Foreign Investment in Aquaculture in Indonesia: Key Fisheries and Business Licensing Requirements

Foreign investment in Indonesian aquaculture is subject to a combination of fisheries-sector requirements and Indonesia’s general investment and risk-based business licensing framework. While aquaculture is not generally listed as a closed business field for foreign investment, fisheries regulations require fisheries businesses operating in Indonesian waters and inland waters to be carried out through Indonesian individuals or Indonesian legal entities. As a result, foreign investors seeking to establish fish farming operations in Indonesia will generally need to operate through an Indonesian limited liability company (Perseroan Terbatas or PT), typically structured as a foreign investment company (PMA), and obtain the relevant risk-based business licensing before commencing operations.

1. Foreign Investors Must Operate Through an Indonesian Legal Entity

Indonesian fisheries regulations establish a specific limitation on who may conduct fisheries business in Indonesian waters and inland waters.

Fisheries business in Indonesia is generally reserved for Indonesian individuals or Indonesian legal entities. The regulatory framework defines fisheries business broadly to include commercial activities involving the catching or cultivation of fish, as well as related activities such as storing, cooling, and preserving fish. Aquaculture is expressly recognized as one of the principal categories of fisheries business and includes freshwater, brackish-water, and marine aquaculture.

The fisheries framework covers a broad range of Indonesian fisheries areas, including inland waters such as rivers, lakes, reservoirs, and swamps, as well as Indonesian waters and the Indonesian Exclusive Economic Zone.

Although the fisheries regime contains limited circumstances in which foreign parties may participate in certain capture-fisheries activities in the Indonesian Exclusive Economic Zone, this does not create a general right for foreign parties to directly operate aquaculture activities in Indonesian waters or inland waters.

Accordingly, a foreign investor cannot generally establish an overseas company and directly operate a fish farm in Indonesia. Instead, the investment should be structured through an Indonesian legal entity.

This is consistent with Indonesia’s investment framework, under which investment activities are generally conducted through an Indonesian limited liability company. In practice, foreign investors therefore participate in Indonesian aquaculture through a PMA company incorporated under Indonesian law.

The Indonesian PT is consequently the entity that enters into the relevant commercial arrangements, holds the required business licences, and conducts the aquaculture operations.

2. Aquaculture Requires Business Licensing

Aquaculture is treated as a fisheries business and therefore cannot generally be conducted without the relevant Perizinan Berusaha.

The fisheries framework requires persons carrying out fisheries business in the Indonesian Fisheries Management Area to obtain business licensing from the central or regional government according to the applicable allocation of authority.

Aquaculture is expressly included among the fisheries business activities subject to business licensing, alongside activities such as capture fisheries, fish transportation, processing, and marketing.

The requirement is reinforced by Indonesia’s risk-based business licensing framework, under which business actors must obtain the appropriate business licensing before conducting business activities.

For an aquaculture investor, this means that incorporation of a PMA company alone is not sufficient to commence fish farming operations. The Indonesian company must also obtain the relevant licensing for its specific aquaculture business activity.

The licensing requirements may differ depending on the nature, scale, location, and risk classification of the proposed operation. Accordingly, the licensing assessment should be undertaken based on the actual business model rather than simply the corporate structure of the investor.

3. The IUP and the Current Risk-Based Licensing Framework

Historically, fisheries businesses were required to hold a Fisheries Business Licence (Izin Usaha Perikanan or IUP).

The fisheries regulatory framework continues to recognize the IUP as the licence authorizing a fisheries company to conduct fisheries business using the production facilities and means specified in the licence. An IUP is issued for the relevant type of fisheries business and, for aquaculture, identifies important operational parameters including the size and location of the relevant land or water area.

Under the post-Job Creation Law framework, however, the licensing system has transitioned toward risk-based Perizinan Berusaha.

The practical significance for investors is that the historical IUP framework should be read together with the current risk-based licensing regime. Aquaculture activities are now assessed and licensed within the broader risk-based business licensing system, with the relevant licensing instruments determined according to the classification and characteristics of the activity.

Aquaculture may also involve different operational stages, including hatchery or fish-seeding activities and grow-out or fish-rearing activities. Investors should therefore identify the precise business activities to be conducted and ensure that the licensing package covers each relevant activity.

For aquaculture operations, the relevant licensing should also properly reflect the operational area and location of the fish-farming facilities, including ponds, cages, or other aquaculture areas.

4. Small-Scale Exemptions Generally Do Not Assist Foreign Investors

The fisheries framework recognizes certain exemptions from the IUP requirement for small-scale aquaculture activities.

These exemptions are directed at specified small-scale freshwater, brackish-water, and marine aquaculture operations falling below prescribed area thresholds. Even where an activity qualifies for an exemption from the IUP requirement, the operator may still be required to register the fisheries activity with the relevant local fisheries authority.

These exemptions are unlikely to provide a practical route for foreign investment projects.

A foreign investor establishing a commercial aquaculture operation will ordinarily operate through a corporate structure and at a scale that falls outside the intended scope of the small-scale exemption. The investor should therefore generally assume that the relevant business licensing will be required rather than structuring an investment on the expectation that the small-scale exemption will apply.

5. Foreign Investment Is Not Generally Prohibited, but Sectoral Fisheries Rules Still Apply

Indonesia’s investment framework generally adopts the principle that business fields are open to investment unless they are expressly closed, reserved for the central government, or subject to specific conditions.

Aquaculture is not generally included among the business fields that are expressly closed to foreign investment.

This, however, should not be interpreted as meaning that a foreign investor can freely conduct aquaculture without complying with sector-specific requirements.

