Legal News Update
Contributors: Almaida Askandar, S.H., MBA, Nita Damayanti, S.H., Renata Luisa Kusuma, S.H.
Published on 9 May 2026 by IABF Law Firm, Jakarta, Indonesia.
The Permission for the Industrial Companies to be Located Outside an Industrial Zone
Minister of Industry Regulation Number 37 of 2025 on Standards for Business Activities and/or Products/Services Standards for Risk-Based Business Licensing in the Industrial Sector (“Regulation 37/2025”) became effective on 5 October 2025. In general, the operation of risk-based licensing issuance is conducted electronically through the Online Single Submission (OSS), which shall be integrated with the Indonesian National Industrial Information System (or Sistem Informasi Industri Nasional) which is managed by the Ministry of Industry in accordance with Article 4 (1) of Regulation 37/2025. Besides the guidelines on the issuance of risk-based licensing, Regulation 37/2025 also contains provisions regarding permission for industrial companies to be located outside industrial zones which will be briefly highlighted below.
I. Requirements for the Industrial Company to be Located Outside An Industrial Zone
Mainly, the industrial companies which will conduct the industrial business activity must be located in the industrial zones. However, there are terms and conditions under Regulation 37/2025 which provide permission for the Industrial company to be located outside an industrial zone as follows:
|
No. |
Terms and Conditions (under Article 16 (2) of Regulation 37/2025) |
Additional Requirements |
| 1. |
Located in a municipality/city that does not have an industrial zone or that has an industrial zone but all industrial plots within the industrial zone have been occupied; |
In the case that industrial zone exists but all industrial plots within such industrial zone have been occupied, Article 16 (5) of Regulation 37/2025 explains that such condition may be in terms of: a) the total area of the industrial zone does not satisfy the needs of the industrial company; or b) the business activity is not covered by the environmental impact analysis. |
| 2. |
Located in an Industrial zone within a special economic zone; |
– |
| 3. |
Falls into the classification of small-scale industry; |
– |
| 4. |
Falls into the classification of medium-scale industry which does not have the potential to cause widespread environmental pollution; or |
In summary, Article 18 of Regulation 37/2025 elucidates that the respective medium-scale industry is classified under the business activity of an industry that: a) not included under the list of business, and/or b) not included under the list of activity, that are required to comply with environmental impact analysis obligations under the prevailing laws and regulations in the environment sector. |
| 5. |
The industry that uses the specific raw materials and/or requires a specific location for its production process. |
For the industry that uses the specific raw materials, Article 19 (1) and (2) of Regulation 37/2025 specifies the requirements that must be satisfied as follows: a) The location of such industrial business activity is integrated with the operational location of raw materials or closer to the operational location of the raw materials which is equipped with the supporting infrastructure. These raw materials are derived from the proceeds of natural resources of agriculture, plantation, fisheries, and/or livestock farming; and/or b) the existential chain value between the operation of raw materials and industrial activities which are conducted within: i) 1 (one) area, or ii) an area that is separated and connected with the physical infrastructure to distribute the raw materials. Regarding the industry which requires a specific location for its production, Article 19 (3) of Regulation 37/2025 states that the respective industry does not require any essential supporting infrastructure in the form of a wastewater treatment installation or the raw water treatment plant in providing or delivering services. |
Furthermore, the above criteria shall be conducted in accordance with (i) the laws and regulations regarding spatial zones and (ii) the following provisions:
a) located in a municipality/city, and/or
b) fall into the classification of a medium-scale industry.
II. Other Criteria for the Industrial Company To Be Located Outside Industrial Zones
The following are the requirements for the industrial company which may be exempted from the obligation to be located within an industrial zone:
a) conduct business activities in business location and/or its activity is located in an area that has already been acquired by another business actor who has obtained a suitable spatial utilization activity and transferred, leased, or being loaned for use to a new business actor with the same Indonesia Standard Industrial Classification or Klasifikasi Baku Lapangan Usaha Indonesia (KBLI), the same type of business activity, and the same area;
b) already owns business licensing in the industrial sector and will conduct other business activity in the industrial sector within the same classification of business activity;
c) changing the classification of its industrial business scale without adding an area of industrial location or relocating its industrial location; or
d) already owns business licensing as legality to start a business in another sector but is transferred to another business licensing in the industrial sector according to the provisions of laws and regulations.
Disclaimer
This news update is prepared for general informational purposes only. The content does not constitute legal advice, a legal opinion, or counsel from IABF Law Firm. The information contained herein may not reflect the most current developments. Any quotation, distribution, or use of this information for any purpose is solely at the user’s own risk.
