Six reasons for setting up a business in Indonesia.

With a GDP of approximately USD 1.5 trillion in 2025, Indonesia represents the largest economy in ASEAN and offers opportunities across diverse business sectors from manufacturing and digital services to natural resources and infrastructure. It combines a large domestic market with strategic regional positioning and increasingly liberalised investment policies.

This guide shares six reasons that make Indonesia attractive for foreign investment, from enhanced market access and expanding investment opportunities to workforce strengths, property rights and ongoing governance reforms, all of which are relevant considerations when registering a company in Indonesia.

Preferential access to ASEAN and global markets

Indonesia’s trade connectivity is a key factor underpinning its attractiveness as an investment destination. By establishing operations locally, businesses can leverage reduced trade barriers within Southeast Asia’s integrated market while benefiting from expanding economic partnerships with Europe and other global partners.

Reduced tariffs across Southeast Asia

Indonesia’s participation in the Association of Southeast Asian Nations creates substantial advantages for companies seeking to serve regional markets. ASEAN comprises 11 member states and collectively represents more than 660 million consumers. The ASEAN Trade in Goods Agreement facilitates preferential tariff treatment for trade among member states, with many goods qualifying for reduced or zero tariff rates when meeting rules of origin.

Companies established in Indonesia can access these preferential arrangements when exporting to other ASEAN markets, providing cost advantages over competitors based outside the region. This proves particularly valuable for manufacturing operations that source materials regionally and serve multiple Southeast Asian markets, as the integrated production networks across ASEAN enable efficient supply chain configurations.

Broader access to European and international markets

Indonesia maintains free trade agreements that extend market access beyond Southeast Asia, reducing tariffs on qualifying goods and facilitating trade in services, creating opportunities for Indonesian-based companies to compete effectively in these larger markets.

Indonesia and the European Union have concluded the substantive negotiations of the Indonesia–EU Comprehensive Economic Partnership Agreement (IEU-CEPA), which was signed in September 2025 after more than a decade of discussions. The agreement is not yet in force and still requires ratification by both sides. Once implemented, targeted for 1 January 2027, it is expected to gradually reduce or eliminate many tariffs, enhance market access for goods and services, improve investment conditions and strengthen cooperation in areas such as intellectual property, sustainable development and digital trade.

Separately, Indonesia already has an active Comprehensive Economic Partnership Agreement with the European Free Trade Association (EFTA), in force since 1 November 2021, providing preferential access to markets such as Switzerland, Norway, Iceland and Liechtenstein. Together, the IEU-CEPA (once effective) and the EFTA–Indonesia CEPA broaden Indonesia’s access to European markets and support greater trade and investment flows into Indonesia.

For companies evaluating regional manufacturing or distribution hubs, Indonesia’s trade agreement network provides competitive market access arrangements comparable to other ASEAN locations while offering the additional advantage of serving Indonesia’s large domestic market alongside export operations.

Secure commercial land ownership for foreign companies

For businesses requiring physical premises, Indonesia allows foreign-owned companies to hold commercial land rights directly, supporting factory development, office establishment and long-term operational planning.

What land title options are available to companies in Indonesia?

Foreign-owned companies can acquire and hold property rights in Indonesia through three principal land title types:

• The Right to Build permits construction and ownership of buildings on land for specified periods initially for 30 years, extendable for another 20 years and renewable for up to an additional 30 years. This title proves suitable for industrial facilities, offices and commercial properties. As a requirement, a Foreign-Owned Company holding this land right must obtain a Building Approval (PBG) before construction and secure an Operational Worthiness Certificate (SLF) to verify that the building is fit for use.
• The Right to Cultivate applies to agricultural, plantation or aquaculture activities, with initial periods of 35 years, extendable for another 25 years and renewable for up to 35 years.
• The Right to Use applies broadly across various property types and business purposes, with terms that vary depending on the land category and intended use. It can be granted over several types of land rights. For example:
  • Right to Use over state land or land under Management Right (HPL) with initial periods of 30 years, extendable for an additional 20 years and renewable for up to another 30 years.
  • Right to Use over Rights of Land Ownership with initial periods of 30 years and can be renewed through a deed of granting Right of Use over freehold land.

These property rights enable foreign-owned companies to establish substantial physical infrastructure without requiring Indonesian partners to hold property titles on their behalf. The titles can be registered in the company’s name, providing security of tenure and enabling the property to serve as collateral for financing when needed.

Practical considerations for property acquisition

Companies acquiring property for business purposes work through procedures such as obtaining location permits, conducting environmental assessments where necessary and securing building permits for construction or renovation activities. The process typically involves coordination with the National Land Agency at the national and local levels, along with relevant municipal authorities responsible for spatial planning and building regulations.

