“Many foreign investors still ask about the PMA Principle Licence when arranging licensing, even though this document no longer exists in Indonesia’s current licensing system.”
The PMA Principle Licence is one of the terms most frequently encountered in discussions about establishing foreign companies in Indonesia, even though the document is officially no longer applicable. This confusion is understandable. Many online sources still list the Principle Licence among required documents, although Indonesia’s licensing system has undergone fundamental changes since the Job Creation Law took effect. This article explains what the PMA Principle Licence was, why it is no longer needed, and what has replaced it in the current OSS RBA system.
A Practical Summary for Foreign Investors
The PMA Principle Licence Is No Longer Required. What Replaces It?
In the OSS RBA era, PT PMA licensing no longer begins with a Principle Licence. Foreign investors need to understand the new workflow: DPI verification, PT PMA establishment, OSS registration, NIB issuance, and fulfilment of risk-based licensing according to KBLI.
1. Check the DPI First
Ensure the business sector is open to foreigners and understand ownership limits or special conditions before selecting a KBLI code.
2. Establish the PT PMA
The deed of establishment and Ministry of Law and Human Rights approval form the basis of corporate legality before OSS registration.
3. Obtain an NIB Through OSS
The NIB serves as the business operator’s official identity and the main entry point for risk-based licensing.
4. Follow Up on Sectoral Permits
For certain sectors or KBLI codes, an NIB alone is insufficient. Companies must still fulfil additional permits, standards, or approvals.
Does the PMA Principle Licence still need to be arranged?
No. In the current licensing system, the PMA Principle Licence is no longer a document that must be applied for. The initial process now runs through OSS RBA and NIB issuance.
What are the risks of still following old guides?
Investors may waste time seeking a document no longer used, misunderstand the BKPM/OSS workflow, or delay checking the DPI and sectoral permits that are more important in the current system.
When do foreign investors need legal support?
Support is important where a business sector has foreign ownership limits, its KBLI code is medium or high risk, sectoral permits are required, or foreign directors/shareholders also need KITAS planning.
What Was the PMA Principle Licence?
The PMA Principle Licence, in full the Foreign Investment Principle Licence (Izin Prinsip Penanaman Modal Asing), was a document formerly issued by BKPM (the Investment Coordinating Board) as initial approval for foreign investors wishing to establish a company in Indonesia.
It served as an initial government “green light” stating that the foreign investment plan had been approved in principle. Only after receiving it could investors proceed with company establishment and arrange other operational permits.
This system operated for a considerable period and was a standard part of PT PMA establishment before licensing reform. It is understandable that many old guides and even some consultants who have not kept up with regulatory developments still refer to it as a required document.
Why Does the PMA Principle Licence No Longer Exist?
The PMA Principle Licence was abolished as part of the sweeping business licensing reforms introduced by Law Number 11 of 2020 on Job Creation, followed by Government Regulation Number 5 of 2021 on the Implementation of Risk-Based Business Licensing.
This reform changed the fundamental licensing philosophy from a system requiring multiple staged approvals before investors could act to a more efficient risk-based system. Under the new system, the NIB (Business Identification Number) directly replaces the functions of various previously separate initial licensing documents, including the Principle Licence.
In other words, what previously required a Principle Licence as the initial step can now begin simply by registering the company in OSS and obtaining an NIB.
JHY Legal routinely explains this change to foreign investor clients who arrive with outdated references, ensuring that they begin with an understanding aligned with current regulations rather than those in force five years ago.
What Replaces the PMA Principle Licence?
In the current OSS RBA system, the “initial approval” function previously performed by the Principle Licence has been integrated into a simpler licensing workflow. Here is how the new system works for foreign investors:
- DPI (Positive Investment List) verification: before registering, foreign investors check whether their planned business sector is open to foreign ownership and under what conditions. This replaces the consultative function previously performed largely during the Principle Licence application.
- PT PMA establishment and Ministry of Law and Human Rights approval: the ministry-approved deed of establishment proves corporate legality without requiring prior BKPM approval.
- OSS registration and NIB issuance: the NIB is issued automatically once company data is verified in OSS. It simultaneously serves as the company’s official identity, a replacement for TDP, and a replacement for API.
- Risk-based business licensing: after the NIB, the operational permit type required is determined by the selected KBLI code’s risk level.
This process is far more linear than the previous system. Investors no longer need to await staged BKPM approvals before establishing a company. Everything can proceed in parallel within an integrated workflow.
“OSS RBA does not remove government supervision of foreign investment. It shifts supervision into a more efficient mechanism: the DPI determines what is permitted, and risk classification determines how strict the supervision is.”
Are Any BKPM Approvals Still Required?
Although the Principle Licence has been abolished, BKPM, now known as BKPM/the Ministry of Investment, still plays a role in the PT PMA licensing ecosystem. That role now takes a different form.
Investment Realization Reporting
PT PMA companies must still periodically report investment realization to BKPM. The reports cover realized paid-up capital and workforce absorption. This is a reporting obligation continuing throughout company operations rather than a permit.
Fiscal Facilities and Investment Incentives
PT PMA companies wishing to use fiscal facilities such as tax holidays or tax allowances must still apply to BKPM. This is a separate process that does not obstruct company operations but must be undertaken if the investor wishes to use available incentives.
Sectors with Special Approvals
Some strategic sectors, such as banking, insurance, and media, still require approval from the relevant sectoral authorities (OJK, Kominfo, etc.) before operating. These are permits from the respective sectoral authorities required for those sectors, rather than Principle Licences from BKPM.
Practical Implications for Foreign Investors
For foreign investors establishing a PT PMA in Indonesia for the first time, abolition of the Principle Licence has several concrete implications:
- There is no longer a document queue for initial BKPM approval. Establishment can begin directly with preparation of the deed after DPI verification.
- The establishment timeline is more predictable because the previously uncertain BKPM approval time is no longer a variable.
- The DPI becomes a much more important reference document because it is the sole mechanism determining whether a business sector is open to foreigners.
- Errors in understanding the DPI cannot be “corrected” through negotiation with BKPM, as was sometimes possible under the previous system, making careful DPI verification from the outset critical.
JHY Legal’s Experience Supporting Foreign Investors in the OSS RBA Era
JHY Legal is a legal advisory firm focused on immigration, corporate actions, and regulatory licensing in Indonesia. Since OSS RBA took effect, we have supported foreign investors in understanding the fundamental differences between the previous and new systems, including ensuring clients do not spend time looking for documents that no longer exist. We assist from DPI verification, PT PMA establishment, and OSS registration through processing sectoral permits still required. For clients also needing immigration planning for foreign directors or shareholders, we integrate business licensing and KITAS processing into one coordinated workflow.
What to Remember When Seeking Information About PT PMA Licensing
A real challenge for foreign investors conducting independent research is the amount of outdated information still circulating online. Articles, guides, and even some consultants still mention the PMA Principle Licence, the BKPM Approval Letter, or other documents from the licensing era before the Job Creation Law as required parts of the process.
The most practical way to verify whether information you find remains relevant is to check whether the source refers to Government Regulation Number 5 of 2021 or OSS RBA. If it does not, it most likely refers to the previous system that no longer applies.
The first step you can take now is simple: check the KBLI code for your planned business sector, verify its DPI status, and ensure all guides you use refer to the current licensing system. For more specific questions about particular business sectors or DPI implications for your proposed ownership structure, JHY Legal is ready to help provide an accurate picture consistent with the latest regulations.