Indonesia's Regulatory Shift and Its Implications for Tech Investments in Southeast Asia

Indonesia's 2025 regulatory reforms, particularly Government Regulation No. 28 of 2025 (PP 28/2025), have redefined the landscape for foreign and domestic tech investments. By introducing a risk-based licensing framework and centralizing approvals through the Online Single Submission (OSS) system, the government aims to create a more predictable and efficient business environment. For investors, this shift presents both opportunities and challenges, requiring a nuanced understanding of compliance requirements and strategic re-entry tactics.

Strategic Regulatory Risk Assessment: Navigating the New Framework

PP 28/2025 expands the number of regulated sectors from 16 to 22, including high-growth areas like geospatial information, electronic systems, and the creative economy. The risk-based approach categorizes business activities into low, medium, and high risk, with corresponding licensing requirements. For instance, high-risk sectors such as electronic transactions now demand detailed environmental and technical approvals before a business license is issued, as reported by APAC News. This structured system reduces bureaucratic delays but necessitates meticulous compliance planning.

A key innovation is the introduction of "deemed approvals," where regulatory authorities automatically grant licenses if deadlines are missed. This mechanism, while enhancing predictability, also underscores the need for investors to monitor timelines and document compliance rigorously, according to ASEAN Briefing. Environmental compliance has also been tightened, with technical checks for wastewater management and hazardous waste handling. For example, companies operating in industrial zones can leverage pre-approved environmental standards, reducing compliance burdens, as outlined by Permitindo.

Market Re-Entry Opportunities: Sectors and Strategies

The reforms align with Indonesia's broader digital economy ambitions, such as the "Making Indonesia 4.0" and "Golden Indonesia 2045" initiatives. Sectors like e-commerce, fintech, and green energy are prime targets for investment. For instance, Danantara Indonesia's partnership with the Japan Bank for International Cooperation (JBIC) to develop green data centers exemplifies how the OSS system facilitates large-scale tech projects while aligning with sustainability goals, as described in a Skylight update.

Foreign investors benefit from reduced minimum paid-up capital requirements (from IDR 10 billion to IDR 2.5 billion), easing market entry, according to a Dentons analysis. However, sector-specific thresholds remain high, with investments in fintech and renewable energy exceeding IDR 10 billion. Strategic partnerships with local firms are critical for navigating regulatory complexities. Google's "Berita Pilihan" initiative, which collaborates with 34 Indonesian media companies to address revenue imbalances in digital journalism, highlights the importance of localized alliances in adapting to regulatory expectations, as discussed in a TechPolicy piece.

Challenges and Mitigation Strategies

Despite the reforms, challenges persist. Smaller startups face hurdles due to infrastructure gaps and a skills shortage in deep tech. The fintech sector, for example, grapples with regulatory uncertainty, as OJK Regulation No. 40 of 2024 imposes stricter capital and consumer protection requirements, per Global Legal Insights. To mitigate these risks, companies must adopt proactive compliance strategies, such as engaging legal experts and leveraging digital tools for real-time regulatory updates.

Cybersecurity and data protection are also top priorities. The revised Electronic Information and Transactions Law (Law No. 1 of 2024) mandates compliance with Indonesian law for international electronic contracts and prohibits harmful content, as outlined on the Tech for Good blog. Multinational firms must review contractual frameworks and invest in infosec self-assessments, particularly for micro, small, and medium enterprises (MSMEs), warns IIA Indonesia.

Conclusion: Balancing Risk and Reward

Indonesia's 2025 regulatory changes position the country as a strategic hub for tech investments in Southeast Asia. While the risk-based licensing model and digital compliance tools enhance transparency, investors must navigate sector-specific requirements and evolving cybersecurity mandates. By prioritizing partnerships, leveraging zone-based approvals, and adopting agile compliance frameworks, companies can capitalize on Indonesia's dynamic market while mitigating regulatory risks.

As the Prabowo administration refines its digital and economic policies, the ability to adapt to regulatory shifts will remain a key determinant of success in Indonesia's tech sector.