Investing in Indonesia: When Caution Builds Confidence
Why Caution Builds Confidence in Indonesia While Investors Face Complex Local Realities
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November 07, 2025
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Recent reports of fraud among Indonesian businesses have sent shockwaves through the investment community. Prominent cases involving start-ups have drawn media scrutiny and exposed years of oversight failures and limited pre- and post-investment due diligence, particularly critical in higher-risk markets.1 These incidents have affected investor sentiment but should not define Indonesia’s broader investment environment. Rather, they underscore the importance of thorough, ongoing monitoring and a clear understanding of the operating conditions in Indonesia.
Indonesia’s political and investment landscape remains complex and can be challenging for foreign investors, but this does not mean a lack of commercial opportunities. Indonesia is projected to become the world’s seventh largest economy by 2030 and to be among the world’s top five economies by 2050.2 With the world’s fourth largest population, Indonesia offers a substantial and growing market for global businesses.3
Despite a temporary dip in foreign direct investment (“FDI”) in the third quarter of 2025, longer-term data suggests that Indonesia remains a top investment destination. FDI inflows rose from $21 billion in 2023 to $24 billion in 2024, moving Indonesia to 14th place among global FDI recipients, up from 21st in the previous year.4
The ambition of the administration of Indonesia’s current president, Prabowo Subianto, to secure Indonesia’s membership in the Organisation for Economic Co-operation and Development (“OECD”) by 2027 could help enhance business transparency and governance.5 Meeting the OECD’s requirements would signal the government’s commitment to aligning with international standards and improving the climate for foreign investors.6 Studies suggest that achieving membership in 2027 could lift FDI inflows to $87.7 billion in 2028 — equivalent to 0.03% of Indonesia’s projected gross domestic product for that year.7
Endemic corruption and structural inefficiencies remain major hurdles in Indonesia and overcoming them will require a significant shift. Yet even partial progress toward OECD standards is likely to strengthen regulatory frameworks and boost investor confidence. For organisations pursuing long-term opportunities, a proactive approach to risk mitigation is essential, and they should:
- Conduct independent due diligence rather than relying on other investors’ assessments
- Understand third parties, their backgrounds and potential red flags
- Prepare internally for risks and the complexities of the business climate
- Continuously monitor portfolio companies and the broader operating environment
Experience shows that financial statements from investee companies cannot always be taken at face value. Engaging directly with local sources – an approach often referred to as human intelligence – provides a valuable way to ensure that due diligence efforts capture the full picture. Even as generative artificial intelligence reshapes the research landscape, insights from those familiar with a target company, its leadership and the operating environment remain indispensable.
Indonesia’s opportunities should not be overlooked, but these opportunities are for investors who combine robust human intelligence-led diligence with a detailed understanding of the local environment. Confidence in the integrity of investments, business partners and regulatory conditions begins with comprehensive due diligence and a proactive risk strategy. Ongoing monitoring of political and economic developments enables firms to navigate uncertainty effectively, allowing investors to turn caution into confidence in Indonesia.
Footnotes:
1: Maryoto, Andreas, “Why Are There So Many Cases of ‘Fraud’ in Technology Companies?” Kompas (February 6, 2025).
2: “Indonesia’s economic plans – March 2025,” New Zealand Foreign Affairs & Trade (March 2025); “Indonesia: a rising global economy that’s open for business,” HSBC (May 18, 2023); and “The Path to 2075 — Slower Global Growth, But Convergence Remains Intact,” Goldman Sachs (Dec. 6, 2022).
3: “The World Bank in Indonesia,” World Bank Group (Oct. 20, 2023.
4: “2025 World Investment Report”, United Nations Conference on Trade and Development (2025), 9.
5: “Indonesia Seeks to Become OECD Member State by 2027,” Cabinet Secretariat of the Republic of Indonesia (May 16, 2024).
6: Feingold, Spencer, et al., “Why Indonesia and Thailand’s bid for OECD membership could be a game changer,” World Economic Forum (Aug. 16, 2024).
7: Shandy, Biyan, et al., “Indonesia’s Accession to OECD: Understanding the Economic Implications,” Center for Indonesian Policy Studies (July 31, 2025), 75.
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November 07, 2025
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