The investment framework and fisheries framework operate cumulatively. The absence of a general foreign ownership prohibition under the investment list does not override the fisheries requirement that the fisheries business be carried out through an Indonesian individual or Indonesian legal entity.

The appropriate structure is therefore generally a foreign-owned Indonesian PT, subject to any foreign ownership limitations or other investment conditions applicable to the specific business classification under the prevailing investment business-field regulations.

Investors should consequently conduct two separate but connected assessments at the structuring stage:

1. whether the relevant aquaculture business field is open to foreign investment and, if so, under what ownership conditions; and
2. whether the proposed Indonesian entity can satisfy the specific fisheries licensing and operational requirements.

This distinction is particularly important for foreign investors because an investment may be permissible from a general foreign investment perspective while still requiring additional conditions to be satisfied under fisheries-sector regulations.

6. Location and Aquaculture Area Are Key Licensing Considerations

Aquaculture licensing is closely connected to the physical location and area in which the operation will be conducted.

The fisheries licensing framework requires aquaculture activities to identify the relevant land or water area and its location. Consequently, investors should determine the proposed location and operating area before finalizing the licensing structure.

This is particularly relevant for projects involving:

• freshwater fish farming in lakes, reservoirs, rivers, or other inland waters;
• brackish-water aquaculture and shrimp farming;
• marine fish farming using cages or other offshore facilities; and
• hatchery and grow-out facilities operating at different locations.

The location of the operation may affect not only the fisheries business licensing but also other approvals and sector-specific requirements applicable to the use of the relevant land, coastal area, water body, or marine space.

Accordingly, site selection and licensing should be treated as interconnected aspects of the investment process rather than as separate post-investment formalities.

7. Vessel-Related Requirements May Apply to Aquaculture Operations

Additional regulatory requirements may arise where the aquaculture operation uses vessels or other floating facilities that fall within the regulatory definition of a fisheries vessel.

The fisheries framework broadly covers vessels and other floating devices used for activities including aquaculture, fish transportation, fish processing, training, and fisheries research.

Where an aquaculture business uses vessels for activities such as transporting live fish, supplying feed, supporting cage operations, or other fisheries-related functions, the investor should assess whether the vessel is subject to separate fisheries business licensing and other regulatory requirements.

The construction, importation, or modification of fisheries vessels may also require prior approval from the relevant government authority.

These requirements mean that an aquaculture investment should not be assessed solely by reference to the fish-farming licence. The operational structure should also identify whether vessels, floating facilities, or other supporting infrastructure will form part of the business.

Where they do, the corresponding licensing and approval requirements should be incorporated into the project from the outset.

8. Non-Commercial Aquaculture Is Subject to a Separate Approval Regime

The regulatory position is different where aquaculture is conducted on a genuinely non-commercial basis.

The fisheries framework requires non-commercial fish capture and/or aquaculture activities conducted in the Indonesian Fisheries Management Area to obtain approval from the relevant central or regional government authority.

This may be relevant to foreign educational institutions, research organizations, training providers, or other entities seeking to maintain fish-farming facilities for research, education, training, scientific, or recreational purposes rather than for commercial production.

Accordingly, the absence of a commercial purpose does not automatically place the activity outside fisheries regulation.

The applicable approval mechanism should be determined based on the actual purpose and nature of the activity. The limited exception for individuals cultivating fish solely to meet daily subsistence needs would generally not be relevant to institutional foreign investors or foreign-controlled companies.

9. Practical Implications for Foreign Aquaculture Investors

For foreign investors, the principal issue is not whether Indonesia permits foreign investment in aquaculture in the abstract, but whether the proposed investment structure and operating model can satisfy both the investment regime and fisheries-sector requirements.

Before commencing an aquaculture project, investors should generally consider at least the following:

• establishing an Indonesian PT, typically as a PMA company;
• confirming the applicable business field and foreign ownership requirements;
• identifying the precise aquaculture activities to be conducted, including hatchery and grow-out activities where applicable;
• obtaining the relevant risk-based Perizinan Berusaha;
• ensuring that the licensing properly covers the intended aquaculture location and operating area;
• assessing additional requirements for the use of fisheries vessels or floating facilities;
• determining whether additional approvals apply to the use of inland, coastal, or marine areas; and
• maintaining compliance with sector-specific fisheries requirements throughout the operation.

The licensing assessment should be conducted before investment implementation because the feasibility of the proposed project may depend on whether the intended business activity, location, ownership structure, and operating facilities can all be licensed consistently.

Conclusion

Foreign investment in Indonesian aquaculture is generally possible, but it is subject to a layered regulatory framework.

The investment regime does not generally close aquaculture to foreign investors. However, fisheries regulations require fisheries businesses operating in Indonesian waters and inland waters to be conducted through Indonesian individuals or legal entities. In practice, foreign investors therefore generally establish an Indonesian PMA company as the operating entity.

That company must then obtain the relevant risk-based business licensing for its aquaculture activities, with the historical IUP framework now operating within the broader post-Job Creation Law licensing system. The licensing analysis should also take into account the location and size of the aquaculture area, the specific type of aquaculture activity, and any vessels or supporting facilities used in the operation.

For foreign investors, the key legal consideration is therefore to align corporate investment structure, foreign ownership requirements, fisheries licensing, site requirements, and operational approvals before commencing the project. Proper structuring at the investment stage can help avoid a situation where a project is permissible from a general investment perspective but cannot operate because its fisheries-sector licensing requirements have not been satisfied.

This alert is part of a series examining regulatory developments affecting foreign investment, fisheries, and natural resources businesses in Indonesia. Please feel free to contact us should you wish to discuss these developments further.

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