JLL, a global commercial real estate and investment management company, highlights that Indonesia is benefiting significantly from companies diversifying their manufacturing bases to complement existing operations in China. Over the next decade, there will be an accelerated shift in supply chains, focusing on Southeast Asia and India. Companies must be flexible in location selection and financing options to navigate supply chain volatility effectively. Trends like near-shoring, re-shoring, and friend-shoring have led to the China+1 strategy, where companies add manufacturing bases outside China to reduce supply chain disruption risks. According to JLL's analysis, the primary impact is felt in destination countries, especially in Southeast Asia and India. Governments in these regions support this opportunity by implementing more policies to bolster local manufacturing industries, prioritizing land availability and access to capital. Michael Ignatiadis, Head of Manufacturing Strategy for Asia Pacific at JLL, stated that with a strong economic foundation, Indonesia is emerging as a hub for large-scale manufacturing. Its large population, abundant workforce, attractive costs, and various incentives make Indonesia an appealing destination for manufacturing investment.
In 2023, Indonesia saw an increase in foreign direct investment (FDI) in manufacturing, rising by USD 4 billion to reach a total of USD 28.7 billion. The country also experienced significant growth in key sectors such as electronics, chemicals, pharmaceuticals, motor vehicles, and other transportation. The Indonesian government has implemented various policies to support and attract investment in the manufacturing sector. Key initiatives include incentives for battery-powered motor vehicles, tax incentives through Special Economic Zones, and the “Making Indonesia 4.0” strategy aimed at integrating advanced manufacturing technologies. Additionally, Indonesia allows 100% foreign ownership in key sectors like logistics and e-commerce. The country is committed to achieving net-zero carbon emissions by 2050 through its Long-Term Low Carbon and Climate Resilience Strategy 2050. These policies create a supportive environment for manufacturing investment, positioning Indonesia as a competitive destination for global manufacturers.
