The Rise of Investment in Indonesia’s Second-Tier Cities (InCorp Global)

Business Opportunities
October 25, 2021 - InCorp Global Pte Ltd

This is a thought leadership article on the The Rise of Investment in Indonesia’s Second-Tier Cities from PrimeGlobal member firm InCorp Global in Singapore.

Most foreign investors and business owners that have considered investing in Indonesia may already be familiar with Jakarta and Bali, the favored Indonesian regions for doing business. However, as the world’s largest archipelagic country with no less than 17 thousand islands, Indonesia has countless diverse natural resources throughout the nation. Each of Indonesia’s regions has, in fact, its own potential business prospects. If you are an investor who is at the early stages of considering investing in Indonesia, this article will help you find the best place for a new Indonesian-based business to operate in. 

Investing in Indonesia: 4 Potential Regions for Doing Business

1. Surabaya, East Java

Located in the easternmost part of Java, Surabaya has become a business gateway for companies that want to reach the eastern Indonesian market.

As a port city, Surabaya stands at the hub of all shipments traveling to and from the east coast of Java. In addition, Surabaya is also one of the many Indonesian cities with high property growth.

When it comes to the red tapes, the local government of Surabaya has developed a more efficient process for company setup and business permits. They have established the Surabaya Single Window Permit Service - an online platform to streamline the process of obtaining a Trading Business Permit (SIUP).

Population: 2.87 million

● Workforce: 1.58 million

● Top Business Sectors: Manufacturing, finance, real estates, information and technology

● Top Companies: PT Saint-Gobain Abrasives Indonesia, PT Essentra, PT Suparma Tbk, and others. 

2. Semarang, Central Java

Given its proximity to industrial estates, Semarang is the perfect destination for manufacturing and trade investment in Indonesia.

In 2019, the total investment value in Semarang reached USD 3.5 billion, with almost half coming from foreign direct investment.

As one of Indonesia’s five most populated cities, Semarang has a large talent pool with relatively low labor costs compared to other industrial cities in Indonesia. This could be a cost-saving factor for establishing new foreign companies.

  • Population: 1.81 million
  • Workforce: 951.135 (2019)
  • Top Business Sectors: textile, furniture, manufacturing, food and beverages
  • Top Companies: MAS Holdings, PT Panalpina Nusajaya Transport (Panalpina World Transport), Nestlé, and others.
  • Population: 1.5 million (2019)
  • Workforce: 632,322 (2018)
  • Top Business Sectors: agriculture, tourism, fisheries, energy.
  • Top Companies: Accenture, Schlumberger, EMPLOYERS and others
  • Population: 2.4 million
  • Workforce: 1.2 million (2020)
  • Top Business Sectors: Creative industry, tourism and hospitality, food and beverages, agriculture, and others. 

3. Makassar, South Sulawesi

If you have a plan to invest in Indonesia’s infrastructure project, then Makassar is the perfect option. Its local government is actively encouraging foreign investors to take a part in its mega projects involving energy, tourism, and transportation.

Given its location in the heart of Indonesia, Makassar’s economic growth has been propelled by strong wholesale and retail trade.

In 2016, Makassar’s local government signed an agreement with International Enterprise - part of the Ministry of Trade and Industry of Singapore - to develop a smart city system in Makassar, debuting the city in the international spotlight.

  • Population: 1.5 million (2019)
  • Workforce: 632,322 (2018)
  • Top Business Sectors: agriculture, tourism, fisheries, energy.
  • Top Companies: Accenture, Schlumberger, EMPLOYERS and others

4. Bandung, West Java

The capital city of West Java is known for its creativity and innovative ideas. Creative industries, such as start-ups and MSMEs are flourishing, and therefore becoming an ideal location for investment in Indonesia.

Bandung’s local government has ambitious plans to turn the city into the ‘Silicon Valley’ of Indonesia. An investment worth USD 800 million has been planned to build a satellite city called ‘Technopolis’ in East Bandung.

● Top Companies: PT Toyota Motor Manufacturing, PT Astra Honda Motor, Cisco Systems, Henkel, Procter & Gamble, Expedia Group and others.

The Rise of Indonesia’s Second-Tier Cities

Although none of the aforementioned cities are quite on the same level as the capital city of Jakarta, it is quite clear that all of these cities have the common goal of improving the living and economic conditions both for domestic and foreign investors. 

As a result of these efforts, the growth rate of these cities now exceeds the capital city of Jakarta. From 2010 through 2015, Surabaya, Bandung, and Makassar’s GDP growth are estimated to be at 7%, 7.9%, and 8.5% respectively, with Jakarta’s GDP growth lagging at 6.2%. This indicates that these second-tier cities are quickly catching up with the national capital.   

With the consistent support of a nationwide plan to improve interconnectivity, these cities continue to drive Indonesia’s impressive economic growth. 

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InCorp Global Pte Ltd

Headquartered in Singapore, InCorp Global is a leading corporate services provider, with an established regional presence across seven Asian countries, including Indonesia, India, Hong Kong, Philippines, Vietnam, and Malaysia. The group services more than 12,000 corporate clients across various industries, including asset / fund managers, as well as family offices. They are official partners with key government authorities in the region, such as Singapore’s Economic Development Board, a government agency that is tasked with bringing in foreign direct investments into Singapore.

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