Indonesia’s status as an emerging economic powerhouse makes it an ideal investment destination for forward-looking companies. It has a large and young population with growing spending power, a positive investment climate, and an abundance of natural resources. Now is the perfect time to enter Indonesia. Here are five key reasons why.
Indonesia has a stable and fast-growing economy. Data from the World Bank shows that its GDP has grown an impressive six-fold over the past two decades — from US$165 billion in 2000 to US$1,058 billion in 2020 — and is expected to increase by 5.2% on average per year over the next five years.
Already the largest economy in Southeast Asia and ranked 16th in the world, it is forecasted to rise to one of the top five largest economies by 2030, surpassing Germany, Japan, Russia, Turkey, and Brazil. It is also the only G20 member state from its region and held the presidency in 2022.
In 2019, Indonesia officially became an upper-middle-income country when its Gross National Income surpassed the World Bank’s threshold of US$4,050.
Twenty percent of its population — roughly 52 million Indonesians — are considered middle class, and another 115 million are aspiring middle class. There is still plenty of room for growth as domestic consumption continues its upward trajectory.
Indonesia transitioned from dictatorship in 1998 and subsequently underwent four years of constitutional reforms. Since then, the political climate has remained stable.
It ranks on par with Brazil and other ASEAN nations, and ahead of India, Mexico, and other CIVETS countries such as Egypt, Colombia, and Turkey (based on rankings by the Lowy Institute and The Global Economy using World Bank data).
Political stability, particularly under President Joko Widodo’s leadership, has enabled the government to focus on policies that attract investors and increase the ease of doing business in the country.
Indonesia offers one of the most conducive investment climates in Southeast Asia. Since coming to power in 2014, President Widodo has prioritized strengthening Indonesia’s appeal to international investors through:
For example, the Omnibus Law on Job Creation (2020) was enacted to reduce corporate taxes, simplify labor laws, and remove regulatory barriers.
Although it has faced legal challenges, many experts agree that foreign investors remain unaffected and that these issues may even allow the government to improve the bill further.
The Presidential Regulation 10/2021 — also known as the Priority List or Positive Investment List — provides greater access to various industries and offers fiscal and non-fiscal incentives.
Out of the 245 priority sectors listed:
The 13,000-island archipelago is an incredibly biodiverse country, second only to Brazil. Indonesia has the third-largest tropical rainforests on the planet, which support its timber industry.
It is also rich in energy sources (oil, natural gas, coal) and mineral resources (tin, copper, gold, and nickel). Additionally, it has vast agricultural land and plantations for spices, rubber, palm oil, and other commodities.
Indonesia currently accounts for 40% of Southeast Asia’s energy consumption, a number expected to rise by 80%, driven by population growth and economic development.
With 40% of the world’s geothermal resources, the potential for clean energy investments — including hydropower, solar, tidal, and geothermal — is enormous.
One of Indonesia’s key advantages is its strong demographic profile. It has a young population (median age 30.2 years) and a total labor force of 140 million people.
The top employment sectors are:
The adult literacy rate is 96%, demonstrating a skilled and adaptable workforce ready to support economic growth.
With our in-depth knowledge and experience in Indonesia, we can help you make the most of the investment opportunities in this dynamic and rapidly growing market.
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