Why the Logistics Industry in Indonesia Presents a Lucrative Business Prospect for Foreign Investors (InCorp Global)

Business Opportunities
December 10, 2021 - InCorp Global Pte Ltd


This is a thought leadership article examining the business prospects of the logistics industry in Indonesia for foreign investors. The article is by InCorp Global in Singapore.

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Since the Covid-19 pandemic spread all over the globe, many countries, including Indonesia, imposed several efforts to slow down the rate of transmission by limiting mobility in public spaces. As a result of such policies, people have become more acquainted with e-meetings, online classes, working from home, as well as online shopping than they previously were.

Even before the pandemic struck, online shopping was already gaining traction in Indonesia, with 90% of the country’s internet users between the ages of 16 and 64 reporting that they have purchased products and services online.

The COVID-19 pandemic has accelerated Indonesia’s e-commerce sales even further. In 2020, e-commerce users in the country increased by 66%, skyrocketing sales by 37.4% with a value of USD 25.3 billion. These numbers are expected to reach USD 51 billion by 2024. 

To accommodate the growing number of users, e-commerce players and online retailers, who tend to have a larger array of products, require a more effective and reliable logistic and warehousing system. Unfortunately, the World Bank's Logistic Performance Index scored 3.3 out of 6 in 2018, much lower than its neighboring countries in ASEAN. 

The rising demand for shipping and warehousing services could be a turning point to rejuvenate the logistics industry in Indonesia, and the good news is, foreign investors and businesses can take their part in this opportune moment, as the government is actively improving its investment policies. 


Ease in Regulations

For the past several years, the Indonesian government has taken a lot of proactive efforts to improve the ease of doing business in the country. Some regulations, such as the Job Creation Law as well as the Positive Investment List, are drafted to attract more foreign investment across many sectors, including the logistics industry in Indonesia. 

According to the new Positive Investment List, some logistics-related businesses are now eligible to be fully owned by a foreign company:

KBLI Number

Business Activity

Foreign Ownership

Local Partnership

52101

Warehousing and Storage Space

100% foreign ownership

No local partnership required

52102

Cold Storage

100% foreign ownership

No local partnership required

52103

Bounded warehousing activities or binding areas

100% foreign ownership

No local partnership required

In spite of ease in regulations, setting up a business overseas, where the regulations are constantly changing, can be a huge challenge for foreign businesses. Partnered with other firms that have an in-depth knowledge of Indonesia’s regulations ease the company registration process and help you obtain the required licenses efficiently.


Attractive Incentives

Some of the aforementioned businesses have been reclassified as priority labor-intensive sectors. These businesses are eligible for a tax holiday of up to 100% of the Corporate Income Tax (CIT) due for 5 to 20 years from the commencement of commercial production, depending on the investment amount. 


Improving Infrastructure

One of the major bottlenecks that needs to be addressed to improve the logistics industry in Indonesia is infrastructure, given its vast and archipelagic topography. 

Luckily, the current government has already acknowledged this challenge, as an infrastructure plan has already become one of the main focuses in President Joko Widodo’s first and second terms in office. 

For instance, the government had previously launched an infrastructure plan valued at USD 350 billion to improve access outside the country’s most populous island of Java. 

In his second term, President Jokowi continues these efforts by presenting hundreds of ambitious plans such as 25 new airports, power plants, and a slew of mass-transit projects totaling more than USD400 billion in funds.

With huge market potential and considerable support from the government, the logistics industry in Indonesia presents a lucrative business opportunity for foreign investors. 


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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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