBLI) through the Online Single Submission (OSS) system, a process that only requires investors to obtain a Business Identification Number (NIB).
That loophole proved especially easy to exploit, Koster said, because registrations for low- and medium-risk KBLI categories can be issued automatically, without requiring the standard certificates or permits typically demanded of foreign direct investment (PMA). “This condition has been used by a number of foreign investors as an entry point to establish businesses, including through the use of virtual offices,” Koster added.
Government Backing and Enforcement Plans
Koster confirmed that the request to restrict foreign investment in these sectors had already been approved by Indonesia’s Minister of Investment and Downstream Industry, Rosan Roeslani, with the restriction taking effect in the third week of May 2026.
Koster said he plans to work closely with mayors and regents across Bali to take firm action against any violations identified going forward.
“With this closure, foreign investors can no longer submit new business licensing applications through the OSS system for the classifications in question, until further policy is issued in accordance with prevailing laws and regulations,” Koster said.
What This Means for Foreign Business Owners and Investors in Bali
For the island’s substantial community of foreign entrepreneurs, digital nomads, and investors who have built businesses in villa rentals, retail, hospitality, and consulting, this policy marks a significant shift in how foreign capital can legally enter Bali’s small business economy. The restriction effectively closes a pathway that had allowed foreign-owned businesses to register under simplified low-risk licensing categories originally intended for Indonesian small business owners, categories that had become a common route for foreign nationals opening cafes, guesthouses, and retail shops across the island.
Existing foreign-owned businesses already operating under these classifications have not been addressed in Koster’s statement, leaving open questions about how the policy will apply to businesses already established through this pathway before the May 2026 cutoff.
What’s Next
The restriction remains in place indefinitely, pending further policy guidance from Indonesia’s national government. For prospective foreign investors and business owners considering entry into Bali’s retail, hospitality, or consulting sectors, consulting directly with a licensed business or immigration attorney familiar with Indonesia’s current KBLI classifications is strongly advised before pursuing any new business registration on the island.
