Indonesia has taken another step toward a more structured, transparent, and partnership-driven investment climate.
With the issuance of Decree No. 220/2025 by the Ministry of Investment/BKPM, the government has now released Technical Guidelines for Investment Partnerships — a long-awaited clarification on how large-scale enterprises must collaborate with UMKM and cooperatives.
This is not just another regulatory document. It’s a practical, operational roadmap that finally explains the procedures, timeframes, obligations, and compliance mechanisms that foreign and domestic investors must now follow.
For serious investors, these guidelines serve as both a compliance requirement and an opportunity to build deeper local engagement — something Indonesia is increasingly prioritizing through its risk-based licensing (PBBR) and investment ecosystem reforms.
Three Partnership Schemes You Must Understand
The new guidelines formally recognize three types of investment partnerships:
1️⃣ Mandatory Partnerships
For business fields that are reserved for UMKM or open only in partnership with UMKM/cooperatives. If you operate in these sectors, you must partner with UMKM. No exceptions.
2️⃣ Priority Business Partnerships
For sectors considered strategic — capital-intensive, labor-intensive, technologically advanced, pioneering, or aligned with national strategic projects. These partnerships come with additional obligations and access to tax facilities.
3️⃣ Voluntary Partnerships
For businesses outside the two categories above who choose to partner with UMKM for CSR, supply chain, capacity building, or ecosystem development.
The Partnership Process: What Large-Scale Enterprises Must Now Do
All partnerships — Mandatory, Priority, and Voluntary — follow a similar workflow, with the OSS system as the administrative backbone.
1. Submit a Partnership Letter of Commitment (SPK)
- Mandatory Partnerships: before NIB issuance/update
- Priority Partnerships: when applying for facilities
- Voluntary Partnerships: anytime
2. Notify Provincial/Regency DPMPTSP Through OSS
Ensures local authorities are aligned with your plans.
3. Prepare a Partnership Consensus Document
- Mandatory & Priority: within 90 days of SPK
- Voluntary: no time limit
4. Draft and Sign a Partnership Contract
- Mandatory & Priority: within 30 days of consensus
- Voluntary: flexible timing
5. Report Implementation Through LKPM
All partnership activities must be included in your quarterly LKPM reports.
This directly affects your OSS compliance rating.
Priority Business Partnerships: Additional Requirements
For Priority Business Partnerships, Decree 220/2025 imposes specific, additional rules, especially when tax or investment facilities are involved.
Work-Value Requirements for Facilities
When applying for master list exemptions, tax holidays, tax allowances, or investment allowances, large-scale enterprises must submit detailed work-value data. OSS will calculate thresholds automatically:
| Facility Type | Mandatory Work Value |
| Duty exemption (master list) | 30% of estimated benefit or max Rp 150B |
| Tax holiday | 1% of fixed capital or max Rp 150B |
| Tax allowance | 3% of fixed capital or max Rp 100B |
| Investment allowance | Sector/region specific |
Timing Requirements
- All partnership works must be completed within 10 years of the facility application.
- At least one activity must start within 1 year of application.
CSR as a Substitute
If a partnership consensus cannot be reached with UMKM, Priority Businesses may substitute with CSR-based programs, which may also qualify for gross income reduction facilities.
Administrative Sanctions: Compliance Ratings Now Matter
Failure to fulfill partnership obligations results in sanctions under Regulation 5/2025, including:
- Reprimands
- Temporary business suspension
- Administrative fines
- Police coercion
- Revocation of business licenses and fundamental requirements
The OSS system issues annual compliance scores:
- 0–39 = Poor compliance → high risk of sanctions
This is a major shift — OSS reputation now affects your operational risk profile.
What This Means for Investors and Foreign Enterprises
Decree 220/2025 signals a stronger alignment between investment incentives and local empowerment. Key implications include:
1. Early Integration into Investment Planning
Partnership planning must now occur before licensing or facility applications.
2. UMKM Collaboration Becomes a Structural Requirement
This is no longer pure CSR — it’s part of Indonesia’s investment model.
3. Accurate Reporting is Critical
LKPM and OSS submissions must be precise and on time.
4. Priority Sectors Gain Predictability
Clear thresholds and timelines resolve earlier uncertainties around tax incentives.
5. Internal Compliance Systems Are Essential
Investors must align legal, finance, and operations to the new procedures.
Our View at Seven Stones Indonesia
Decree 220/2025 provides clearer expectations for investors and reinforces Indonesia’s move toward a more responsible and partnership-driven investment ecosystem.
To stay ahead, investors should:
- Map partnership obligations early
- Identify UMKM partners proactively
- Prepare SPK and consensus documentation with proper timing
- Integrate partnership activities into LKPM workflows
- Align with new thresholds for tax and investment facilities
Done well, these partnerships strengthen supply chains, enhance local inclusion, and improve compliance standing — all essential for long-term success in Indonesia.