Why Indonesia is the Next Big Thing for Canadian Business

Why Indonesia is the Next Big Market for Canadian Business

  • InCorp Editorial Team
  • 7 February 2025
  • 7 minutes reading time

Canada and Indonesia’s economic partnership has developed over decades, with trade and investment crucial to their bilateral ties. As a result, Canada’s investment in Indonesia has increased significantly. This article examines the opportunities for Canadian business in Indonesia. It highlights important sectors where businesses can grow and offers tips for overcoming investment challenges. It also discusses how both countries can work together economically. 

Canada-Indonesia Trade Relations 

The enhancement of trade relations between Canada and Indonesia has created new business opportunities in both countries. The recent Canada-Indonesia Comprehensive Economic Partnership Agreement (CEPA) aims to eliminate trade barriers, making Canada’s investment in Indonesia more accessible and rewarding.  

Here are some key developments in Canada-Indonesia trade relations: 

  • Growth in Bilateral Trade: Canada-Indonesia trade has expanded over the past decade. Canadian businesses export agricultural products, industrial machinery, and mining resources to Indonesia while importing palm oil, rubber, and textiles. 
  • Foreign Direct Investment in Canada and Indonesia: Indonesia has shown interest in Canada’s investment market, particularly in energy and technology. At the same time, Canadian investors focus on manufacturing, mining, and infrastructure in Indonesia. 
  • Strategic Business Partnerships Between Canada and Indonesia: The rise in joint ventures between companies in both nations has strengthened bilateral ties and significantly enhanced Canada’s investment prospects in Indonesia.
  • The Impact of Canada-Indonesia CEPA: This trade agreement makes it easier for Canadian businesses to access markets and lowers tariffs. It also creates a more stable and predictable investment environment, giving Canadian investors more security and confidence in their investment choices. 

Why Canadian Investors Should Consider Indonesia 

In recent years, Canada’s investment in Indonesia has increased significantly, reflecting the growing interest of Canadian businesses in one of Southeast Asia’s largest economies. The potential return on investment in Indonesia is high, making it an attractive and lucrative destination for Canadian businesses. 

Partnerships and Organizations 

On November 15, 2024, Prime Minister Justin Trudeau and Indonesian President Prabowo Subianto announced the completion of negotiations for the Canada-Indonesia Comprehensive Economic Partnership Agreement (CEPA), aiming for immediate implementation to strengthen Canada’s presence in Indonesia. 

  • Canada prioritizes trade with fast-growing economies like Indonesia, ensuring easier access for Canadian businesses, entrepreneurs, and farmers to this market. 
  • In 2023, Canada-Indonesia trade totaled $5.1 billion, with Canadian exports valued at $2.3 billion and imports at $2.8 billion. 
  • Indonesia is Canada’s largest export market in Southeast Asia, particularly for agricultural products, manufactured goods, and natural resources. 
  • In 2023, Canadian direct investment in Indonesia reached $6.7 billion, making Indonesia the second-largest destination for Canadian direct investment in the region. 
  • CEPA aims to eliminate or lessen both tariff and non-tariff barriers, improve access to Southeast Asian supply chains, and create a more transparent and predictable investment environment. 

Canada-Indonesia Trade Landscape 

The trade relationship between Canada and Indonesia is strong, with each country exporting key commodities that support their industries. In 2024, Canada supplied raw materials and agricultural products, while Indonesia contributed consumer goods to Canada’s manufacturing sector. 

Why Indonesia is the Next Big Thing for Canadian Business

Key Sectors for Canadian Investment in Indonesia 

The Canada-Indonesia CEPA has unlocked new avenues for Canada’s investment in Indonesia, particularly in sectors where Canadian expertise and technology can contribute to Indonesia’s economic growth.  

Renewable Energy 

Indonesia is shifting towards cleaner energy sources, creating vast opportunities for Canada’s solar, wind, and hydroelectric power investment. Canadian businesses specializing in renewable energy technologies can support Indonesia’s commitment to reducing carbon emissions and increasing sustainable energy adoption. 

Infrastructure Development 

With ambitious infrastructure goals, Indonesia seeks expertise in transportation, urban planning, and large-scale project management. Canadian businesses with strong backgrounds in engineering, construction, and smart city solutions can play a critical role in modernizing Indonesia’s urban centers, roads, and transit systems. 

Agriculture and Food Processing 

Indonesia’s demand for Canadian agricultural products like wheat and pulses continues to grow. The Canada-Indonesia CEPA enhances market access, making Canada’s investment in food processing and cold-chain logistics a highly lucrative opportunity. Canadian businesses specializing in food technology, packaging, and supply chain management can capitalize on this demand. 

Technology and Innovation 

With Indonesia rapidly digitizing its economy, Canadian investors can tap into sectors like fintech, artificial intelligence (AI), and digital infrastructure. Canadian expertise in cybersecurity, blockchain, and cloud computing makes Canada’s investment in Indonesia’s growing technology sector highly promising. 

