In this page: FDI in Figures | What to consider if you invest in Indonesia | Protection of Foreign Investment | Procedures Relative to Foreign Investment | Office Real Estate and Land Ownership | Investment Aid | Investment Opportunities | Sectors Where Investment Opportunities Are Fewer | Finding Assistance For Further Information
According to UNCTAD's World Investment Report 2024, FDI flows to Indonesia totalled USD 21.6 billion in 2023, down by 14.8% compared to the previous year, making the country the eighteenth-largest recipient worldwide. Over the year, Indonesia emerged as a top destination for announced greenfield projects by value. Notable investments included USD 11 billion in upstream projects by Chinese glass and solar manufacturer Xinyi Group. Additionally, a consortium of European and Indonesian companies is developing a USD 9 billion electric vehicle battery supply chain. At the end of the same period, the total stock of FDI was estimated at USD 285.7 billion.
According to data from the national statistics agency BPS, in 2023 the main investing countries were Singapore (30.5% of the total), China (14.8%), Hong Kong (12.9%), Japan (9.2%), and the U.S. (6.5%). In terms of sectors, the ones receiving the most FDI were metal, except machinery, and equipment industry (23.4%), transportation, warehouse, and telecommunication (11.2%), chemical and pharmaceutical industry (9.6%), mining (9.4%), and paper, paper-based goods and printing industry (6.8%). Indonesian authorities announced that in 2024 the country attracted IDR 1,714.2 trillion (around USD 105 billion), with FDI accounting for 52.5% of the total, or IDR 900.2 trillion. The basic metal industry was the top choice for foreign investors, drawing USD 13.6 billion, followed by the mining subsector, which secured USD 5.2 billion.
Indonesia's youth demographics, strong domestic demand, stable politics, rich natural resources, and sound macroeconomic policies make it an attractive destination for foreign direct investment. FDI flows to Indonesia have been growing and their base expanded due to resilient economic growth, low public debt and prudent fiscal management. FDI growth is attributed to a series of economic policy packages that have been implemented by the Indonesian government over the last years, mainly focusing on deregulation, law enforcement and business certainty, interest rate tax cuts for exporters, energy tariffs cuts for labour-intensive industries, tax incentives for investment in special economic zones and lowered tax rates on property acquired by local real estate investment trusts. Moreover, Indonesia lowered the minimum equity requirement for foreign investors and abolished the approval requirement for several business transactions involving foreign investors. On the other hand, foreign investors encounter a challenging investment climate in Indonesia due to various factors including restrictive regulations, legal and regulatory uncertainty, economic nationalism, trade protectionism, and vested interests. These obstacles pose significant barriers to investment, impacting the ease of doing business and potentially deterring foreign capital inflows. Indonesia ranks 54th among the 133 economies on the Global Innovation Index 2024 and 53rd out of 184 countries on the latest Index of Economic Freedom.
Foreign Direct Investment | 2020 | 2021 | 2022 |
---|---|---|---|
FDI Inward Flow (million USD) | 18,591 | 21,131 | 21,968 |
FDI Stock (million USD) | 240,564 | 259,697 | 262,920 |
Number of Greenfield Investments* | 64 | 73 | 96 |
Value of Greenfield Investments (million USD) | 20,300 | 8,248 | 15,016 |
Source: UNCTAD, Latest data available.
Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.
Main Investing Countries | 2023, in % |
---|---|
Singapore | 30.5 |
China | 14.8 |
Hong Kong | 12.9 |
Japan | 9.2 |
USA | 6.5 |
South Korea | 5.1 |
Netherlands | 2.5 |
Main Invested Sectors | 2023, in % |
---|---|
Metal, except machinery, and equipment industry | 23.4 |
Transportation, warehouse, and telecommunication | 11.2 |
Chemical and pharmaceutical industry | 9.6 |
Mining | 9.4 |
Paper, paper based goods and printing industry | 6.8 |
Electricity, gas, and water supply | 5.5 |
Housing, industrial estate, and office building | 5.1 |
Food industry | 4.5 |
Vehicle and other transportation industry | 4.1 |
Source: Bank Indonesia, Latest data available.
Advantages for FDI in Indonesia:
Disadvantages for FDI in Indonesia:
Country Comparison For the Protection of Investors | Indonesia | East Asia & Pacific | United States | Germany |
---|---|---|---|---|
Index of Transaction Transparency* | 10.0 | 5.9 | 7.0 | 5.0 |
Index of Manager’s Responsibility** | 5.0 | 5.2 | 9.0 | 5.0 |
Index of Shareholders’ Power*** | 2.0 | 6.7 | 9.0 | 5.0 |
Source: The World Bank - Doing Business, Latest data available.
Before conducting business in the abovementioned sectors , approval must be obtained from the competent organization BKPM.
Indonesia benefits from the assistance plan of the European Union and of USAID. For the USAID program, the national organization in charge of carrying it out is the Indonesian Plan of assistance to commerce (ITAP), whose task is to reinforce the capacities of public administrations in analysis, negotiation and setting up of bilateral and multilateral trade agreements. The ITAP works directly with the Ministry of Commerce to ensure training which will help Indonesian companies to find more openings on the international markets. The Program of support for commerce (TSP), which is in charge of carrying out the assistance program of the EU, devotes itself mainly to training and broadcasting information, as well as market research. The beneficiaries of this program are those who engage in international commercial activities in Indonesia, in particular exporting SMEs, who can thus increase trade with their counterparts in other countries and in the EU. European companies which buy in Indonesia will find more reliable products, more in conformity with European standards, while European companies which export to Indonesia, or which operate in the country, should also benefit from simplified import procedures.
Any Comment About This Content? Report It to Us.
© eexpand, All Rights Reserved.
Latest Update: February 2025