The Advantages of Expanding into Indonesia, Southeast Asia’s Largest Economy
- Publish
- 2022/06/22
- Update
- 2025/04/11
- You can read this article in 4minutes
- Nominal GDP Ranking Trends (2000–2020)
- Comparison of Nominal GDP in Southeast Asia
- Population Composition of Southeast Asian Countries (2020)
- E-commerce Market in Southeast Asia
- Japan as a Key Export and Import Partner for Indonesia
- Indonesia: The Second-Largest Country for Japanese Language Learners
- Conclusion
Indonesia may not be a familiar country to many Japanese people, but it is the largest economy in Southeast Asia, with the region’s highest population (ranked 4th in the world) and vast land area. Comprising over 14,000 islands along the equator, Indonesia is a multi-ethnic nation where approximately 90% of the population adheres to Islam, making it the country with the world’s largest Muslim population. Bali, a popular tourist destination for many Japanese people, is part of Indonesia.
There are numerous benefits for Japanese companies expanding into Indonesia, and this article will highlight those advantages.
● Domestic corporation ⮕ Foreign companies cannot be shareholders
Are you curious about how other companies are expanding into Indonesia?
Nominal GDP Ranking Trends (2000–2020)
Many Japanese people may still perceive Indonesia as a developing country. However, as of 2020, Indonesia ranked as the world’s 16th largest economy, with projections suggesting it could surpass Japan by 2050 (*1).
Indonesia is now close to surpassing countries such as Mexico, Spain, Australia, and Brazil, which are more familiar to the Japanese public. This indicates that Indonesia’s economic presence is already significant.
Visitors to Jakarta, Indonesia’s capital, are often surprised by the city’s level of development. High-rise buildings are constantly under construction, and roads are filled with cars and motorcycles. Luxury brand stores are common in shopping malls, where local consumers enjoy shopping, often spending over 10 USD per meal at restaurants.
To fully grasp Indonesia’s economic growth, we highly recommend visiting the country and experiencing it firsthand.
Precautions when conducting an on-site inspection in Indonesia
Some visitors consider, "My primary purpose is to conduct maintenance work at the factory, but the visa application process appears cumbersome. I will simply enter on a Visa on Arrival (VOA) and carry out the work discreetly."
However, there have been numerous cases where entering without the appropriate visa for the intended activities has resulted in significant legal and operational issues. It is therefore strongly advised to obtain the correct visa prior to travel.
Here are the types of visas and their purposes.
Comparison of Nominal GDP in Southeast Asia
Indonesia, as the 16th largest economy globally in 2020, is the largest market in Southeast Asia, with a GDP nearly double that of Thailand, the region’s second-largest economy. While Singapore is an advanced economy within Southeast Asia, Indonesia surpasses it in terms of economic size.
When considering expansion into Asia through cross-border e-commerce (EC), businesses often focus on China, South Korea, and Taiwan. However, these markets are highly competitive, requiring companies to offer significantly superior products or services to succeed.
By shifting attention to Southeast Asia, particularly Indonesia, businesses can explore new opportunities with less competition and potentially greater rewards.
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Population Composition of Southeast Asian Countries (2020)
As previously mentioned, Indonesia is the world’s fourth-most populous country. Beyond just its population size, the country’s demographics are particularly attractive, with a high proportion of young people. Indonesia is expected to enjoy a demographic dividend until 2030.
Approximately 50% of Indonesia’s population is under 30 years old. A visit to Jakarta reveals a youthful population, in stark contrast to Japan, where aging is a significant issue. In Japan, the elderly population (65+) reached 36.17 million, making up 28.7% of the total population.
Thailand is another attractive country for Japanese business expansion, but it is already entering an aging society. By contrast, Indonesia’s young and growing workforce presents a long-term economic advantage.
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Domestic corporation
Recruitment Agency
We set up a domestic capital company in Indonesia using the name of a former employee from Japan’s Specified Skilled Worker program. At first, communication was smooth, but once the business became profitable, they claimed ownership, seized bank accounts and contracts, and disrupted client relations. A contract was in place but ineffective, leaving us to regret relying solely on trust.
