Top 5 Reasons Why Expand Your Business to Indonesia in 2025

Top 5 Reasons Why Expand Your Business to Indonesia in 2025

  • InCorp Editorial Team
  • 5 December 2024
  • 6 minutes reading time

Indonesia, the world’s largest archipelago, offers an ideal blend of cultural richness, natural beauty, economic potential, and opportunities for Indonesia’s business setup. In this article, we will delve into why investing in Indonesia is a smart decision, explain the process of starting a business in Indonesia, and highlight key factors such as PT PMA Indonesia, business costs, and regulatory requirements.

Indonesia Business Setup: Top 5 Reasons to Expand in 2025

Indonesia offers vast opportunities for businesses seeking high growth potential. Its growing middle class, large labor pool, and strategic position in global trade routes make it a premier destination for investors.

Robust Economic Growth

Indonesia is one of the biggest economies in Southeast Asia and ranks among the top 20 economies in the world. In the third quarter of 2024, the country experienced a GDP growth rate of 4.95 percent compared to the same quarter of the previous year.

According to Trading Economics global macro models and analyst expectations, Indonesia’s GDP annual growth rate is projected to reach 5.20 percent by the end of this quarter. With strong domestic demand, Indonesia provides a favorable environment for long-term investments.

Strategic Location and Developed Infrastructure

Indonesia connects Asia-Pacific to global markets at the crossroads of big global trade routes. Its proximity to powerhouse economies like China, India, and ASEAN nations enhances its strategic importance.

Massive investments in ports, airports, and toll roads enhance connectivity and support economic growth, creating thriving business opportunities.

Large Consumer Market

With over 275 million people and a growing middle class, Indonesia offers a massive and expanding market for consumer goods, technology, and services.

Competitive Labor Market

Indonesia provides a cost-effective labor force, with wages significantly lower than those of neighboring countries like Singapore and Malaysia. This makes it ideal for labor-intensive industries.

Investment-Friendly Policies

The Indonesian government supports foreign investments with tax reductions, incentives for PT PMA Indonesia, and simplified registration processes.

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Trade Agreements Boosting Business Prospects

Indonesia has entered several significant trade agreements, making it a vital player in global commerce. These agreements provide greater market access and reduce trade barriers, enhancing business opportunities.

  • RCEP (Regional Comprehensive Economic Partnership): The Regional Comprehensive Economic Partnership (RCEP) connects Indonesia with 14 Asia-Pacific nations, facilitating seamless trade across a third of the global economy.
  • IA-CEPA (Indonesia-Australia Comprehensive Economic Partnership Agreement): This partnership boosts trade and investment flows between Indonesia and Australia, creating opportunities for various industries.

Investment Incentives in Indonesia

Indonesia has implemented a series of investment incentives to attract foreign businesses, encompassing both fiscal and non-fiscal benefits.

Fiscal Incentives

  • Corporate Income Tax Reduction: The corporate income tax rate has been reduced to 20%, aiming to enhance the country’s competitiveness.
  • Super Deduction Tax: To encourage investment in research and development (R&D) and vocational training, companies can receive tax deductions of up to 300% for R&D expenses and up to 200% for vocational training costs.
  • Tax Holidays: Businesses in pioneer industries may be eligible for tax holidays, which offer a 50% reduction in corporate income tax for investments between IDR 100 billion and IDR 500 billion for five years and a 100% reduction for investments over IDR 500 billion for up to 20 years.

Non-Fiscal Incentives

  • Special Economic Zones (SEZs): Investors operating within SEZs benefit from infrastructure support, streamlined business licensing procedures, and energy and raw materials supply guarantees.
  • Extended Land Rights in Nusantara: To attract investment in the new capital city, Nusantara, the government has extended land rights durations, providing more precise terms for businesses operating in the region.
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How to Start Your Own Business in Indonesia?

Starting a business in Indonesia involves navigating its legal and regulatory landscape. Foreigners must ensure compliance with local laws while tapping into a market full of opportunities.

Choose a Business Structure

Foreign investors often opt for a PT PMA (Penanaman Modal Asing), a foreign-owned limited liability company. This structure allows full or partial foreign ownership based on industry regulations.

Register Your Business

Indonesia’s Online Single Submission (OSS) system simplifies registration. It issues the Business Identification Number (NIB), enabling companies to operate legally.

Secure Necessary Licenses

Additional licenses may be needed for specific industries. For instance, companies engaging in real estate development must obtain Hak Guna Bangunan (HGB).

Apply for Investor KITAS

Foreign investors managing their businesses in Indonesia must secure an Investor KITAS. This temporary stay permit also waives the work permit fee, simplifying the process.

Open a Corporate Bank Account

Establishing a local corporate bank account is mandatory for all businesses operating in Indonesia.

Understand Indonesia’s Business Setup Cost

Costs vary depending on the business type and complexity. Setting up a PT PMA, including registration and capital requirements.

Permitted Land Ownership for Foreign Investors

Land ownership in Indonesia is an essential aspect of business setup for foreigners. While Hak Milik (Right of Ownership) is reserved for Indonesian citizens, foreigners can own land through alternative arrangements.

How Foreigners Can Own Land

  • PT PMA (Foreign-Owned Company): Allows ownership under Hak Guna Bangunan (Right to Build).
  • Hak Pakai (Right to Use): A renewable title granting long-term use of state-owned land.

By adhering to land ownership regulations in Indonesia, foreign businesses can invest securely and legally.

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Start Setting Up Your Business in Indonesia with InCorp

Indonesia offers immense opportunities for foreign investors and entrepreneurs. Investors can secure high returns in a thriving economy by understanding its market dynamics, leveraging PT PMA Indonesia, and effectively navigating Indonesia’s business setup costs.

Whether you’re exploring real estate development in Indonesia or looking to establish a new venture, Indonesia provides a supportive ecosystem for business growth. Take the next step to unlock the potential of one of Southeast Asia’s most dynamic markets.

Our team of business incorporation specialists can assist you with the following:

Fill out the form below to contact our team and discuss your business setup plan in Indonesia.

Daris Salam

COO Indonesia at InCorp Indonesia

With more than 10 years of expertise in accounting and finance, Daris Salam dedicates his knowledge to consistently improving the performance of InCorp Indonesia and maintaining clients and partnerships.

Get in touch with us.

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Frequent Asked Questions

There are three things business owners need to consider before setting up a business in Indonesia: the type of business entity, capital requirements, and regulations.

Indonesian regulations separate local companies from foreign companies. Generally, foreign-owned companies (PT PMA) have more limitations than their local counterparts (Local PT). However, to pursue more foreign direct investment in the country, the government has taken several bold initiatives to increase the ease of doing business and provide numerous attractive incentives for foreign investors.

It depends on the type of company you decide to establish.
  • In a local (PT) company, a foreigner cannot become a commissioner. It is possible to have a foreign director, but there has to be at least one local Director in PT.
  • In a foreign-owned (PT PMA) company, a foreigner can be a director or a commissioner.

Foreign citizens can expand to Indonesia and establish a foreign-owned company (PT PMA). Depending on the business line you want to pursue, there are regulations for foreigners to follow when setting up a company in Indonesia. One of the most important is the so-called Positive Investment List, which is updated frequently and with other Indonesian regulations.