Several current trends are propelling Indonesia to become a key node in the global strategic layout of enterprises, making it particularly suitable for the following development needs:
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Achieving business diversification in the Asia region
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Tapping into the ASEAN and South Asia markets
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Building a strategic complement to China-based operations
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Connecting with advantageous free trade agreements and market resources
In the field of consumption upgrade (such as retail, healthcare, and finance), Indonesia has become an important location for enterprises to establish their second headquarters in Asia. The restructuring of the global supply chain and changes in labor costs have further made it an ideal recipient for the “China + 1” strategy.
Core Investment Drivers
I. Demographic Dividend and Market Depth
With a population base of 270 million, Indonesia supports the world’s fourth-largest labor market. Combined with the expansion of the middle class and its rich natural resources, this forms a unique competitive advantage. Renowned statistical companies predict that, measured by purchasing power parity, Indonesia’s economic size will soar from $4.2 trillion in 2020 to $10.1 trillion in 2030, making it the world’s fourth-largest economy by then. This sustained growth momentum creates strategic opportunities for international investors seeking a complement to their China-based operations.
II. Continuous Improvement of the Business Environment
Through a series of reform measures, Indonesia has been steadily climbing in the global rankings for ease of doing business:
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Business Registration: The digital business license system has enabled full-process digitization for company registration.
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Tax Administration: Major taxes can now be declared and paid online.
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Judicial Efficiency: The electronic case management system has enhanced the efficiency of contract enforcement.
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Cross-border Trade: The digitalization of customs operations has significantly improved customs clearance efficiency.
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Energy Security: The modernization of the power grid has optimized the electricity usage experience for businesses.
III. Free Trade Network with Global Reach
Leveraging its status as an ASEAN member state, Indonesia has established a free trade system that spans multiple countries:
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ASEAN Free Trade Area (AFTA) (effective since 1992): Tariffs on goods within the region have been reduced to 0–5%.
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Regional Comprehensive Economic Partnership (RCEP): The world’s largest free trade area, covering the ten ASEAN countries as well as China, Japan, South Korea, Australia, and New Zealand.
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Bilateral Agreements: Special agreements have been signed with Japan, Australia, Pakistan, and others.
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Latest Development: The Indonesia–Australia Comprehensive Economic Partnership Agreement (IA-CEPA) officially came into effect in February of this year.
IV. Comprehensive Tax Treaty Network
Indonesia has signed Double Taxation Agreements (DTAs) with 71 jurisdictions, covering major sources of investment (including China, the United States, Australia, the European Union, and others). This network effectively reduces the tax burden on cross-border business operations through mechanisms of tax exemptions or reductions.
