Indonesia: Which Sectors Remain Closed to Foreign Investment

Updated: December 2025

Indonesia is actively reforming its investment policies, opening the economy to foreign capital and entrepreneurs. Most sectors are now accessible to international investors under favorable conditions. However, some areas remain entirely prohibited or conditionally restricted for foreign participation. These exceptions were previously compiled under the now-defunct Negative Investment List, officially abolished in 2021 but still commonly referenced in business terminology to denote restricted sectors.

From Negative to Positive Investment List: A Shift Toward Openness

Until 2021, Indonesia regulated foreign economic participation through the Negative Investment List (Daftar Negatif Investasi or DNI)—a list of sectors fully or partially closed to foreign enterprises. However, with the enactment of the Job Creation Law (Omnibus Law) and Presidential Regulation No. 10/2021, the investment framework was overhauled. It introduced the Positive Investment List, specifying in detail the sectors, capital participation conditions, and potential incentives for foreign investors.

Key changes include:

Over 90% of the economy is now open to up to 100% foreign ownership;
Previous blanket restrictions and individual quotas have been lifted;
Information on permitted and restricted sectors is now centralized and regularly updated via the OSS licensing system and the BKPM (Ministry of Investment) website.

Nevertheless, certain industries remain entirely off-limits to foreign investment, often due to moral, religious, cultural, or national security considerations.

Which Sectors Are Completely Closed to Foreign Investment in Indonesia?

As of late 2025, foreign investors may not participate in the following business activities:

Production and distribution of narcotics — All commercial activity involving drugs is strictly banned, including the manufacture and sale of substances classified as categories A and B under Indonesian drug law.
Handling of psychotropic substances — Outside of licensed medical and pharmaceutical use, this is heavily regulated by Indonesian authorities.
Production of chemical precursors — Includes import, distribution, and storage of substances that could be used in drug or explosives production.
Gambling and gaming industry — All forms of commercial gambling, including casinos, betting shops, online gambling, and slot machines, are prohibited.
Trade in protected wildlife — Encompasses hunting, breeding, export, and commercialization of endangered flora and fauna.
Blood transfusion services — By law, these are not commercial activities and may only be conducted by the Indonesian Red Cross.
Disposal of hazardous/toxic (B3) waste — Foreign participation is barred unless operations meet the highest available technology and environmental safety standards and receive special government approval.

These sectors are officially deemed threats to public order, morality, public health, or environmental safety and are therefore entirely excluded from foreign investment opportunities.

Restricted or Conditionally Open Sectors

Beyond fully prohibited areas, there are industries open to foreign participation under specific conditions. Examples include:

Certain sectors—such as rural retail, construction, or private security—require a local partner with majority ownership;
Projects located in border areas or sensitive zones may require prior government approval;
Some industries necessitate involvement of Indonesian MSMEs (UMKM) or adherence to quotas for local employment.

These factors are crucial when selecting a legal business structure—for instance, forming a PMA (foreign-owned company) is only possible in sectors listed in the Positive Investment List.

Why Are These Sectors Still Restricted?

These bans are legislated for good reason—each of the excluded industries poses a potential risk to the nation or society. Indonesia considers them strategically, morally, or religiously sensitive:

Narcotics and precursors — Target of strict national policies aimed at transnational crime and organized trafficking;
Gambling industry — Conflicts with religious norms, especially Islamic values, and is prohibited nationwide including all digital platforms;
Natural resource protection — Bans on wildlife trade and environmental non-compliance reflect Indonesia’s ecological vulnerability and global environmental commitments.

Thus, even within a liberal investment climate, the government maintains control over sectors it deems critical.

How Can You Check If a Business Sector Is Open to Foreign Investment?

Several official channels provide clarity on sector availability for foreign capital:

The BKPM (Indonesia’s Ministry of Investment) website — includes up-to-date sectoral lists and regulations;
The OSS online platform — allows application submissions and KBLI code classification checks for sectors;
Consultations with licensed investment agents or legal advisors specializing in Indonesian corporate law;
Partner platforms like Invest in Asia, offering translated and interpreted regulatory updates.

Before registering a legal entity (such as a PT PMA), ensure that the business activity is open to foreign founders and properly categorized under the correct KBLI code.

Conclusion: Open Economy with Red Lines

Modern Indonesia is one of Southeast Asia’s most open economies for foreign capital. However, despite its market-forward approach, the nation maintains clearly defined boundaries that restrict overseas participation in particular industries. These exceptions reflect Indonesia’s ethical, cultural, and strategic imperatives.

For investors, it’s vital to determine whether a desired business activity falls within the open, restricted, or prohibited category. Non-compliance can lead not only to license denial but also to legal penalties and criminal liability.

Thorough preparation, legal guidance, and proper ownership structuring are key to successfully entering Indonesia’s rapidly growing market.

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