Why Indonesia

As Southeast Asia’s most populous nation, Indonesia’s people are the driving force behind its development. With over 70 per cent of its population of working age, it is benefiting from a demographic dividend that will last until 2040. Its large and increasingly prosperous labour force is driving private consumption, innovation and demand for new goods and services.

New drivers of economic growth are emerging to complement Indonesia’s traditional strengths in resources. The digital economy is growing rapidly, accounting for just under half of Southeast Asia’s total e-commerce revenue. Electric vehicle manufacturing is gathering pace, with investments from leading international carmakers complementing government efforts to expand the entire automotive value chain. As the world’s largest producer of nickel, Indonesia is on track to become the largest lithium-ion battery manufacturing hub in Southeast Asia.

Indonesia’s global profile has increased alongside its strong economic development. Jakarta continues to play a leading role in regional and international fora, hosting the G20 in 2022 and chairing the Association of Southeast Asian Nations (ASEAN) in 2023. Situated at the intersection of the Pacific and Indian Oceans and one of the world’s most important trade routes, it will play an outsized role in determining prosperity and security. In 2024, Indonesia officially applied to join the Organisation for Economic Cooperation and Development (OECD) and the Comprehensive and Progressive Trans Pacific Partnership (CPTPP).

The political and economic relationship with Australia has also matured. Since its entry-into-force in 2020, the Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA) has become a cornerstone of the bilateral economic relationship. It has removed barriers to two-way trade and doubled its value, increased worker mobility and fostered closer collaboration in key sectors, from health and education to agriculture and energy. Approaching its fifth anniversary, both nations have reaffirmed their commitment to fully implement the Agreement and have commenced development of the next iteration of IA-CEPA to ensure it remains fit for purpose.

Indonesia has been identified as a key market for two-way trade and investment in the Australian Government’s Southeast Asia Economic Strategy to 2040. More information on the bilateral relationship is available in Section 5.1 and from the Department of Foreign Affairs and Trade’s Indonesia Country Brief.

As economic and demographic trends coalesce around a concerted government effort to promote emerging industries and reduce regulatory burdens, Australian businesses will find new opportunities to trade and invest with one of the region’s most dynamic economies.

Comparing key indicators: Indonesia and Australia

Indonesia is the fourth most populous country in the world and the largest economy in Southeast Asia. Historically dependent on the agricultural sector, industrialisation and global economic integration has seen a steady increase in prosperity and productivity. While the poverty rate has plummeted from 70 per cent in 1998 to 5.4 per cent in 2024, productivity has risen in key sectors like financial services, resources and construction. Through structural reform, technological investment and economic competitiveness, it aims to build on these achievements and reach high-income status by 2045.

After the major setback of the Asian economic crisis of the late 1990s, Indonesia’s economy accelerated with annual GDP growth averaging 5 per cent in the two decades to 2023 (Figure 1). A range of economic reforms have been instituted by the Indonesian Government, improving the business environment and attracting foreign investment to finance infrastructure and other national development priorities.

Indonesia’s economic outlook over the short to medium-term will be heavily influenced by the growth of the consumer class and rising household consumption. However, commodities will continue to play an important role considering Indonesia’s significant reserves of strategic resources like nickel and bauxite. Long-term economic and productivity growth will depend on improving the business environment and investing in human development, particularly education and healthcare.

Figure 1: Real GDP Growth – Indonesia and world average (2016 – 2026f), %

Indonesia’s growth trajectory presents opportunities for Australian trade and investment, particularly in sectors that align with Indonesia’s economic development priorities and its growing consumer class. This section provides a short overview of prospective sectors.

Food and agribusiness

Historical growth in discretionary household income and evolving consumer preferences are presenting opportunities for value-added food and beverage products in Indonesia, particularly premium and organic foods. While disposable income remains relatively low, and consumer spending has slowed in response to shifting economic uncertainty, a large proportion of monthly household expenditure is spent on packaged and fresh food. Demand is particularly high for staples such as meat, vegetables, fruits, fish and seafood. As supply chain connectivity, cold storage and distribution options improve, new opportunities will emerge for Australian exporters. Austrade has identified opportunities in dairy, grains, horticultural products, meat and livestock, packaged foods, seafood and wine and beverages.

