Indonesia Falling Behind: Time to Act Before It’s Too Late

Southeast Asia Is Heating Up — And Not Just the Weather

Southeast Asia is heating up — not due to climate, but due to the fierce competition for foreign capital. Unfortunately, Indonesia is starting to fall behind. While neighboring countries like Vietnam and the Philippines continue to attract foreign direct investment (FDI), Indonesia is still grappling with internal issues: illegal levies, regulatory uncertainty, and an unfriendly labor climate.

Global giants are now choosing Vietnam as a base for production and business development. From Lego and Apple to Nvidia, these companies are investing billions in advanced factories, AI ecosystems, and innovation centers.
Why is Vietnam more attractive than Indonesia? Let’s dive deeper.

Why Investors Prefer Vietnam

1. Lower Costs
Vietnam offers much cheaper labor compared to Indonesia. In an era where operational efficiency is king, this is a key factor. On top of that, logistics and distribution costs in Vietnam are lower due to better infrastructure.

2. Superior Infrastructure
With efficient ports, highways directly connected to industrial estates, and fast-paced digital development, Vietnam treats infrastructure as an investment — not a burden.

3. Business-Friendly Environment
Vietnam is almost free from illegal fees, provides regulatory certainty, and practices cleaner governance. Even unofficial demands like "holiday bonuses for community groups" common in Indonesia are rarely heard in Vietnam.

4. Long-Term Stability and Vision
Vietnam maintains political and social stability and actively supports long-term investment ecosystems — making it a strategic global partner, not just a short-term destination.

Indonesia’s Challenges and Threats

Lagging in Talent and Investment
In the IMD World Talent Ranking 2024, Indonesia ranks 46 out of 67 countries, far behind Singapore and Malaysia. This highlights serious problems in workforce quality and investor appeal.
High Production and Logistics Costs
Logistics costs in Indonesia account for 23% of GDP, well above the global standard. Uneven infrastructure and slow bureaucracy add to the burden.
Regulatory Uncertainty
Sudden policy shifts, overlapping rules, and complex licensing processes make long-term investment risky.
Unstable Political and Social Climate
Labor unrest, social tensions, and populist pressures frequently disrupt investor confidence.

Undeniable Data: Vietnam Is Soaring

Although Indonesia received more FDI nominally in 2023 (USD 22.1 billion vs Vietnam’s USD 18.5 billion), Vietnam’s FDI contribution to GDP was 4.59%, compared to Indonesia’s only 1.94% — meaning Vietnam converts investment into real, sustainable growth.

Vietnam’s economy is projected to grow 5.2% in 2025, while Indonesia is stagnant at 4.7%, with unemployment threatening to rise from 4.9% to 5.1%.

Bonded Logistics Centers (PLB): A Strategic Solution for Investment and Industry

In response to these threats, Indonesia must not stay idle. One powerful and immediate tool is the Bonded Logistics Center (PLB) — a customs and logistics facility offering significant incentives and efficiencies.

🔹 Direct Benefits for Businesses

Import Cost Efficiency: Goods can be stored in PLB without paying import duties or VAT upfront.
Distribution Flexibility: Companies can release goods according to market demand.
Reduced Port Storage Costs: Avoid costly demurrage and storage fees.
Export Support: Re-export directly from PLB with speed and ease.

🔹 Long-Term Impact for Industry

Boosting National Competitiveness:
PLB helps manufacturers and distributors manage supply more efficiently and cut production costs to compete with regional players like Vietnam and Thailand.
Reducing Dependency on Major Ports:
With decentralized logistics, businesses avoid bottlenecks at overburdened big ports.
Promoting Digitization and Transparency:
Digital PLB systems (like those used by Transcon Indonesia) ensure accountability, reduce illegal fees, and provide full visibility of stock and flows.
Increasing Investor Confidence:
PLBs demonstrate Indonesia’s readiness to provide modern, efficient, and transparent logistics infrastructure.

Conclusion: Indonesia Must Move Fast

Reforms cannot be delayed any longer. If Indonesia wants to remain a key regional player, it must:

Enforce anti-corruption and bureaucracy reforms.
Accelerate the development of efficient, nationwide logistics infrastructure.
Fully leverage PLB as an investment incentive.
Improve workforce quality and strengthen export-oriented industries.

Indonesia is rich in potential — with a massive domestic market, abundant resources, and a strategic location. But without bold improvements, this potential may go untapped.

Let’s make PLB not just a logistics tool, but a symbol of national industrial resurgence.

📞 Want to know how PLB can help reduce costs and boost your logistics efficiency?
📅 Schedule a free consultation with Transcon Indonesia today.