Indonesia Remains a Magnet for Foreign Investment
Indonesia is considered strategically positioned to attract global foreign investment as investor interest in the Asian region grows, despite worldwide economic and geopolitical uncertainties. This is reflected in the “Kearney FDI Confidence Index® 2026” report, which, since its launch in 1998, has shown a close correlation with major destinations for global Foreign Direct Investment (FDI) inflows in subsequent years.
The index’s respondents are C-level executives from companies with annual revenues of at least US$500 million, based in 30 markets and representing various industrial sectors.
This year’s report captures investor sentiment amid global uncertainties influenced by geopolitical volatility, expanding industrial policies, and intensifying technological competition. The Asia-Pacific region has the highest representation in the index, with ten countries in the list. The United States ranks first, followed by Canada, Japan, and China, while Singapore is in eighth place globally. FDI inflows to the ASEAN region reached a record US$225 billion in 2024.
Erik R. Peterson, Partner and Managing Director of Kearney’s Global Business Policy Council, stated that global capital flows continue, but companies are now more selective in choosing investment destinations. Key considerations include technological capabilities, geopolitical risks, and the influence of industrial policies.
In the 2026 emerging markets ranking, Thailand rose from 10th to 6th place, while Malaysia improved from 11th to 7th. Indonesia is in 13th place, down one spot from the previous year.
The appeal of Southeast Asian countries to investors is driven by ease of doing business, workforce quality, and economic performance. Thailand is known for its skilled workforce in manufacturing sectors such as automotive and food processing, while Malaysia excels in high-value-added industries like semiconductors and technology. Indonesia, on the other hand, has advantages in its large domestic demand and wealth of natural resources.
Amid rising global geopolitical tensions, including conflicts in the Middle East, 87% of survey respondents remain optimistic, or even more optimistic, about Indonesia as an investment destination.
Additionally, as the world’s largest nickel producer, Indonesia continues to leverage its natural resource potential. In 2025, the basic metals sector recorded the highest FDI realisation at US$14.6 billion, followed by mining at US$4.7 billion. Other factors considered by investors include economic performance (27%), ease of doing business (25%), and technological innovation (21%). Meanwhile, aspects such as transparent governance and low corruption levels (19%) are seen as having a relatively smaller influence compared to other factors.
Indonesia’s investment performance also shows a positive trend. In the first quarter of 2026, investment realisation reached Rp498.79 trillion, or 100.36% of the government target, growing 7.22% year-on-year. The composition of investments between FDI and domestic investment (PMDN) is relatively balanced, each around 50%. The largest contributors come from Singapore, Hong Kong, China, the US, and Japan.
Shirley Santoso, President Director of Kearney Indonesia, stated that Indonesia has implemented a coordinated strategy combining industrial policies, regulatory reforms, targeted incentives, and investment targets to deepen industrial downstreaming and increase value added.
“These efforts also include ongoing simplification of regulations and investment permits to reduce bureaucracy, as well as channelling capital to priority sectors such as electric vehicles (EV), renewable energy, infrastructure, and digital through various incentives to actively encourage both foreign and domestic investment,” she said.
Geopolitical Risks and Industrial Policies
Nevertheless, global business leaders continue to monitor various risks that could affect the investment climate. Geopolitical tensions are the most likely risk to occur in the next year (36%), followed by rising commodity prices and political instability in advanced economies (30%).
Industrial policies are also playing an increasing role in shaping global investment directions. 84% of investors consider industrial policies important or very important in investment decision-making, while 57% say these policies positively impact business performance. However, nearly 90% of investors also report moderate business risks due to competing and overlapping national industrial policies.
In Asia, this dynamic is particularly prominent as governments actively implement industrial policies to compete in strategic sectors such as semiconductors, EVs, and green energy, while facing increasing geopolitical fragmentation. Countries like China, Japan, and Singapore continue to bolster investor confidence through policy stability and strong institutional frameworks, while emerging Southeast Asian economies like Vietnam, Thailand, and Malaysia have successfully attracted supply chain diversification flows in “China+1” strategies.
“Indonesia is at a critical point in this landscape. To maintain and enhance its attractiveness, Indonesia needs to emulate neighbouring countries by strengthening regulatory certainty, accelerating energy transition efforts, and deepening regional cooperation, while continuing structural reforms to transform the country’s potential into consistent investor confidence; including improving transparent governance, technology and innovation, and infrastructure development.”