Health and medical

As digitisation gathers pace, digital health solutions will become more common in Indonesia. Even before the COVID-19 pandemic, digital health revenue was averaging 60 per cent growth per year. Universal access to healthcare is a key government priority – an ambitious task across an archipelago of 17,000 islands. The Ministry of Health’s Digital Transformation Office is helping resolve issues of access, cost, quality and customer experience.

Public-private partnerships are encouraged, including in community prevention and promotion campaigns, service provider quality assurance and electronic referral systems. Australian healthcare companies can leverage their strong reputation to enhance their value proposition in Indonesia. Austrade has identified digital health and complementary medicine as opportunities in the sector.

Green economy

To achieve its 2030 goal of an extra 35 GW in power generation capacity, the Indonesian Government is exploring ways to increase supply of renewable energy. The government aims to grow renewables to 23 per cent of the energy mix by 2030, up from 13 per cent in 2023. This is creating trade and investment opportunities in rooftop solar PV, biofuel, waste-to-energy and electric vehicles. Australian businesses are well placed to leverage commercial opportunities in support of Indonesia’s clean energy transition, including through project engineering, design, construction and advisory services and technology. Austrade has identified renewable energy solutions as an opportunity for Australian businesses.

Infrastructure, transportation and cities

The Indonesian Government has identified infrastructure development as a key priority and actively promotes public-private partnerships (PPP) to develop road, rail, water and sanitation, port and airport infrastructure. The National Strategic Projects (PSNs) were established in 2016 and originally included 200 initiatives and 12 programs worth around AUD 529 billion. The new PSN list, released in March 2025, includes 77 projects. Although the new Indonesian government has slowed down the timeframes for establishing the new capital, Nusantara, trade and investment opportunities are expected to persist in construction and smart city development. And with modern warehouses accounting for just eight per cent of Indonesia’s total warehouse market, investment in logistics infrastructure is a priority that will have cross-sectoral benefits for Australian exporters.

Austrade has identified opportunities for Australian business in road, rail and ports, airport solutions and, in line with the Indonesian Government’s smart cities program, sustainable building solutions.

Technology

Information and communication technology (ICT) is central to Indonesia’s digital agenda and wider economic development goals. Expansion in the sector has positioned Indonesia as one of the world’s biggest mobile phone markets, with 356 million mobile phone subscriptions in 2025 . Indonesia’s ICT market is currently in a period of rapid expansion, with the Indonesian Government’s rollout of 4G and 5G networks, investment in ICT and telecom infrastructure and the rise in mobile data usage driving growth. Continued expansion of Indonesia’s ICT sector will present opportunities for innovative Australian tech firms.

Mining equipment, technology and services (METS)

Indonesia is estimated to account for over one quarter of the world’s mineral supply. To meet growing global demand for critical minerals like copper, nickel, bauxite and tin, Indonesia will need to modernise its mining sector. This will require a wide range of equipment, technologies and services to boost productivity, improve safety and facilitate processing. As the transition to net zero progresses, demand for sustainable mining services and technologies that increase efficiency and reduce carbon emissions will grow. Austrade has identified mining equipment, technology and services (METS) as a key trade and investment opportunity.

Education

The rapid expansion of Indonesia’s economy is creating additional demand for high-quality education – a demand Indonesian tertiary institutions are currently struggling to meet. The shortage of industry-focused curricula and the positive perception of international education represents a valuable opportunity for Australian providers, both in-market and in Australia. As Australian education providers continue to climb in international rankings, demand among the 80 million Indonesians under the age of 18 will grow. Austrade has identified opportunities in higher education and vocational education and training.

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