Indonesia Intensifies Competition for Quality Foreign Investments Amid ASEAN Rivalry

Indonesia's Strategic Push for High-Quality FDI

Indonesia's Investment Minister, Rosan Roeslani, has underscored the nation's proactive stance in attracting high-quality foreign direct investments (FDI), acknowledging the intense competition within the Association of Southeast Asian Nations (ASEAN) region. Speaking at the 2025 Investor Daily Summit in Jakarta, Roeslani emphasized that while ASEAN members are friends, they are also competitors in the global investment landscape. The focus is not merely on the quantity of investments but on their quality and sustainability, particularly those that generate substantial employment opportunities.

This strategic drive is integral to President Prabowo Subianto's administration, which aims to achieve an ambitious 8 percent annual economic growth by 2029. Investment inflows are considered crucial for reaching this target, with the government setting a goal of attracting Rp 1.9 quadrillion ($114.4 billion) in investments from both domestic and foreign sources throughout 2025.

Policy Reforms to Enhance Investment Climate

To bolster its attractiveness, Indonesia is accelerating regulatory reforms and streamlining bureaucratic processes. Minister Roeslani highlighted the need to 'cut its bureaucratic red tapes to prevent investors from running to other Southeast Asian economies.' Key initiatives include the implementation of Government Regulation No. 28/2025, which introduces a risk-based business licensing system through the Online Single Submission (OSS) platform, simplifying procedures for low-risk enterprises.

Further demonstrating its commitment to a more investor-friendly environment, Indonesia has significantly reduced the paid-up capital requirement for foreign-owned limited liability companies (PT PMAs) from IDR 10 billion ($640,000) to IDR 2.5 billion ($160,000) under Minister of Investment Regulation No. 5 of 2025. This reform aims to lower upfront burdens for investors while maintaining the requirement for a minimum investment plan of IDR 10 billion, aligning Indonesia's capital framework closer to ASEAN norms.

Targeted Sectors and Recent Investment Performance

Indonesia is strategically channeling FDI into priority sectors that align with its national development goals and contribute to value-added industries. These include:

• Downstream natural resources: Particularly in mining, basic metals, and the electric vehicle (EV) value chain, aiming to process raw materials domestically.
• Renewable energy: Leveraging its vast potential in solar, hydro, geothermal, and wind energy.
• Digital technology: Driven by increasing internet penetration and government support.
• Manufacturing: Including automotive, electronics, and textiles, benefiting from local production policies.
• Health services and human capital development.

The country has shown robust investment realization, with Rp 942.9 trillion amassed in the first half of 2025, of which approximately 54.1 percent originated from overseas. By the third quarter of 2025, investment realization reached around Rp 1,400 trillion. In 2024, Indonesia attracted $114.3 billion in investments, surpassing its presidential target. Singapore remains Indonesia's largest foreign investor, contributing $8.8 billion in the first half of 2025, representing about 32.4 percent of the total FDI.

Navigating the Competitive ASEAN Landscape

Despite global economic headwinds, ASEAN as a region saw a 10 percent rise in FDI in 2024, drawing $226 billion, reflecting growing investor confidence. Indonesia's Investment Minister Rosan Roeslani acknowledged the stiff competition from neighboring countries for FDI. Challenges such as bureaucratic inefficiency, legal and regulatory uncertainty, and corruption have been cited by investors as obstacles.

However, Indonesia is actively working to address these issues through continuous policy improvements and reforms. The government's commitment to creating a predictable and open investment climate is aimed at positioning Indonesia as a 'safe harbor amid global uncertainty' and a magnet for sustainable FDI. The country's large population, growing middle class, abundant natural resources, and stable economy continue to make it an attractive destination for investors.