Indonesia tightens control over foreign-owned companies (PMA): what businesses need to know
Indonesia is significantly increasing oversight of foreign-owned companies (PMA). In March 2026, Bali’s Department of Industry and Trade sent official requests to hundreds of companies, launching a large-scale compliance review.
The main focus of these checks is on partnerships with local micro and small enterprises (UMK), which are mandatory for certain types of business activities.
What’s Happening
Indonesian regulations have long required foreign companies in specific sectors to cooperate with local businesses. These requirements are established at the regulatory level and implemented through the OSS system with the involvement of the Investment Coordinating Board (BKPM).
In practice, many companies have treated this requirement as a formality or underestimated its importance. That is now changing. Authorities are no longer checking only whether a partnership exists—they are also assessing its substance and whether it reflects real business activity.
What Regulators Are Requesting
As part of the current review, companies are receiving official requests to disclose detailed information about their cooperation with local partners. This includes data on the UMK entities themselves, the structure of the partnership, the nature of their activities, and their geographic scope.
Particular attention is being paid to supporting documentation—contracts, agreements, and other materials that demonstrate that the partnership is genuinely operational rather than existing only on paper.
Why This Matters for Businesses
For companies, this signals a shift toward stricter and more substantive oversight. If a partnership with a UMK is missing or merely formal, it may trigger additional scrutiny from regulators and potentially lead to further inspections or restrictions.
In essence, the government is raising expectations around transparency and the real economic contribution of foreign businesses within Indonesia.
What Companies Should Do Now
Under these conditions, foreign-owned companies should proactively review their structure and ensure compliance with current requirements. It is important to focus not only on having a local partner but also on the quality of the collaboration and the proper documentation of all arrangements.
The sooner a business aligns its operational model with regulatory expectations, the lower the potential risks.
Conclusion
These inspections demonstrate that Indonesia is consistently strengthening control over foreign investment and expects companies to be genuinely integrated into the local economy rather than merely complying with formal requirements.
If you are already operating in Indonesia or planning to enter the market, it is essential to assess risks early and review your business structure.
Director of Legal Indonesia
Patricia Christy
