Expanding your business to a new country can be risky. It would help if you had comprehensive research and a thorough investigation. This article will guide you in finding the right Indonesia business opportunity.
Foreign Investment in Indonesia has great potential. But is it worth investing? To answer this, read more to find out more about foreign direct investment in Indonesia (FDI).
Business owners must adequately address many issues before venturing into an investment decision, especially with foreign direct investment (FDI). Foreign direct investment (FDI) is an investment made by one business into a business (corporation) in another country with the purpose of establishing a long-term relationship. Some classic challenges with foreign direct investment are the risk of interference by the host country and the political changes that may follow after the investment is made. Foreign Direct Investment (FDI) may initially be capital-intensive, which reduces its appeal in terms of economic risk. Furthermore, there might not be sufficient valuable data due to low levels of research and development in the target countries.
There are plenty of considerations and insights required for a successful foreign investment in Indonesia. As foreign direct investment Indonesia is ultimately financially motivated, it is imperative to minimize investment loss in a balanced consideration with achieving a grander scale of operations and profits.
Adding to the complexities, many corporations are stuck in making an FDI decision simply because various countries offer too many investment options. This paralysis by analysis makes it a tough call for you and your team.
Fortunately, this does not happen exclusively to the select few. Many multinationals have had trouble making an FDI decision. FDI realization comes only after comprehensive research, consultations, and multiple site visits. And sometimes a gut feeling of the experienced pro.
To take advantage of this Indonesia business opportunity and avoid unnecessary loss from foreign Investment in Indonesia, we have compiled this short article to help you understand investing in Indonesia. We will cover topics such as why investing in Indonesia is a good choice, where to invest in Indonesia, and the best industrial estates to choose.
As you will see in the following, today is the right time to make foreign direct investment in Indonesia.
Why Foreign Investment in Indonesia?
Definition of Direct Investment
Foreign direct investment is when an individual or business owns 10% or more of a foreign company. If an investor owns less than 10%, the International Monetary Fund (IMF) defines it as part of their stock portfolio. A 10% ownership does not give the investor a controlling interest in the foreign company. However, it does allow influence over the company’s management, operations, and policies.
Why Indonesia is the Best Place for Investing
Indonesia is your investment destination. Abundant natural resources, a young and capable workforce, a large and growing domestic market combined with an improving investment climate, and a higher global profile, are just a few of Indonesia’s salient strengths. Indonesia’s business opportunity offers stability.
As of now, Indonesia has succeeded in maintaining political stability. Following Indonesia’s economic resilience during and after the global financial crisis, the government will continue reforming the investment climate to make it a safe and attractive investment destination. Indonesia is undergoing a major structural shift, namely demographic bonus. The percentage of productive age group in 2025-2035 would dominate the population.
As the 4th most significant population globally, Indonesia has more than 53% of the people live in urban areas with a modern lifestyle and increasing purchasing power. Indonesia is an emerging global powerhouse, the fourth biggest economy in Asia and Southeast Asia.
Overview of Indonesia
The latest census from BPS (Centre Statistical Bureau) as of September 2020 shows that Indonesia has a population of just over 270 million, the majority of which is made up of Gen Z at 28% (born between 1997-2012) and Millenials at 26% (born between 1981-1996). These two classes of 145 million workforces are the driving force of the future of Indonesia. When added to the rest of the aging workforce (born between 1965-1980), the total productive employment reached 70.72% or 189 million in 2020.
The total Indonesian workforce with an educational level of High School or equivalent reaches 49 million, whereas those having completed university sits at 14.3 million. The numbers show the excellent quality & abundant quantity of employment availability.
The average labor wage in February 2021, according to BPS, was USD 201. The average wage of university-educated workers is 305 USD. Suffice to say, there is a good balance between supply, quality, and cost of labor.
These factors alone make foreign Investment in Indonesia feasible and very attractive.
Economic Growth and Size
The last ten years (2010-2019) have seen Indonesia’s GDP grew at an annual 5-6% rate. An abundance of natural resources, substantial human capital, and a conducive investment climate contribute to making Indonesia the largest economy in the Southeast Asia region and the fourth in Asia. If you are looking for scalability and growth, now is the time to invest in Indonesia.
Indonesia’s business opportunity is very favorable, so the next question would be, “In which area should you make foreign Investment in Indonesia?”
West Java – Strategic Location for Investment
The Indonesian Investment Coordinating Board (BKPM) has released an investment growth report in Indonesia from January to March or the first quarter of 2021. Based on the data, West Java’s foreign Investment in Indonesia still ranked first, both from Domestic Investment and Foreign Investment.
Since 2018, the investment realization in West Java has been superior in both sectors compared to other areas such as Sumatra, Kalimantan, Sulawesi, Bali, Nusa Tenggara, Maluku, and Papua.
Quality Infrastructures And Human Capital
Major infrastructures available in the province serve as distribution veins that facilitate the growth of foreign investment in Indonesia. These are the new Patimban Seaport and Tanjung Priok Seaport (sea), Kertajati, Husein Sastranegara, and Soekarno-Hatta International Airports (air), various Toll Roads and High-Speed Railway (land).
Foreign direct investment Indonesia becomes more attractive with West Java’s 1.1 million productive range workforce – almost half are high school and college graduates. These are why West Java is still leading foreign direct investment in Indonesia, having a supportive investment climate in terms of infrastructure and human capital, labeled as the most productive in Indonesia.
Two of the Most Promising Industrial Cities for Foreign Direct Investment Indonesia
For foreign investment in Indonesia, the government allocates several particular industrial locations all across Indonesia. However, the two most prominent are Karawang and Subang due to their site and infrastructure.
