Investment in Indonesia 2023: 5 Most Prospective Sectors

Investment in Indonesia 2023: Top 5 Sectors You Should Consider

  • InCorp Editorial Team
  • 22 August 2023
  • 4 minute reading time

Indonesia’s Economic Outlook In 2023

Global economic growth in 2023 has been fluctuating. However, Indonesia can maintain its growth rate. The global market continued to shop for Indonesia’s abundant natural resources like palm oil, nickel, and tin. Thanks to the exports sector in Q1 of 2023 and other avenues of investment opportunities in Indonesia. 

The steady trading condition indicates Indonesia’s economy is reaching the government’s economic growth target of about 5% at the end of the year. The increase in Indonesian export trade to Switzerland also contributes to the plan.

The export sector reached new highs in the first quarter of 2023. The total value of exports in early May 2023 was up to USD 23.50 billion which is 9.89% higher than the previous month.

Other than trading, the Indonesian government lifted most travel restrictions in Indonesia. Foreign tourist arrivals almost tripled between January and March. Combining Indonesian exports of natural commodities with the travel boom, it is no surprise that Indonesia is well on its way to a full economic recovery.

3 Key Factors of Why You Should Invest in Indonesia

With the government eager to enact prudent macroeconomic policies and reforms to improve the investment landscape, Indonesia presents vast opportunities for foreign investors. Some key factors include:

1) Indonesia provides various benefits 

such as removing or reducing tariffs, as it is part of ASEAN’s regional free trade agreements (FTA). Typically, all taxable goods imported into Indonesia have a 7.5% import duty and a 10% value-added tax. However, under the agreement, goods originating from ASEAN benefit from an applied 0-5% tariff rate.

2) The Special Economic Zones (SEZs)

The Special Economic Zones (SEZs) in Indonesia offer investors access to preferential regulatory infrastructure and taxation to channel investment into specific locations. Businesses in these zones enjoy fiscal incentives such as tax allowance and withholding import tax that help reduce the tax burden on a newly set up business. Also, non-fiscal incentives are provided for Immigration, Business licenses, and land rights to help enterprises seamlessly commence their operations.

3) ASEAN’s labor market host 

Being a host to ASEAN’s most prominent labor market, the government offers tax incentives for establishing training programs for unskilled laborers, thus making the country ideal for labor-intensive manufacturing.

Read more: Indonesia Elections  in 2024: What will Happen to Investment?

What Sectors Show Great Potential for Investment Opportunities in Indonesia?

1. Healthcare and Pharmaceuticals

With the introduction of the Positive Investment List, Hospitals with more than 200 beds, pharmaceutical manufacture, and wholesale industries are now open to 100% foreign shareholding. 

Given the sector’s large market size, new demand for products treating chronic diseases and the government’s amplified spending make the healthcare sector a lucrative opportunity for foreign investors.

2. Manufacturing Investment in Indonesia

Production of electronics, automotive, textiles, footwear, food and beverages, and chemicals have significantly contributed to the economy. It forms 20% of Indonesia’s GDP and has had a 4% year-on-year growth since 2016. 

3. Startup Investment in Indonesia: E-Commerce and Digital Economy Based Industry 

Indonesia’s digital economy has seen exponential growth and is expected to be valued at US$124 billion by 2025, making the country a prime location to invest. 

Avenues such as Digital Wallets, Cloud Kitchen Services, Online Education and Consultation, Delivery Services, and Digital Marketplaces are viable options for investors seeking to capture Indonesia’s digital space. For example, some tech giants are now acquiring businesses, such as local low-capital banks, to

Read more: Unlocking Investment Opportunities in the New Capital of Indonesia

4. Fast-Moving Consumer Goods 

According to market research conducted by Technavio, Indonesia’s retail market is expected to grow by US$37.2 billion during 2021-2025. The market also will accelerate at a Compound Annual Growth Rate of 4.06%. 

In 2019, Global Retail Development Index also ranked Indonesia’s retail market in fifth place based on its investment attractiveness, making FMCG one of the productive sectors foreign investors should consider. 

5. Infrastructure Investment in Indonesia

Indonesia has shown improvement in its efforts to lower the risks of its infrastructure projects through schemes like viability gap funds (VGF) and public-private partnerships (PPP), as cited on Infrastructure Asia – a Singapore-based infrastructure investment advisory. Indonesia also aims to invest around US$430 billion in infrastructure from 2020-2024 – a 20% increase compared to 2019. 

Get the Right Investment Opportunities in Indonesia with InCorp

Despite the ample investment opportunities in Indonesia, investing overseas comes with its fair share of challenges. While you focus on the strategic aspect of your business, InCorp Indonesia full range encompasses company registration, recruitment, and even your tax and accounting needs.

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.

Get in touch with us.

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Frequent Asked Questions

Yes, this mainly applies to import and export businesses. Instead of establishing a company, you can use an under-name import service, an importer of record.

It should take between 30 to 45 days.

As their names suggest, the main differences between the three business kinds in Indonesia lie in the businesses and the purpose of their incorporation. Local company owners (PT) must be Indonesian citizens, as even 1 percent of foreign ownership is not allowed. This type of company is not limited to entering any business field, and restrictions on incorporation are not so tight. On the contrary, a foreign-owned company (PT PMA) is open to international investors, but the maximal percentage of foreign shares differs in various business sectors. Contact InCorp to get the most updated information on the Negative Investment List. International investors tend to open representative offices as a first step to understanding the Indonesian market before setting up a limited liability company. This type is used for marketing and promotion activities and needs the right to sell directly and receive income.

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.