Education and Training 

Canada’s world-class education system is recognized globally, and Indonesian institutions want to collaborate with Canadian universities and vocational training providers. The CEPA enables Canada to invest in higher education partnerships, student exchange programs, and specialized training programs tailored to Indonesia’s workforce development. 

Mining and Natural Resources 

Indonesia is rich in natural resources, and Canadian businesses have a strong track record in sustainable mining and resource management. With CEPA streamlining trade regulations, Canada’s investment in mining technology, exploration, and responsible resource extraction will be instrumental in Indonesia’s push for sustainability. 

Healthcare and Pharmaceuticals 

As Indonesia aims to improve healthcare accessibility, Canadian companies can introduce innovative medical solutions, pharmaceutical advancements, and telemedicine technologies. The CEPA facilitates market entry for Canada’s biotechnology, medical equipment, and hospital infrastructure investment. 

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Challenges and How to Overcome Them 

While Canada’s investment in Indonesia presents exciting opportunities, Canadian businesses must navigate several challenges to succeed in this dynamic market.  

Skilled Labor Shortages 

Indonesia offers low labor costs, with wages nearly 50% lower than Canada’s, making it an attractive hub for production and operations. However, the challenge lies in finding highly skilled workers. Many industries, especially technology and manufacturing, struggle with a shortage of experienced professionals. 

Cultural and Linguistic Barriers 

Indonesia’s business culture is deeply rooted in relationships, hierarchy, and etiquette. While English is widely used, fluency in Bahasa Indonesia can significantly improve business negotiations and stakeholder engagement. 

Indonesia has favorable investment policies, including tax breaks and grants, but navigating import-export regulations, corporate governance, and labor laws can be challenging. Compliance requirements often cause delays in business operations. 

Political and Economic Overview 

While Indonesia remains politically stable, regional disparities and policy shifts can impact business operations. Canadian mining companies in regions like West Papua have encountered disruptions, leading to 5% higher risk mitigation costs. Additionally, changes in import tariffs have led to unexpected price increases for Canadian retailers, impacting competitiveness. 

Market Competition and Consumer Preferences 

Indonesia’s market is price-sensitive and brand-conscious, making it challenging for Canadian companies to penetrate specific industries. While demand for foreign direct investment in Canada and Indonesia continues to grow, intense local competition and consumer behavior must be carefully assessed. 

Canadian investors can navigate trade relations with Indonesia and establish substantial business operations by addressing challenges proactively. Seeking expert guidance can be a game-changer, and InCorp Indonesia is well-equipped to provide the support you need. 

How Canadian Investors Can Get Started in Indonesia 

Expanding into Indonesia offers Canadian investors vast opportunities in one of Southeast Asia’s fastest-growing economies. However, understanding the proper business structure is essential for a successful market entry.  

The choice between a Perseroan Terbatas Penanaman Modal Asing (PT PMA) and a Representative Office (RO) depends on your business objectives and long-term goals: 

  • A PT PMA is better if you plan to generate revenue, operate independently, and own assets. 
  • An RO is ideal if your focus is market research, brand promotion, or forming partnerships before committing to entire operations. 

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Unlocking Investment Potential with InCorp 

Navigating Indonesia’s business environment can be challenging, but InCorp Indonesia (an Ascentium Company) provides end-to-end support to ensure a smooth and compliant investment process. Our services include: 

  • Company Registration: Assistance in setting up PT PMA or Representative Offices, handling all legal requirements and regulatory approvals. 
  • Investor KITAS: Support obtaining the necessary visas and work permits for foreign investors looking to reside and operate in Indonesia. 
  • Legal & Compliance Advisory: Ensuring compliance with Indonesia’s corporate and investment regulations. 
  • Accounting & Tax Services: Providing financial compliance, tax registration, and bookkeeping support to keep your business legally compliant. 

Fill out the form below to confidently enter the Indonesian market and start your successful investment journey. 

Daris Salam

COO Indonesia at InCorp Indonesia

With more than 10 years of expertise in accounting and finance, Daris Salam dedicates his knowledge to consistently improving the performance of InCorp Indonesia and maintaining clients and partnerships.

Get in touch with us.

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Frequent Asked Questions

As an investor, you are required to have a minimum investment of IDR 1 billion in invested shares to be eligible for an investor KITAS.

An Index 313 Investor KITAS will allow its holder to stay in Indonesia for a year, while an Index 314 Investor KITAS allows for a 2 year stay.

There are three things business owners need to consider before setting up a business in Indonesia: the type of business entity, capital requirements, and regulations.

Indonesian regulations separate local companies from foreign companies. Generally, foreign-owned companies (PT PMA) have more limitations than their local counterparts (Local PT). However, to pursue more foreign direct investment in the country, the government has taken several bold initiatives to increase the ease of doing business and provide numerous attractive incentives for foreign investors.