According to the ASEAN Investment Report 2024, foreign investment in Indonesia dropped significantly, decreasing by 15% throughout 2023. This decline has had a widespread impact on businesses, even into 2025. From limited capital, hindered technology transfer, to reduced job creation.
However, this situation has also forced businesses to become more adaptive, creative, and self-reliant.
Foreign Investment Trends in Indonesia
FDI Down, Domestic Investment Up
Although Indonesia’s total investment realization increased in early 2025, the growth was mainly driven by domestic sources. Foreign Direct Investment (FDI) accounted for only a small portion compared to Domestic Investment (PMDN). This trend suggests that foreign investors are becoming more cautious about Indonesia’s business outlook.
Top Investing Countries
Singapore remains the largest contributor of FDI, followed by Hong Kong, China, and Japan. However, Indonesia’s share of total ASEAN FDI has stagnated at 14–15%, far below its economic potential, which accounts for 40% of the region’s GDP.
Read Also: Global Economic Trends Affecting Businesses in Indonesia
Why Is Foreign Investment Declining?
Foreign Investment Decline: Business Impact in Indonesia (pexels.com)
Internal and External Factors
The decline in FDI is triggered by several factors: changing regulations, legal uncertainty, and rising economic nationalism. Externally, global geopolitical tensions have worsened foreign investor sentiment toward developing countries, including Indonesia.
Industries Directly Affected
The basic metals, mining, and chemical and pharmaceutical industries are the most impacted by the drop in foreign capital. These are capital- and technology-intensive sectors that rely heavily on FDI.
Business Impacts in Indonesia
Limited Access to Capital
The decline in investment has delayed many projects. External funding, usually used for large-scale ventures, is now harder to secure.
Loss of Technology Transfer
The reduced entry of foreign companies also means fewer opportunities for local firms to access modern technologies and management practices—critical for boosting national business competitiveness.
Decreased Employment Opportunities
Job absorption rates may be disrupted. Even though 2025 shows a positive trend, reliance on foreign investment can slow down job creation.
Read Also: Efficiency Tips to Avoid Rising Tax Burdens
Strategies to Help Businesses Stay Afloat
Foreign Investment Decline: Business Impact in Indonesia
Diversify Funding Sources
Businesses should explore alternative funding sources: local banks, crowdfunding, and partnerships with domestic investors. Joint ventures are also a viable option to expand capital access without relying solely on FDI.
Focus on the Domestic Market
With a population of over 270 million, Indonesia has a vast and attractive domestic market. Businesses can thrive by focusing on local consumer needs, strengthening distribution, and adapting products.
Read Also: Adaptation Tips to Navigate Changing Business Regulations
Boost Efficiency and Innovation
Leverage digital technology to reduce costs and improve efficiency. Business process automation and data utilization can provide a competitive edge in capital-constrained conditions.
Leverage Downstream Opportunities
The government’s downstreaming policy opens business opportunities in processing raw materials into high-value products. Companies aligned with this strategy can benefit from various incentives.
Read Also: Tips for Business Expansion Amid Economic Uncertainty in 2025
Boost Business Efficiency with Virtual Offices
One solution for greater efficiency amid capital constraints is to utilize virtual office services. Amid challenges like declining foreign investment flows, virtual offices offer a more efficient, flexible, and budget-friendly workspace alternative.
A trusted provider is vOffice, which has supported over 50,000 businesses in Indonesia since 2012.
With flexible service packages, vOffice offers:
- Strategic business addresses in official office zones.
- Dedicated company phone numbers for a professional image.
- Complete legal processing, from company establishment to PKP licensing.
- Exclusive meeting rooms in major cities.
- Fast setup, ready in less than 24 hours.
Thanks to its advantages in reducing operational costs, supporting flexible work, and enhancing professional business image, vOffice is a strategic choice for businesses aiming to grow amid global investment instability. Beyond cost-saving, using a virtual office strengthens a company’s legal structure and simplifies key documentation.
vOffice is also ISO 9001 certified and in 2022 received a MURI Record as the virtual office provider with the most locations in Indonesia.
Read Also: Why Choose vOffice Virtual Office?
For more details, visit the vOffice Virtual Office page.
Check out these strategic location options from vOffice:
- Rent a Virtual Office in Jakarta
- Rent a Virtual Office in Tangerang
- Rent a Virtual Office in Bekasi
- Rent a Virtual Office in Surabaya
- Rent a Virtual Office in Bali
- Rent a Virtual Office in Medan
- Rent a Virtual Office in Bandung
What are you waiting for? Contact us now and get exclusive offers!
FAQ: Frequently Asked Questions
What are the main causes of declining foreign investment in Indonesia?
The key factors include regulatory uncertainty, protectionism, and global geopolitical challenges.
What are the direct impacts of reduced foreign investment?
Limited access to capital, reduced technology transfer, and declining job creation.
How can businesses survive without FDI?
By diversifying funding, focusing on the local market, improving operational efficiency, and using services like virtual offices.
Is using a virtual office legal in Indonesia?
Yes. With vOffice, your business will be domiciled in a legally recognized office zone and comply with all regulations.
Why choose vOffice?
vOffice offers high flexibility, complete legal services, strategic addresses, and has been trusted by over 50,000 clients since 2012.
