Multinational Companies' Strategies Targeting Indonesia 2027
The wave of global supply chain relocation is opening new opportunities for Indonesia to become a production and growth base for multinational companies. However, heading towards 2027, these opportunities arrive alongside equally significant challenges. Companies must choose between expanding investment, deepening existing businesses, or re-evaluating their exposure in Indonesia.
Indonesia is entering a critical phase in global investment competition. Changes in supply chains, an increasingly multipolar global economy, financial market fluctuations, and geopolitical uncertainty are driving multinational companies to restructure their business strategies towards 2027.
Southeast Asia is becoming an increasingly attractive region for investors. Foreign Direct Investment (FDI) inflows are projected to increase from approximately US$225 billion in 2024 to nearly US$250 billion in 2025. The primary drivers include global supply chain relocation, manufacturing expansion, and the growth of the ASEAN market.
Indonesia possesses strong capital in the form of a large domestic market, natural resources, a downstreaming agenda, and opportunities in the manufacturing and technology sectors. However, market potential alone is insufficient. Companies must also consider US interest rates, the Rupiah exchange rate, regulations, production costs, and geopolitical risks.
These issues were discussed at the DBS Bank Indonesia forum, ‘The Indonesia Equation: Risks, Returns and the Road to 2027’. The forum brought together the government, analysts from DBS Group Research, and multinational corporations to discuss investment opportunities and risks in Indonesia.
Radhika Rao, Senior Economist at DBS Group Research, noted that the increasingly multipolar global economy provides opportunities for Indonesia to strengthen its position as a new growth centre. According to Rao, Indonesia’s future advantage lies not only in its natural resources and market size but also in its ability to attract technology-based investment, strengthen domestic value chains, develop the digital economy, and maintain policy and macroeconomic stability.
Expand, Deepen, or Reassess
Multinational companies now face three primary strategic choices: expand, deepen, and reassess. ‘Expand’ involves increasing production capacity, building new facilities, or increasing investment in potential sectors. ‘Deepen’ is pursued by companies already operating in the country by strengthening local suppliers, increasing manufacturing, and developing value-added products. Meanwhile, ‘reassess’ involves re-evaluating business exposure due to changing economic and geopolitical risks.
Changes in global supply chains through ‘China+1’ and ‘Taiwan+1’ strategies also present opportunities for Indonesia. The manufacturing, electric vehicle, electronics, semiconductor, energy, and infrastructure sectors are poised to benefit. Downstreaming can increase value-added components while simultaneously creating supporting industries.
However, Indonesia faces intense competition from other ASEAN nations. Infrastructure, energy, logistics, labour quality, regulatory certainty, and ease of doing business are critical factors in determining investment locations.
Riyatno, Deputy for Investment Climate and Investment Development at the Ministry of Investment and Downstreaming/BKPM, stated that Indonesia’s investment realisation continues to show a positive trend. The government continues to promote the investment climate through end-to-end services, regulatory reforms, and the simplification of licensing.
Managing Financial Risk
Exchange rate and interest rate risks are also vital considerations. Changes in US monetary policy direction can affect capital flows, the Rupiah, and funding costs. Consequently, companies require integrated financial risk management, including working capital, capital expenditure, liquidity, trade, and foreign exchange.
Natalia Ratulangi, Head of Large & Multinational Corporates Institutional Banking Group at DBS Bank Indonesia, noted that the needs of multinational companies are becoming increasingly complex. They require not only financing but also solutions to navigate fluctuations in interest rates, exchange rates, regulations, and local economic sentiment.
Heading towards 2027, Indonesia’s opportunities remain vast, but multinational companies are becoming increasingly selective. The strategy to expand, deepen, or reassess will depend on business conditions and Indonesia’s ability to maintain economic stability, regulatory certainty, and a robust investment ecosystem.