potential cities in indonesia

8 Potential Cities for Foreign Direct Investment in Indonesia

  • InCorp Editorial Team
  • 16 August 2016
  • 7 minute reading time

As a unique country with countless resources and diversities that make it rich with various business potentials, foreign direct investment in Indonesia should be highly considered.

Each province in Indonesia has its own prospects that can attract foreign investors to do businesses or foreign investment.

However, the two favorite destinations that foreign companies are familiar with are only Jakarta and Bali, whereas, in the reality, other major Indonesian cities also have hidden jewels that can be your next gold mines.

In this article, we will discuss the 8 most investment-friendly cities for foreign direct investment in Indonesia, other than Jakarta and Bali.

8 Potential Cities for Foreign Direct Investment in Indonesia

1. Surabaya, East Java

Surabaya is one of the Indonesian cities with the highest property growth. Even, this city is in the top five cities in Asia to invest in the property sectors.

One of the reasons is because this city is a business gate for companies that want to invest in the eastern region of the Indonesian provinces. Apart from that, Surabaya is also lucrative for its industrial and trading sectors.

One great advantage of investing in this metropolitan is the relatively lower cost of resources and living expenses compare to the great capital of Jakarta.

This condition will reduce the initial cost to start and run a new foreign company. Many companies in nearby countries, like Singapore and Australia have increased interest to invest in this capital city of East Java.

The local government of Surabaya is also getting more efficient with its bureaucracy, making the PMAs find it easier to deal with permits and other legal documents.

2. Pekanbaru, Sumatra

Pekanbaru is appointed to be one of the best cities for investment in Indonesia for 3 years in a row (2014, 2015, and 2016). This is the 9th largest city in Indonesia with the highest money and banking rotation in Indonesia. Currently, Pekanbaru is the host of several mega-foreign companies in the petroleum, oil, pulp, wood-sawmill, rubber-processing, as well as CPOs industries.

Also, as one of the major tourism gates – especially tourists from Southeast Asia and other Asian countries, it is also a perfect place for tourism industries. Shopping centers and properties are other strengths that this city has that invite many new PMAs to invest.

With extraordinary infrastructures, dynamic markets, a high-income population, and good governance, many PMAs are attracted to invest with the value of approximately 8 trillion rupiahs in 2015 and are expected to keep increasing drastically during the coming years.

3. Bandung, West Java

Bandung is another great city for investment and also a great place to live in. This city is so famous for its creative people. The creative industry is mushrooming in this capital city of West Java Province.

More interestingly, there are many startup companies showing how open the people and the government are for new ideas. This is absolutely a great place for you to start your investment in this culturally rich city.

Moreover, in 2015, the foreign direct investment in the West Java Province hit the amount of 77 trillion rupiahs – exceeding the amount of FDI in Jakarta, which was only 64 trillion – and this number continues to grow, especially in its several big cities, like Bandung (Bandung contributed 9.4 trillion rupiah for its FDI in 2015).

Some great potentials fields for investment in Bandung include creative industries (such as e-commerce, advertising, fashion and apparel, designs, etc.), telecommunication, science and technology, tourism, housing and property, health care, goods and services, industrial sectors (including metal, pulp, textile, agro-industries, electronics, chemical, etc.), environment, as well as trading.

4. Yogyakarta

Yogyakarta is the heart of cultural heritage and tourism on Java Island. It is a special province that is led by a Sultan. Apart from its traditional values, it is also a metropolitan city in Java. This condition enriches the dynamic of modern societies that still care about nature and its values.

It is proven by the existence of one of the oldest and most reputable universities in Indonesia in Yogyakarta—Gadjah Mada University—which shows how Jogjakarta can be a great place to live for people with diverse backgrounds.

In terms of investment, the tourism industry is the biggest magnet of this city. Property is another field that attracts investors because the land is vast with beautiful sceneries and a perfect atmosphere to live, study, and do business.

Food and beverage, retail, automotive, textile, pottery, handicraft, furniture, fashion, jewelry (especially silver), and leather are some popular industries in Yogyakarta. Its fertile soil is also perfect for agricultural and agribusiness sectors. Transportation and machinery industries are other potential fields in this city.

5. Makassar, South Sulawesi

Makassar – in the leadership of the current Mayor – has issued a policy to invite foreign investors in some of its mega projects, including transportation, energy, maritime, fishery, trading, tourism, healthcare services, property, and infrastructures.

Especially for property, the chief of Indonesian Real Estate (REI), said that this year, the prospect of real estate development in Makassar is positive due to the high economic development in Sulawesi.

The economic growth is very high in Makassar, exceeding major areas in Indonesia. It shows that even in a difficult condition of the global economy, Makassar can take care of itself well. The purchasing power remains high, the income per capita increases, and the businesses survive – some even develop very well.

6. Medan, North Sumatra

In general, Medan is in the top 10 of the best cities for property investment in Indonesia in 2016. It is because of its vast area—the 4th largest cities in Indonesia after Jakarta, Surabaya, and Bandung and the 1st largest city outside Java—and excellent economic development.

Medan is also one of the busiest cities in Indonesia, with its main seaport that contributes to one-fifth of the total containerized export in Indonesia. It shows that trading is another strength that this city offers.

Manufacturing, retail, food and beverages, warehousing, telecommunication, mining, and chemical, are some potentials that Medan offers for foreign direct investment in Indonesia.

7. Samarinda, East Borneo (East Kalimantan)

Borneo or Kalimantan has become a target for Foreign Direct Investments because there are 3 provinces that are appointed as the 10 most targeted provinces (out of 33) for FDI in Indonesia. One of the best destinations in Samarinda, the capital city of East Borneo Province.

In 2015, the total investment in this city was 7.1 trillion rupiahs. Property sectors contribute to 20% of the number. Other interesting sectors include trading, mining, oil, and retail industries.

Since the location of the city is also close to the petroleum city of Balikpapan and also other industrial cities like Kutai Barat, the growth of property and business sectors—especially trading and retail—in Samarinda is relatively high.

It is because Samarinda has a strategic location to become the home offices or headquarters of those big companies in the nearby area. In addition, among 536 bank offices across East Borneo, the highest number, or 195 of them are in Samarinda, showing that this city has a very good economic condition compares to the other big cities in East Kalimantan.

8. Semarang, Central Java

The development of industrial areas in Semarang as well as the growth of retail and trading sectors make Semarang a perfect destination for investment.

Central Java Province itself is in number 6 of investment targets in Indonesia, and Semarang is the number 1 city in Central Java that becomes the host of many foreign companies.

Because of its demographic, many companies are labor-intensive companies, such as apparel, machinery, textile, etc. Moreover, Semarang is the 5 biggest city in Indonesia with a dense population.

Also, it is close to several industrial cities, but relatively with better infrastructures, facilities, and entertainment. For those reasons, the property sector will become a great advantage to invest in for the coming years.

Foreign Direct Investment in Indonesia with Cekindo’s Assistance

There are some other investment-friendly cities in Indonesia, with some potential in various distinctive sectors that may be suitable for your business, such as Banten, Banjarmasin, Balikpapan, etc.

Cekindo can help you find the best investment destination that suits your interests. The unique condition of Indonesia makes investment in almost all fields possible. You just need to find the right place to reap the lucrative advantages of investing in Indonesia.

Our professional team will assist you to make the most suitable investment plan for your business, contact us now!

Pandu Biasramadhan

Senior Consulting Manager at InCorp Indonesia

An expert for more than 10 years, Pandu Biasramadhan, has an extensive background in providing top-quality and comprehensive business solutions for enterprises in Indonesia and managing regional partnership channels across Southeast Asia.

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