Foreign-owned companies generally face fewer restrictions on commercial property acquisition than foreign individuals purchasing residential property. However, specific regulations may apply depending on the property’s location, particularly in strategic areas or border regions. Companies should confirm their registered office address requirements early in the process and should conduct thorough due diligence on land titles before acquisition, as issues with documentation or competing claims can create complications.

Workforce readiness and geographic advantage

For businesses seeking both operational capability and regional connectivity, Indonesia offers a compelling combination of workforce depth and geographic positioning. Its growing talent pool supports a range of industries, while its location enhances access to regional and international markets.

Multilingual workforce and high English proficiency talent

Indonesia’s business centres, particularly Jakarta, Surabaya and other major cities, have workforces with varying degrees of English proficiency. While Bahasa Indonesia is the national language, many professionals in finance, technology, consulting and other sectors in international markets have functional to advanced English skills. This facilitates communication for foreign businesses establishing operations.

The availability of English-speaking talent varies by sector and seniority level. Senior management positions and roles in multinational corporations or international service providers typically attract candidates with stronger English capabilities, while operational and technical positions may require Bahasa Indonesia. Companies can address language considerations through recruitment strategies that prioritise bilingual candidates for key positions, provision of language training for staff or engagement of translation services for documentation and communications.

Strategic location on key trade routes

Indonesia’s geographic position along major maritime trade routes connecting East Asia, South Asia, the Middle East and beyond provides logistical advantages for trade-oriented businesses. Major ports across the archipelago handle substantial container volumes and offer connections to global shipping networks. The government’s ongoing infrastructure development programmes focus on improving port facilities, expanding road and rail networks, and enhancing digital connectivity to strengthen the country as a regional logistics and distribution hub.

Air connectivity through Jakarta’s Soekarno-Hatta International Airport and other major airports also provides passenger and cargo links to regional and international destinations. Companies establishing regional headquarters benefit from Indonesia’s central location within Southeast Asia, enabling convenient travel to major Asian, Middle Eastern and European business centres.

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Expanded foreign investment opportunities

Through the introduction of the Investment Positive List and subsequent regulatory updates, Indonesia has shifted towards a more open and risk-based investment regime, enabling greater foreign participation across a wide range of sectors.

Access under the Positive Investment list

Indonesia replaced its previous Negative Investment List with an Investment Positive List through Presidential Regulation No. 10 of 2021, which was lastly amended through Presidential Regulation No. 49 of 2021. This identifies business sectors that are closed to investment, limited to government ownership or open to private investment. The reform reduced the amount of restricted business sectors, expanding opportunities for foreign investment across the economy.

Business sectors not clearly listed in the Investment Positive List are generally open to 100% foreign ownership without restriction. This represents a substantial shift from previous approaches where foreign investment had more limitations. The current framework maintains restrictions primarily for small-scale traditional businesses reserved for Indonesian small and medium-sized enterprises, certain strategic industries with government participation and activities restricted on national security or cultural preservation grounds.

In line with the government’s efforts to enhance ease of doing business, the Ministry of Investment/BKPM issued Regulation No. 5 of 2025 on risk-based licensing procedures through the OSS system, which introduces a new provision lowering the minimum paid-up capital requirement for Foreign Investment Companies to IDR 2.5 billion, a significant reduction from the previous higher threshold. The application thresholds vary by structure and sector, and the details are set out in the guidance on registered capital requirements in Indonesia. This policy aims to attract more small and medium-scale foreign investors and strengthen Indonesia’s competitiveness as an investment destination.

What sectors are open to increased foreign participation in Indonesia?

There are now expanded foreign ownership opportunities across many sectors. Some of the sectors that are open to 100% foreign ownership, in most cases, include:

• Distribution businesses not affiliated with manufacturing operations
• Healthcare services, including hospitals, clinics, medical laboratories and pharmaceutical raw material manufacturing
• Tourism and hospitality sectors, including restaurants, cafés, bars and tourism support services
• Certain manufacturing activities, including cold storage facilities, crumb rubber processing and renewable energy components such as biomass pellets for energy generation
• Film production and distribution

E-commerce platforms and digital marketplaces, as well as sports facilities and certain consulting services, face fewer restrictions on foreign participation compared to before.

Some sectors remain subject to foreign ownership caps based on policy considerations, such as:

• Construction services
• Golf courses and meeting, incentive, conference and exhibition operations
• Certain telecommunications and broadcasting services
• Maritime cargo handling and port services

Companies should consult the Investment Positive List and relevant sectoral regulations to confirm applicable foreign ownership limits for their intended business activities.

