DENPASAR: Bali is tightening restrictions on foreign investment in small tourism, food and lifestyle businesses as authorities move to protect local enterprises struggling to compete with a growing number of foreign-owned operators on the holiday island.
Bali Governor I Wayan Koster said his administration had removed 18 business categories from the government's Online Single Submission (OSS) licensing system, effectively preventing businesses in those sectors from obtaining new licences.
"The decision was made after we found that some businesses had exploited loopholes in the OSS system, allowing them to operate without meeting the substantial capital requirements normally applied to foreign investors," Koster said on Wednesday.
He said the practice could create unfair competition and threaten the sustainability of local businesses, particularly micro, small and medium enterprises.
Indonesia introduced the OSS system in 2018 to simplify and accelerate the business licensing process by allowing entrepreneurs to apply for permits through a single integrated online platform rather than dealing with multiple government agencies.
However, Koster said some foreign-owned businesses in Bali had taken advantage of the system by registering their operations under low-risk business categories in the Indonesian Standard Industrial Classification (KBLI) within the OSS platform.
Businesses classified as low risk can obtain licences automatically through the OSS system and are not required to secure standard certifications or additional permits. They are also allowed to use virtual offices as their registered business addresses.
According to Koster, the mechanism enabled some foreign-owned businesses to circumvent regulations requiring foreign investment (PMA) companies to have a minimum investment value of Rp10 billion (US$556,000), excluding the value of land and buildings.
The loophole has contributed to a surge in the number of small and micro businesses owned by foreign nationals, raising concerns that they are increasingly competing with and threatening locally owned enterprises.
Koster revealed last year that more than 400 car rental and tour businesses in Badung regency, one of Bali's main tourism hubs, were owned by foreign nationals. Many of these businesses, he said, did not even maintain a physical office on the island.
The 18 business categories removed from the OSS licensing system include hotels with a building area of less than 6,000 square metres, hostels, property rental businesses, car and motorcycle rental services, bus and truck rentals, clothing retailers, textile businesses, restaurants, cafes, traditional medicine shops, stadiums, fitness centres and management service companies.
The restriction has been in force since May.
Koster stressed that the Bali provincial government would take firm action against businesses found violating licensing and investment regulations.
"Bali remains open to high-quality and responsible investment that delivers tangible benefits to the regional economy. Investments entering Bali must be aligned with the island's development vision, respect local wisdom and cultural values and contribute to strengthening a people-based economy through micro, small and medium enterprises," he said. - Jakarta Post/ANN
