Bali to clamp down on illegal foreign-owned businesses

All travel agencies, including those owned by foreigners, will need to join the local tourism association to ensure better management and oversight. PHOTO: EPA-EFE via The Straits Times/Asia News Network

JAKARTA – Bali Governor I Wayan Koster has formed a special task force to crack down on illegal foreign-owned businesses, following widespread permit violations by foreign investors that are believed to be harming the local economy.

According to Mr Koster, the team will consist of local stakeholders and tourism associations and will be tasked with thoroughly auditing tourism business permits in Bali.

“I will also issue a circular that will serve as a legal basis for the Bali Public Order Agency and the Bali Police to take action against businesses that violate their permits,” Mr Koster said on June 1, as reported by Antara.

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He will also require all travel agencies, including those owned by foreigners, to join the local tourism association to ensure better management and oversight.

Mr Koster said the crackdown was essential to protect Bali from “economic, social and tourism setbacks”, arguing that illegal foreign businesses might exacerbate the wealth gap on the island and accelerate the deterioration of the local economy.

“There are numerous challenges facing tourism in Bali, such as traffic congestion, mounting waste issues, illegal villas and rowdy tourists.

“While we are committed to addressing these problems, the root causes must be tackled upstream through stronger regulations and stricter permit enforcement,” he said.

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Mr Koster stated that in recent years, he has received numerous complaints about an increasing number of micro, small and medium-sized enterprises (MSMEs) in Bali being operated or controlled by foreign nationals.

According to existing regulations, foreign investment businesses must have a minimum capital of 10 billion rupiah (S$791,000) excluding the value of land and buildings, an amount that exceeds the capital of MSMEs. Any investment below that threshold is strictly reserved for domestic direct investment.

However, Mr Koster said many foreign investors have been exploiting loopholes in the government’s Online Single Submission (OSS) system for business licensing, allowing them to dominate strategic sectors in Bali’s tourism industry, even at the micro level.

The government launched the OSS system in 2018 to streamline and simplify the business licensing process, allowing business owners to apply for permits through a single integrated online platform instead of navigating multiple state institutions.

However, oversight of the system has been relatively lax, leading to various violations in the field. For example, there have been numerous reports of foreign nationals using the identities of local Bali residents to register their MSMEs through the OSS system.

Mr Koster revealed that more than 400 car rental and tour businesses in Badung Regency, a major tourism hub in Bali, are owned by foreign nationals.

“Most of these businesses don’t even have a physical office in Bali, and their owners are not based here. This is unacceptable. Bali cannot be treated as a free trade zone at the expense of its own people,” he said.

In November 2024, National Economic Council chairman Luhut Pandjaitan stated that President Prabowo Subianto had instructed his aides to closely monitor foreign companies operating in Bali and to implement stricter regulations.

“Violations of business permits by foreign investors are a serious problem that have created unfair competition and significantly harmed local businesses,” he said.

Overtourism and overdevelopment have become serious issues in Bali as tourism returns to the island following the Covid-19 pandemic. Reports of rowdy tourists violating local customs and unlicensed businesses competing unfairly with locals have become increasingly common in recent years.

Earlier in June, the Bali chapter of the Indonesian Hotel and Restaurant Association reported an approximate 20 per cent decrease in hotel occupancy rates, despite the rising number of tourists visiting the island.

The association attributed this trend to travelers increasingly choosing “illegal accommodations”, such as unlicensed luxury kos-kosan (boarding houses) and villas.

In January and February, Indonesian immigration authorities detained 312 foreign nationals in Bali for visa violations related to problematic foreign investments.

A few months earlier, the authorities revoked the business permits of 267 foreign companies for failing to meet the 10 billion rupiah capital requirement. /dl