Part I: Legal and Regulatory Framework
Core Regulations and Regulatory Logic: Indonesia’s foreign investment access regime is centered on Government Regulation No. 28 of 2025, marking a policy shift from cautious liberalization to strategic attraction of foreign investment. Through 14 sections and 550 articles, the regulation introduces a deep reform of the risk-based business licensing system, expanding the number of sectors subject to risk-based licensing from 16 to 22. Six new areas have been added: legal metrology, the creative economy, geospatial information, cooperatives, investment, and electronic systems and transactions. The core mechanism is a digitally integrated model of single-entry access plus system interconnection. Through the Online Single Submission (OSS) system, a unified front-end entry point for administrative approval is established, reducing communication and coordination costs for enterprises in administrative procedures.
Market Access and Operational Regulation: The new framework adopts a two-stage management model consisting of the start-up stage and the operational stage. During the start-up stage, enterprises apply through the system for legal entity establishment, spatial planning approval, environmental permits, and business licenses. Certain micro, small, and medium-sized enterprises may submit an environmental commitment statement in place of a full environmental impact assessment. During the operational stage, production, logistics, and other business activities may only commence after the relevant licenses have taken effect; operating without approval will result in administrative penalties. The system has been upgraded into four major subsystems: the Basic Requirements Subsystem, which integrates prerequisite materials and enables one-time submission with multi-agency mutual recognition; the Business Licensing Subsystem, which retains the function of generating the business registration number; the Investment Facilitation Subsystem, which supports online applications for eight investment incentives; and the Partnership Subsystem, which supports the filing of cooperation projects between large foreign-invested enterprises and local SMEs.
Dispute Resolution Regulation: Judicial procedures in Indonesia are lengthy and inefficient. Chinese-invested enterprises should therefore include arbitration clauses in their contracts designating neutral venues such as the Singapore International Arbitration Centre (SIAC), so as to avoid litigation in local courts. At the same time, enterprises should establish a comprehensive compliance monitoring mechanism in order to respond promptly to regulatory updates.
Part II: Investment Opportunities
Core Investment Advantages: With 65% of the world’s refined nickel supply, a population dividend of 270 million people, and a digital economy valued at USD 90 billion, Indonesia has become a strategic foothold for Chinese enterprises seeking to build out the full new energy vehicle supply chain. The 2025 regulatory restructuring improves licensing efficiency through a positive presumption mechanism, under which an application is automatically deemed approved if the approving authority does not issue an explicit rejection within the statutory time limit. For example, if no decision is made on a spatial planning permit within 20 working days, it is automatically approved, significantly improving the predictability of approval timelines. At the same time, a six-tier administrative penalty mechanism has been introduced, ranging from warnings to revocation of the business registration number, thereby enhancing regulatory transparency and enforcement capacity and creating a more stable business environment for compliant enterprises.
Key Investment Sectors: The full nickel resource industry chain is Indonesia's most strategically valuable sector. Chinese enterprises have already built a complete layout from upstream mining to downstream battery manufacturing, controlling approximately 75% of local refined production capacity and forming integrated industrial clusters such as the Morowali Industrial Park and the Weda Bay Industrial Park. In the field of new energy vehicle manufacturing, Chinese automakers such as Wuling, BYD, and Chery have established localized production operations. In the first half of 2025, electric vehicle sales grew significantly, and Chinese brands rapidly broke through the long-standing dominance of Japanese automakers in the market. In the fields of digital economy and infrastructure, the construction of Indonesia's new capital, Nusantara, has attracted strong investment interest from many Chinese enterprises, while the planned extension of the Jakarta–Bandung high-speed railway to Surabaya continues to generate infrastructure demand.
