Indonesia, as the fourth most populous country in the world, has become a magnet for foreign investment, particularly in the digital sector. In recent years, rapid growth in information and communication technology (ICT) has opened up significant opportunities for global investors. It is predicted that foreign investment in Indonesia’s digital sector will continue to experience significant growth, driven by infrastructure development, increasing internet users, and a vast market potential.
Vast Market Potential
One of the main factors driving foreign investment growth in Indonesia’s digital sector is its vast market potential. With over 270 million people, most of whom are active internet users, Indonesia offers a large consumer base for technology companies. According to a report by We Are Social, at the beginning of 2024, there were approximately 200 million internet users in Indonesia, indicating internet penetration reached 72% of the total population. This number continues to increase each year, making Indonesia one of the most promising digital markets in Southeast Asia.
Improved Digital Infrastructure
Indonesia’s digital infrastructure has also seen rapid development. The Indonesian government is committed to enhancing technological infrastructure by launching the 100 Smart Cities program and the Palapa Ring project, aimed at expanding internet access to remote areas. These projects not only improve connectivity but also attract the attention of foreign investors looking to enter the Indonesian market.
As a result of these efforts, foreign technology companies such as Google, Facebook, and Alibaba have shown interest in investing in Indonesia. For example, Alibaba has invested in e-commerce and logistics, while Google has invested in technology development and training human resources in the digital field.
Growing Need for Digital Transformation
The rapid digital transformation across various industrial sectors is also a driver of foreign investment. Many Indonesian companies, especially in retail, healthcare, and education, are increasingly realizing the importance of digitalization to remain competitive. Consequently, they are seeking innovative technological solutions and investing in software, applications, and digital platforms.
This need for digital transformation creates opportunities for foreign companies to offer their products and services. Foreign investors with expertise in technology can fill this gap and help local companies adapt to the digital era.
Supportive Regulations
The Indonesian government has also taken steps to create a more investment-friendly environment for foreign investors. Policies such as tax reductions, incentives for investments in technology, and ease of licensing processes are additional attractions. According to a report released by the Ministry of Investment, the ICT sector is a priority sector for attracting foreign direct investment (FDI).
Additionally, various facilities in business operations, such as the development of innovation centers and business incubators, help create a supportive ecosystem for startups. This makes foreign investors increasingly optimistic about the growth potential in Indonesia’s digital sector.
The amount of foreign investment entering Indonesia’s digital sector is expected to increase in 2025.
This estimate is based on several things, one of which is the increase in Indonesia’s ranking in the Ease of Doing Business (EoDB) released by a number of international agencies. Indonesia’s ranking continues to increase from year to year.
Center for Indonesian Policy Studies (CIPS) researcher Novani Karina Saputri has ever said the process of simplifying permits and regulations at the central and regional levels must continue to be carried out to support this ranking increase. Clear, effective and efficient permits and regulations will encourage more investors to invest in Indonesia.
Another thing that can encourage an increase in the amount of foreign investment in the digital sector is an investment scheme in the form of a tax holiday. The scheme designed by the Minister of Finance is in the form of incentives for industries engaged in the information technology sector or companies with a minimum value of IDR 500 billion.