Karawang – The Most Favourable City in West Java
Karawang, the golden hub of foreign direct investment in Indonesia, is located in one of the government-prioritized regions in Indonesia’s national strategic infrastructure development program. If you are looking for an excellent Indonesia business opportunity, this is a must look.
Karawang Economic Facts
This prized industrial area offers a 1.1 million potential workforce, with great skilled labor. Having GDP per Capita of 4,989 USD, no wonder many choose to settle in Karawang, one of the jewels of foreign Investment in Indonesia.
From over ten thousand companies and manufacturing industries, 127 are top global and FORBES organizations making their home here. 8 out of 10 world’s leading consumer electronics companies, 6 out of 10 world’s leading automotive companies, and 5 out of 10 of the world’s top FMCG companies also operate from Karawang.
Advantages of Investing In Karawang
Why do major world corporations making a foreign investment in Indonesia choose Karawang? It offers all the convenience of business operations. This established industrial real estate includes entire facilities for urban lifestyle such as commercial, educational, residential, and healthcare facilities supported by a robust transportation network perfect for any global manufacturer’s requirements making a foreign investment in Indonesia.
The Jakarta-Cikampek Elevated Toll-Road effortlessly connects tenants to Jakarta and Bandung, two major cities of Indonesia. Other supply chain avenues are the Trans Java Highway Network, Tanjung Priok Seaport, and Soekarno Hatta International Airport that connect the area to many important cities on the island.
The newly built Patimban Seaport and Kertajati International Airport will further enhance the movement from Karawang. They are designed explicitly as major logistic hubs. Karawang also provides close access to the Jabodetabek LRT and Jakarta-Bandung High-Speed Railway for daily commutes.
Suryacipta – Home to World’s Top Companies
One of the most sought-after industrial areas in Karawang is Suryacipta City of Industry (Suryacipta). The 1.400 Ha industrial estate currently hosts 150 foreign investments in Indonesia from Europe and Asia, including Japan, Korea, China, Taiwan, Belgium, Switzerland, Indonesia, and other ASEAN countries. This fully serviced industrial estate is equipped with international standard infrastructures and utilities, integrated with ample facilities and amenities to ensure tenant’s needs.
Indonesia is ASEAN’s largest automotive market and second-largest automotive manufacturer in the region. Suryacipta currently hosts several high technology and labor-intensive industries, FMCG manufacturing, as well as automotive producers. Some of the most prominent tenants are Daihatsu Motor, Bridgestone Tire, Isuzu Motor, JVC Electronics, GS Battery, Inc, Bekaert Belgium, Astra International, ZTT Cable, Zinus Global Korea, and Nestle Switzerland.
Suryacipta established Industrial Research & Development Center 4.0 (IRDC 4.0) that uses advanced technology from ATMI to control various industrial facilities. ATMI is an industrial polytechnic located in Bekasi, that has been well-known as a mechatronics educational and training center with international European Qualification Framework (EQF) Level 6 standard.
IRDC 4.0 allows for performing simulation, study, and development of intelligent building systems using modules and software to assist industrial production and maximize the application of industry 4.0. The whole area is facilitated by a fiber-optic network, water and wastewater treatment plants, gas and electricity supplies, and an underground sewage system with a 50-meter row primary road network.
Smart and Sustainable City of Subang – Part of the Rebana Metropolitan Development Project
As the new center of economic corridor expansion, Subang accommodates various industrial estates. One of them is the promising smart & sustainable city, Subang Smartpolitan, which is another potential foreign Investment in Indonesia. This Indonesia business opportunity is home to the seven-regions Rebana Metropolitan, with a population of 9.28 million. Rebana Metropolitan is projected as a driving force for West Java’s economic growth in the future through the development of an integrated, innovative, collaborative, highly competitive, and sustainable industrial area.
Advantages of Investing In Subang
Subang Smartpolitan is supported by the new Patimban Port and West Java International Airport that serves as connectivity and logistics centers. It has convenient entry and exit points for your good foreign direct investment in Indonesia, with direct access from Cipali Interchange and Patimban Toll Road.
The new Patimban Seaport is ±40 km, Kertajati International Airport ±70 km, Husein Sastranegara International Airport ±93 km, Bandung City ±90 km, and Central Java Province ±150 km. Going west towards Jakarta City ±90 km, Tanjung Priok Seaport ±100 km, Soekarno-Hatta International Airport, ±120 km. With a quality workforce and competitive wages, Subang Smartpolitan is ready to support any significant business operation.
Ready For Industrial 4.0 Companies
Subang Smartpolitan welcomes industrial 4.0 companies seeking to make foreign direct investment in Indonesia with Smart Grid System, Smart Lighting, Solar Panel, Water Management System, Sustainable Water, Waste Water Line, and Water Sensitive Urban Design.
Utilizing advanced technology and IoT, this excellent Indonesia business opportunity’s road network and intelligent mobility systems are monitored at the Command Center. The designs are interconnected with world-class sustainable electricity and gas systems to create an innovative and environmentally friendly Infrastructure that enhances efficiency, effectiveness, and security.
With full fiber-optic coverage and a 5G network ready, your Industrial 4.0 set-up is ready to go. All essential infrastructures like gas, water, and electricity are integrated into an underground network. Subang Smartpolitan has various enhancements to create a truly connected world with the smart systems applied in the grid, water management, and wastewater drainage. The complete eco-friendly ecosystem of Smartpolitan combines modern elements powered with technology to support a work-live-learn-play lifestyle.
This article should enlighten you about Foreign Investment in Indonesia. We hope it will assist you in deciding to capture this promising Indonesia business opportunity. With an open investment policy in place, you do not want to miss investing in Indonesia, especially in either of the two most promising industrial cities of Karawang and Subang, as more MNCs look to capitalize on foreign investment in Indonesia.