Part III: Risk Prevention and Control
Major Risk Identification: The transformation of the technology route is the highest-priority risk. Global EV batteries are shifting from nickel-cobalt-manganese (NCM) ternary batteries to lithium iron phosphate (LFP) batteries, which do not contain nickel. By 2024, LFP batteries had already reached a 50% global market share, while Indonesia’s nickel resource advantage depends primarily on the ternary battery technology route. At the same time, oversupply of nickel has led to persistently weak prices. Inventory on global exchanges has risen from 54,000 tons to 366,000 tons, significantly increasing profitability pressure on smelting projects. In terms of policy uncertainty, a large-scale crackdown on illegal mining in 2025 led to the recovery of mining rights covering more than 4 million hectares, with fines totaling USD 1.7 billion. Rising resource nationalism has also pushed the government to tighten control over mining rights. ESG compliance pressures continue to intensify. Environmental controversies involving deforestation, coal dependence, and community relocation have triggered international criticism, while international clients and financial institutions are imposing higher ESG requirements on supply chains.
Targeted Response Strategies: Extending the industrial chain is the key to mitigating technology route risks. Enterprises should move beyond upstream smelting into downstream sectors such as precursors, cathode materials, and battery manufacturing, while also paying attention to emerging technologies such as solid-state batteries and sodium-ion batteries. A front-loaded ESG strategy requires enterprises to internalize international ESG standards into their overall business strategy, proactively disclose environmental data, establish community communication mechanisms, and replace coal with renewable energy wherever possible to reduce their carbon footprint. In terms of deeper localization, enterprises should cultivate local suppliers to meet local content requirements and accelerate talent localization through university-industry cooperation with Indonesian universities and polytechnic institutes. The Wuling model, for example, has driven the coordinated development of 17 Chinese supply chain enterprises together with more than 100 local suppliers.
Part IV: Practical Guidance
Preliminary Preparation Stage: Enterprises should accurately verify their industry classification and assess whether their business falls within the six newly added regulatory sectors, so as to clarify applicable licensing requirements. They should log in to the system to complete registration information, submit basic licensing applications and related technical documents, and ensure that account permissions are fully configured. At the same time, they should map out the full compliance chain from establishment to operation, clearly identifying the processing steps for spatial planning approval, environmental commitment statements, and business registration numbers, among others.
Implementation Stage: Enterprises should apply through the system for the necessary legality permits, prepare spatial planning and environmental documents in advance, and make use of the environmental commitment statement to simplify the environmental review process and accelerate the acquisition of the business registration number. They must strictly comply with the sequencing requirements of the start-up and operational stages, and may only begin production activities after the relevant licenses have taken effect. They should also simultaneously apply for the eight investment incentives available under the Investment Facilitation Subsystem, including tariff exemptions and corporate income tax reductions.
Ongoing Operation Stage: Enterprises should establish a regular compliance audit mechanism, with particular attention to fulfillment of environmental commitments, management of license validity periods, and partnership compliance. They should monitor nickel prices and changes in technology routes, and establish price risk hedging mechanisms. At the same time, they should maintain continuous communication with the Indonesia Investment Coordinating Board, stay informed of policy developments, and build a government relations team capable of responding to unexpected regulatory changes.
Part V: Conclusion
The investment logic of Indonesia lies in its use of nickel resource advantages to attract the global new energy industry chain, its use of digital licensing reform to improve administrative efficiency, and its use of population dividends and regional hub status to absorb manufacturing relocation. However, the regulatory restructuring in 2025 serves as a warning: projects that lack forward-looking planning on technology routes and fail to front-load ESG compliance will face the dual dilemma of market elimination and policy reversal. Chinese enterprises must carefully balance the contest between the NCM ternary battery route and the LFP route, while seeking breakthroughs amid the tension between resource nationalism and international ESG standards. It is advisable to give priority to locating in already approved special economic zones, make use of park-level integration advantages to reduce logistics and energy costs, transform policy dividends into sustainable competitive advantages through industrial chain extension and deeper localization, and at the same time establish comprehensive risk hedging and exit mechanisms in order to move forward steadily in this opportunity-rich yet highly complex market.