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 minutes 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.

Verified by

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.

Frequently Asked Questions

    To provide you with accurate pricing information for our product registration services, we consider the complexities of your inquiries and the dynamic nature of regulations in Indonesia. As a result, the pricing for the service may vary accordingly. For detailed information, don’t hesitate to contact our consultants.

    CV (Commanditaire Vennootschap) is a proprietary business entity that houses several individuals to run a business.

    For tax purposes in Indonesia, companies must maintain their books in Rupiah, using the Indonesian language, and store them within the country. Exceptions for using USD and English in bookkeeping require prior notification to the authorities and any use of languages other than Indonesian needs approval from the Ministry of Finance.

    A newly established PMA company in Indonesia is typically provided with import facilities, tax holidays, tax allowances, or investment allowances.

    • Import facilities
      Investors in Indonesia, particularly in manufacturing, may benefit from import tax exemptions for capital goods and raw materials through the Master List Facility. The imported goods must meet specific criteria, such as not being produced locally or not meeting industry demand despite local production.
    • Tax holiday
      The government offers CIT reductions of 50% or 100% for 5–20 years for listed pioneer industries, based on investment value. After this period, a CIT reduction of 25% or 50% applies for two fiscal years. Non-listed sectors can also apply by meeting criteria demonstrating pioneer industry status.

      • Pioneer industries are industries that have a wide range of connections, provide additional value and high externalities, introduce new technologies, and have strategic value for the national economy.

    • Tax allowance
      For companies in certain designated areas or regions, the government may provide the following tax concessions:
      Net income reduction up to 30% of the amount invested, prorated at 5% annually for six years, on condition that the assets invested are retained for the same duration.
      Accelerated depreciation and/or amortisation deductions
      An extension of tax losses carried forward for a maximum of ten years
      A 10% (or lower if treaty relief is available) withholding tax rate on dividends paid to non-residents
      The applicant eligible has to meet high-level-criteria for the above tax facilities:
      High investment value or for export purposes
      High manpower absorption
      High level of local content
    • Investment allowance
      The government offers a reduction in net income of up to 60% of the investment, distributed at 5% annually over six years of commercial production, contingent upon the retention of invested assets for the same duration. To qualify, applicants must meet business line eligibility criteria and employ a minimum of 300 Indonesian workers in the project.
    • Super deduction
      This facility could be granted to certain businesses, such as:
      60% reduction in net income of the amount of tangible fixed assets invested for labor-intensive industries, distributed throughout a certain time frame.
      Up to 200% reduction in the gross income of the amount spent for human resources development in certain competency activities.
      Up to 300% reduction in gross income of the amount spent for certain R&D activities in Indonesia.

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Disclaimer

The information is provided by PT. Cekindo Business International (“InCorp Indonesia/ we”) for general purpose only and we make no representations or warranties of any kind. We do not act as an authorized government or non-government provider for official documents and services, which is issued by the Government of the Republic of Indonesia or its appointed officials. We do not promote any official government document or services of the Government of the Republic of Indonesia, including but not limited to, business identifiers, health and welfare assistance programs and benefits, unclaimed tax rebate, electronic travel visa and authorization, passports in this website.

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