Governor of Bali Wayan Koster has drawn attention to the continued presence of illegal practices involving foreign nationals in the island’s tourism sector. The issue centers on thousands of villas and houses owned by foreigners that are being rented to tourists from their home countries without proper authorization.
Koster stated that if such illegal property rentals were resolved, the potential for hotel and restaurant tax revenues in Badung Regency and Denpasar City could increase by trillions of rupiah. He emphasized the need for decisive steps to ensure all business activities in the tourism sector are properly regulated.
“There is data from the Minister of Tourism, from a meeting a few days ago, that thousands of villas and houses owned by foreigners are rented out to tourists from their home countries, and the potential for a large loss of hotel and restaurant tax revenue is quite significant,” Koster said in his speech during the 67th anniversary of Bali Province at the Bali Governor’s Office in Denpasar on Thursday, August 14, 2025.
Coordinated Action with the Tourism Ministry
To address the matter, Koster is scheduling a meeting with the Minister of Tourism in the near future. The planned discussion will focus on identifying and investigating all villas and houses rented to foreign visitors.
In addition, Koster is forming a joint task force to enforce regulations against foreign tourists who iolate laws or engage in actions that undermine Bali’s cultural values. The task force will be responsible for carrying out inspections, compiling accurate data, and taking enforcement measures where necessary.
“I have formed five integrated teams to conduct an enforcement or ‘cleanup’ operation in Bali,” He stated.
Broader Tourism-Related Concerns
The governor noted that the problem of illegal villa rentals is part of a broader set of issues facing Bali’s tourism industry. Other concerns include unregulated tourism transport services and the existence of prostitution operations disguised as tourism businesses.
These activities, according to Koster, require comprehensive regulation to ensure Bali’s tourism sector operates within legal and ethical frameworks.
Industry Observations on Foreign-Owned Villas
Advisor to the Bali Villa Association (BVA), Gede Ricky Sukarta, has observed a recurring practice where luxury houses are upgraded and subsequently rented out by foreign nationals to other foreigners. He stated that this arrangement reduces or even eliminates the circulation of revenue within the local economy.
Sukarta also pointed to the use of nominee arrangements and so-called contract marriages between foreign nationals and local residents as one method by which foreigners are able to operate villa businesses in Bali.
Concerns on Foreign Investment Practices
The phenomenon of contract marriages was previously highlighted by Bali Deputy Governor I Nyoman Giri Prasta, who identified it as a catalyst for illegal foreign direct investment and the proliferation of foreign-owned villas on the island.
Giri Prasta stressed that such arrangements complicate regulatory oversight and undermine the intended legal structure for foreign investment in Indonesia.
Koster’s administration plans to move forward with the formation of the joint task force and the upcoming meeting with the Tourism Ministry. These steps are intended to create a clear framework for identifying, regulating, and, if necessary, taking action against foreign-owned properties that operate outside of legal parameters
With investigations and coordinated enforcement planned, the Bali provincial government aims to ensure that all tourism-related businesses comply with applicable laws and contribute fairly to the region’s economic system.
