There probably aren’t many people involved in Bali’s property and investment sectors who would argue that everything is fine. Take a look around, and you’ll see it isn’t.
Development has accelerated dramatically. In some areas, infrastructure is struggling to keep up. Rice fields disappear, trash piles up, roads become increasingly congested, water is under pressure, and developments occasionally appear in places where you find yourself wondering how on earth they were ever approved.
So, when the Bali Government says that enough is enough and calls for restrictions on certain types of foreign investment, I understand the sentiment. In fact, I largely agree with it.
But there is an important difference between controlling bad development and simply making development more difficult. And that’s where things become complicated.
Since May, new activations of a number of Klasifikasi Baku Lapangan Usaha Indonesia (KBLI) business classifications for foreign-owned PT Penanaman Modal Asing (PMA) companies in Bali have effectively been frozen. The original restrictions covered nine business classifications and subsequently expanded to 18.
The intention appears straightforward enough: slow down development and address some of the increasingly obvious abuses occurring on the island. The problem is that Indonesia already has laws and regulations designed to do exactly that.
Which raises a fairly obvious question: why not enforce them?
The rules already exist
KBLI, the classification system determining which business activities a company is registered to conduct, is a national system. So is Indonesia’s Online Single Submission (OSS) risk-based licensing framework. Investment regulations, zoning regulations, building approvals, environmental requirements, and company licensing requirements already provide the government with considerable powers to determine what can be built, where it can be built, and who can operate it.
If someone builds illegally, enforce the regulations. If a company operates outside its licensed business activities, sanction it. If a development violates zoning, stop it. If foreign investors are using nominee structures or other arrangements that breach Indonesian law, investigate them. That seems considerably more logical than restricting an entire category of investment, especially because blanket restrictions have an unfortunate habit of catching the people following the rules along with those breaking them. And once that happens, you create another problem.
What does ‘doing everything right’ actually mean?
Imagine an investor who has spent months conducting due diligence. They establish the correct company structure. They use reputable lawyers and notaries. They check the zoning. They obtain the appropriate licences. They invest substantial capital and employ Indonesian staff.
Then the rules effectively change. Their project may suddenly find itself sitting alongside another development where someone ignored half those requirements. The bottom line is that both are affected. From an investment perspective, that is potentially more damaging than tighter regulation.
Investors can deal with strict rules. What they struggle with is uncertainty.
If Indonesia says, “These are the rules for investing in Bali,” serious investors can evaluate those rules and decide whether the opportunity makes sense. But if complying with those rules doesn’t necessarily protect an investment from subsequent administrative restrictions, investors begin pricing that uncertainty into every decision.
This doesn’t only affect foreign investors buying villas in Canggu. It’s much broader than that because Indonesia competes globally for capital. Someone considering a manufacturing facility in Java, for example, or a renewable-energy project in Sulawesi, or a tourism development in Lombok is also watching how investment regulations are applied elsewhere in the country. The question becomes less about Bali and more about predictability.
Who is actually being protected?
There is another unintended consequence worth considering: when you freeze new entrants into a market, who benefits?
The honest answer is usually the people already inside it.
Existing businesses holding the necessary licences suddenly operate in a market with fewer competitors. Existing landowners and developers may find that approvals already obtained become more valuable. Meanwhile, smaller investors and new entrants face higher barriers.
We should at least ask whether restrictions intended to protect Bali could inadvertently protect established commercial interests instead. That surely isn’t the objective—nor should this discussion become the familiar argument of foreigners demanding some supposed right to live, build, or operate businesses in Bali. They don’t have one.
Indonesia has every right to determine who invests here and under what conditions. Foreign investors are guests in the Indonesian economy and should respect Indonesian law, Indonesian communities, and the environment in which they operate. But that argument works both ways. If investors are expected to follow the rules, the rules need to mean something.
The legal question
There is also a legal issue that deserves clarification, as much of the public discussion has focused on whether the Governor of Bali has the authority to block national KBLI classifications.
Strictly speaking, that may not be quite the right question. The Governor requested restrictions; Badan Koordinasi Penanaman Modal (BKPM), the Ministry of Investment and Downstream Industry, implemented them. The more important question, perhaps, is whether BKPM itself can effectively suspend nationally available business classifications within one province through administrative action—rather than through a Government Regulation, Presidential Regulation, or another clearly established regulatory mechanism. That distinction matters.
Indonesia has a hierarchy of laws and regulations for good reason. Businesses need to know which rules take precedence and which government institutions have the authority to make them. Otherwise, policy gradually becomes discretion. And discretion creates uncertainty.
Bali does need a slowdown
None of this means Bali should continue developing at the pace we have witnessed over recent years. Quite the opposite. I would welcome stronger enforcement. Close illegal businesses. Stop developments violating zoning. Investigate nominee arrangements. Protect agricultural land. Enforce building regulations. Prosecute corruption where approvals were improperly issued. And if existing regulations are inadequate, change them.
Do it transparently, through the appropriate legal mechanisms, and make the new rules clear to everybody. Good investors will adapt; some investors may leave. That isn’t necessarily a bad thing, though.
Bali does not need every dollar of investment it can attract. What it needs is investment that contributes something meaningful: employment, infrastructure, sustainable tourism, responsible development, and long-term economic value. Perhaps the objective shouldn’t be less foreign investment; instead, it should be better foreign investment. Why? Because slowing Bali down may well be necessary, but moving the goalposts after people have started playing is something else entirely.
For more investment insights, you can find Terje at Seven Stones Indonesia and via hello@sevenstonesindonesia.com.
These opinions are based on a review of Peraturan BPS 7/2025, PP 28/2025, UU 25/2007, UU 23/2014, UU 15/2023, Perpres 185/2024, and Surat Edaran Bersama 4.S/M.HH-1.HH.04.02/1/2026. These are provided for informational purposes and do not constitute legal advice.