Substantial market scale and economic growth opportunities

Establishing operations in Indonesia allows companies to tap into a vast domestic market supported by digital acceleration, industrial development and rising household consumption.

Growing consumer market

Indonesia’s population exceeds 280 million people, making it the fourth most populous country globally and creating a substantial domestic consumer base. The rising middle class, combined with urbanisation trends, drives increasing demand for consumer goods, digital services, healthcare, education and lifestyle products. This demographic advantage distinguishes Indonesia from many other markets where consumer bases remain smaller.

The youth of Indonesia’s population also provides favourable long-term prospects for consumer demand growth. A large proportion of the population is within working-age demographics, supporting productivity and income growth. Urban centres continue expanding, with Jakarta, Surabaya, Bandung, Medan and other cities serving as focal points for commercial activity.

Digital economy expansion

Indonesia’s digital economy is projected to exceed USD 146 billion by 2025, with e-commerce platforms, digital payments, ride-hailing services, online food delivery, logistics technology, fintech and software-as-a-service providers driving growth. High internet and mobile rates, with the majority of the population accessing the internet primarily through smartphones, create opportunities for digital business models.

Jakarta has emerged as a regional technology hub, hosting unicorn companies valued above USD 1 billion and attracting substantial venture capital investment. The ecosystem supports startups and technology companies through accelerator programmes, co-working spaces, technology parksand government initiatives promoting digital transformation. Foreign technology companies and investors increasingly view Indonesia as attractive due to its large user base, growing digital adoption and entrepreneurial talent pool.

Natural resources and strategic industries

Indonesia ranks among the leading global producers of nickel, coal, tin, copper, gold and palm oil, creating opportunities in resource extraction, processing and downstream manufacturing. The government’s policy requiring downstream processing of certain minerals before exporting has attracted significant foreign investment in metal smelting and processing facilities, particularly related to electric vehicle battery supply chains.

Manufacturing contributes substantially to GDP, spanning automotive, electronics, textiles and food processing. The government promotes Indonesia as a regional manufacturing hub through special economic zones, tax incentives and infrastructure investments. Foreign manufacturers view Indonesia as complementing or diversifying production bases across Southeast Asia, particularly for goods serving both the domestic market and regional export markets.

Strengthened business governance framework

Regulatory reforms in recent years have aimed to improve transparency, streamline administrative procedures and enhance legal certainty for businesses. These measures contribute to a more predictable operating environment for companies establishing operations in Indonesia.

Simplified business licensing

The Online Single Submission (OSS) system, implemented under the Job Creation Law, consolidated business licensing procedures into a single digital platform. Companies can register, obtain a Business Identification Number (NIB) and apply for licences through this centralised system rather than navigating multiple agencies separately. These steps form part of the process for registering a company in Indonesia. The system categorises business activities by risk level, with lower-risk businesses facing simpler licensing requirements and higher-risk activities subject to more review processes.

Anti-corruption efforts

Indonesia continues addressing corruption challenges through institutional reforms and enforcement actions. The Corruption Eradication Commission operates with authority to investigate and prosecute corruption cases, including those involving government officials and business actors. The country also participates in international anti-corruption frameworks including the United Nations Convention Against Corruption.

Conclusion

Indonesia offers foreign investors a compelling combination of market size, regional connectivity and expanding opportunities across sectors. While some challenges remain, including infrastructure constraints and regulatory complexity in certain sectors, Indonesia’s trajectory points toward continued economic growth and increasing integration into regional and global value chains.

Companies considering Indonesian market entry should evaluate how the country’s specific advantages align with their strategic objectives, whether serving the domestic consumer market, establishing regional manufacturing or distribution operations, accessing natural resources or participating in the expanding digital economy. The right entry structure depends on the level of commitment intended, and the trade-offs between incorporation and employer of record in Indonesia are worth considering early. The combination of a large population, improving business environment and strategic positioning allows businesses to establish successful operations in Indonesia.

How Acclime can help set up your business in Indonesia

Acclime provides comprehensive business setup and compliance services for companies establishing operations in Indonesia. Our team assists with company registration in Indonesia, licensing applications, foreign investment approvals and ongoing regulatory compliance. We help foreign investors understand sector-specific requirements, foreign ownership restrictions and optimal business structures for their activities. Our services include registered office provision, corporate secretarial support, accounting and tax compliance and assistance with work permits and visas for foreign personnel.

Contact Acclime to discuss your business plans in Indonesia and how we can support your market entry.