Indonesia is moving closer to becoming a major Asian manufacturing base as global companies accelerate supply-chain diversification away from China and Taiwan, with Bank DBS Indonesia saying the shift could redirect more factory investment into Southeast Asia’s largest economy.
Indonesia Attracts More Factory Investment
The bet matters because manufacturing relocation is no longer just a trade-policy story; it is a capital-spending story. If more multinationals choose Indonesia for production, the country could capture more jobs, industrial output, export earnings and technology transfer at a time when investors are looking for alternatives across Asia.
Sentiment IndicatorsⓘProprietary · adalytica.com · September 13, 2026
This is a snapshot — live sentiment, awareness and momentum for 130+ markets update continuously in the dashboard.Open AlphaPulse
DBS Group Research said the China+1 and Taiwan+1 strategies are opening a window for Indonesia to take a bigger role in global supply chains, especially in electric vehicles and downstream processing. Senior economist Radhika Rao said Indonesia’s advantage is not just its resource base and domestic market, but its ability to attract technology-linked investment, deepen local value chains and maintain policy and macroeconomic stability.
The timing is favorable. Foreign direct investment into Southeast Asia rose from about $225 billion in 2024 to nearly $250 billion in 2025, underscoring how quickly manufacturing capital is shifting around the region. Indonesia’s own investment realization in the first half of 2026 was already close to 50% of its 7.2% year-on-year growth target, according to the Investment Ministry, suggesting the inflow trend has not stalled.
For investors, that makes Indonesia a more credible destination in a region where competition for factory projects is intensifying. The upside is clearest for industrials, EV supply chains, logistics, energy and infrastructure developers; the risk is that weaker execution on permits, transport, power and workforce quality could push capital toward Vietnam, Thailand or India instead.
The government is trying to address that gap by speeding up licensing through OSS Version 2, which it says is backed by AI and blockchain, while also pushing regulatory reform and an end-to-end investment service model. That matters because multinationals are increasingly weighing execution speed, currency stability and regulatory certainty as much as labor costs and market size.
The message for markets is that Indonesia is not yet the default winner of the Asia manufacturing reset, but it is becoming a serious contender. If policymakers convert the current interest into durable industrial capacity by 2027, the country could gain a larger share of the region’s manufacturing rerouting just as China loses some of its pricing power in global supply chains.
| Entity | Gains | Losses |
|---|---|---|
| Indonesia | ▲More factory investment | ▼Missed if reforms lag |
| Multinationals diversifying supply chains | ▲Lower concentration risk | ▼Higher setup complexity |
| Vietnam/Thailand/other ASEAN rivals | ▲Some regional spillovers | ▼Fewer new projects |
| Industrial and logistics investors | ▲Higher demand for assets | ▼Execution and policy risk |
