Bank of America: Indonesia’s Rising Investment Appeal

JAKARTA — Jakartaweekly.com. Indonesia continues to attract attention from global investors as the country seeks to sustain economic growth, expand investment and strengthen its position within ASEAN.

With an economy valued at around US$1.4 trillion, projected growth of 5.2%–5.6% this year and a large young population, Indonesia offers a sizeable domestic market alongside opportunities in infrastructure, manufacturing, digital services, financial services and other sectors.

For Mira Arifin, Bank of America Indonesia Country Executive, the country’s investment profile has developed significantly over the past several years.

“Indonesia has evolved from a market valued primarily for its natural resources and domestic scale into a more diversified and strategically important investment destination,” Mira said.

She pointed to Indonesia’s growth resilience, expanding consumer economy and increasingly sophisticated financial ecosystem as factors supporting its appeal to long-term global investors. Recent policies supporting private-sector credit and extending foreign-exchange incentives to foreign direct investment have also contributed to the investment environment, she said.

The latest government data provides a snapshot of investment activity.

According to the Ministry of Investment and Downstreaming/BKPM, Indonesia recorded Rp511.8 trillion in investment realization during the second quarter of 2026, an increase of 7.1% year-on-year. Foreign investment contributed Rp257.7 trillion, or 50.4% of the total, while domestic investment reached Rp254.1 trillion, representing 49.6%.

During the first half of 2026, total investment realization reached Rp1,010.6 trillion, equivalent to 49.5% of the government’s full-year investment target. The realization also absorbed around 1.45 million workers.

A Shift in Fiscal Policy

Indonesia’s investment environment has also developed alongside changes in the government’s approach to fiscal policy.

Purbaya Yudhi Sadewa was appointed Minister of Finance by President Prabowo Subianto on September 8, 2025. One of the early policy measures during his tenure was the government’s decision in September 2025 to place Rp200 trillion in state funds with five partner commercial banks.

The funds were placed at Bank Rakyat Indonesia, Bank Negara Indonesia, Bank Mandiri, Bank Tabungan Negara and Bank Syariah Indonesia. The policy was intended to strengthen banking liquidity and encourage greater economic activity.

The move also reflected a broader approach in which the State Budget, or APBN, was positioned not only as an instrument for maintaining fiscal stability but also as a means of supporting economic growth.

Entering 2026, Purbaya has continued to emphasize the role of fiscal policy in generating a greater impact on economic activity.

Indonesia’s economy grew 5.39% in the fourth quarter of 2025, followed by 5.61% in the first quarter of 2026 and 5.29% in the second quarter. The second-quarter growth rate moderated from the previous quarter amid global economic conditions.

Purbaya has said Indonesia has moved beyond what he described as the “5% growth curse” and is targeting growth toward 6%.

To support that objective, the Finance Minister has said investment needs to grow by around 7%. Under the approach outlined by the government, the public sector is expected to act as a catalyst, while the private sector remains the main driver of investment. Danantara is also expected to be involved in efforts to accelerate investment.

The Ministry of Finance is continuing reforms as part of its 2027 work plan, including reforms to the tax and customs systems, accelerating productive expenditure, and maintaining control over the fiscal deficit and government debt.

Indonesia’s Scale in ASEAN

For global businesses, Indonesia’s domestic market remains one of its defining advantages.

Mira said Indonesia offers a combination of scale, growth and long-term demand. Its large population and expanding economy provide companies with opportunities to serve domestic consumers while also developing production, digital and financial platforms that can connect with wider regional markets.

Indonesia’s demographic profile is another factor in its long-term investment proposition. The country has a large young population, with the median age expected to be around 33 by 2030.

“Few markets offer that combination of scale and long-term growth potential,” Mira said.

Indonesia’s position within regional supply chains also provides opportunities for companies seeking to establish production and operational bases in Southeast Asia.

Investment Spreads Beyond Java

Recent investment data also shows the geographical distribution of investment becoming more balanced.

During the second quarter of 2026, investment outside Java reached Rp256.5 trillion, representing 50.1% of total investment, compared with Rp255.3 trillion in Java.

DKI Jakarta recorded Rp94.9 trillion in investment during the quarter, followed by West Java with Rp61.3 trillion. Other significant destinations included Maluku Utara, which recorded Rp40.2 trillion, and Central Sulawesi with Rp36.6 trillion.

The distribution is also connected to Indonesia’s downstreaming agenda. During the second quarter, investment in downstreaming activities reached Rp152.7 trillion, accounting for 29.8% of total investment.

Mineral processing represented the largest portion of downstreaming investment, alongside opportunities associated with manufacturing and supporting infrastructure.

Sectors on the Investment Radar

Looking ahead over the next five to 10 years, Mira identified several areas that could attract increasing investor attention.

These include digital infrastructure, advanced manufacturing, energy transition, consumer industries, healthcare, financial services and transportation infrastructure.

The financing requirements associated with these sectors are also expected to create opportunities, including through capital-markets solutions, sustainable finance and partnerships between the public and private sectors.

Mira said Indonesia should continue focusing on policy certainty, transparency and execution to convert its economic scale into greater productivity.

She highlighted infrastructure development, financial-market deepening, talent development and institutional capacity as areas requiring continued attention.

Maintaining macroeconomic stability is also important for investors. According to Mira, policy remains focused on inflation and currency stability while placing greater consideration on economic growth and expanding credit to the private sector.

Looking Toward 2027

The government’s fiscal policy remains part of the broader economic outlook.

The proposed 2027 state budget assumes economic growth of 6%, while the projected headline fiscal deficit remains within the statutory 3% ceiling.

For Purbaya, continued reform of fiscal management will include improving tax and customs systems, accelerating productive government spending and maintaining control over deficits and debt.

For Mira, Indonesia’s position in ASEAN will increasingly depend on its ability to sustain growth, move further up the value chain and attract international capital into productive, long-term opportunities.

“I am very optimistic. Indonesia is well positioned to become an even more influential growth engine for ASEAN and a larger participant in global trade, investment and capital markets,” she said.

The investment figures, fiscal measures and policy priorities provide the current backdrop as Indonesia enters the next phase of its economic development, with the government targeting higher growth and greater private-sector participation in investment.