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Foreign-owned corporation
Machinery Manufacturer
We hired a local consulting firm to set up our foreign-owned company in Indonesia, but responses were slow and explanations kept changing. Repeated requests for extra documents and shifting requirements disrupted our schedule, and the process took nearly a year, delaying our business launch. We learned the importance of clearly defining project management and responsibilities in the contract.
E-commerce Market in Southeast Asia
Indonesia leads the region in e-commerce market expansion, with Singapore and Thailand following closely. The e-commerce market is expected to grow at an annual rate of 15–20%.
Major e-commerce platforms in Indonesia include Tokopedia, Shopee, and Lazada. Due to the impact of the COVID-19 pandemic, e-commerce has become an even more integral part of daily life, with same-day delivery becoming common in Jakarta. This trend indicates that Indonesia’s e-commerce sector will continue expanding.
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Japan as a Key Export and Import Partner for Indonesia
Japan is one of Indonesia’s most important trading partners, ranking third in exports and second in imports. China and the United States are Indonesia’s top two export destinations, while Japan follows closely behind.
Japanese brands dominate Indonesia’s automotive and electronics markets. Approximately 90% of vehicles and motorcycles in Jakarta are Japanese-made, and Japanese home appliances such as refrigerators and air conditioners are widely available in shopping malls.
We create a WhatsApp group, allowing you to contact us anytime for free if any issues arise during your business trip. Unexpected troubles can occur during on-site visits, but with our team-based support, we can resolve problems quickly and efficiently.
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●Creative agency
I traveled without arranging an interpreter, but when I faced difficulties dealing with the local police, they came to my aid.
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●Recruitment agency
When I suddenly needed a conference room, I truly appreciated that they arranged one on my behalf.
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●Cosmetics manufacturer
After finishing drinks with colleagues late at night and being unable to find a taxi, they arranged a car for us, which was a great help.
Indonesia: The Second-Largest Country for Japanese Language Learners
Indonesia has about 700,000 Japanese language learners, making it the second-largest Japanese-learning population worldwide.
Indonesia is often described as a pro-Japanese country, with many people displaying positive attitudes toward Japan. Popular anime such as One Piece, Naruto, Demon Slayer, and Jujutsu Kaisen further strengthen cultural ties.
This affinity for Japan presents a significant advantage for Japanese businesses operating in Indonesia.
Conclusion
As outlined above, Indonesia is an extremely promising destination for Japanese companies seeking overseas expansion. Our company specializes in supporting cross-border e-commerce and digital marketing specifically for the Indonesian market.
Unlike other firms that take a broad approach to Southeast Asia, we focus all our resources on Indonesia, ensuring deep expertise and effectiveness.
If you are considering expanding into Indonesia, please feel free to contact us.
We create a WhatsApp group, allowing you to contact us anytime for free if any issues arise during your business trip. Unexpected troubles can occur during on-site visits, but with our team-based support, we can resolve problems quickly and efficiently.
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What are the advantages of Indonesia as an overseas expansion destination for Japanese companies?
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Indonesia offers numerous advantages and opportunities for Japanese companies. With the world’s fourth-largest population—of which 50% is under the age of 30—the country boasts a young and dynamic consumer base. Additionally, Indonesia has the world’s 16th-largest economy and continues to experience steady economic growth, making it a highly promising market for future expansion.
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How large is Indonesia’s e-commerce market?
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Indonesia accounts for approximately 40% of the total e-commerce market in Southeast Asia and is experiencing rapid growth. This expansion is driven by increasing internet penetration, a growing middle class, and the widespread adoption of digital payment solutions.
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How familiar are Indonesians with Japanese products and services?
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Japan is one of the most familiar and influential countries for Indonesians. As a major trading partner, Indonesia imports a wide range of Japanese products, from consumer goods to industrial machinery. Moreover, Japanese pop culture, language, and lifestyle continue to attract strong interest among Indonesians, further strengthening the cultural and economic ties between the two countries.
