Foreign investors comparing Southeast Asia’s top destinations face one major question: Indonesia or Vietnam? Both countries present competitive foreign direct investment (FDI) incentives—but they do so through vastly different strategies.
While Vietnam offers standardized, long-term benefits primarily through economic zones, Indonesia provides targeted, sector-specific incentives, greater financial flexibility, and expansive tax relief for pioneering industries.
This article breaks down each nation’s strengths to help you choose the most profitable investment destination.
Business Climate Comparison
Indonesia boasts Southeast Asia’s largest economy, driven by a tech-savvy population, abundant natural resources, and consistent 5%+ GDP growth. Its government aggressively promotes reforms, notably through the Omnibus Law and the Online Single Submission (OSS) system, streamlining permits and business licenses.
Vietnam, on the other hand, thrives on manufacturing efficiency and lower labor costs. Its centralized government allows faster policy implementation, and the country enjoys increasing attention from global manufacturers relocating from China. However, its business environment remains heavily zone-centric and less diversified compared to Indonesia.
Also read: How to Apply for Indonesia Investment Incentives via OSS
Investment Incentives Comparison
Indonesia’s Incentives emphasize flexibility and high financial commitment. Tax holidays extend up to 20 years for qualifying sectors like renewable energy and data centers. Companies may also receive:
- 0% corporate tax for digital projects exceeding Rp1 trillion
- 60% investment allowances over six years
- Super deductions for R&D and vocational partnerships
Vietnam’s Incentives, meanwhile, focus on uniformity:
- 4-year tax exemptions, followed by 9 years at 50% tax rate
- A permanent 10% corporate income tax rate is available within designated economic zones.
- Comprehensive import duty exemptions for manufacturing inputs
Indonesia rewards investors willing to scale fast in strategic sectors. Vietnam provides predictability for long-term, stable investments.
Sector Preferences: Diversification vs Manufacturing Focus
Indonesia aggressively supports eight key sectors. These include:
- Small-scale manufacturing (textiles, furniture)
- Renewable energy (solar, hydro, waste-to-energy)
- Digital economy (data centers, fintech)
- Electric vehicles and supporting infrastructure
Government-backed incentives like preferential credit (Rp20 trillion fund) and VAT exemptions for farming tech are evidence of a multi-sectoral development model.
Also read: Top Indonesian Strategic Sectors for Tax Incentives in 2025
Vietnam, on the other hand, anchors its sectoral focus on manufacturing and export-led production. Its economic zones favor:
- Assembly and processing factories
- Infrastructure development
- Supporting industries such as electronics and apparel
Also read: How Incentives Encourage Investment in Indonesia in Times of Economic Instability
Ease of Doing Business in Indonesia
Indonesia’s Online Single Submission (OSS) system streamlines processes by minimizing bureaucracy and enabling centralized document submission and progress tracking. Tax holiday and tax allowance applications are processed jointly through BKPM and the Ministry of Finance, with a typical approval time of 30–90 days.
Investors in Special Economic Zones (KEK) or IKN (Indonesia’s new capital city) benefit from simplified permitting, extended land rights (up to 95 years), and even immigration perks like 10-year work permits. Vietnam, while relatively efficient, relies on more conventional project-by-project evaluations.
Also read: Why Indonesia Remains an Attractive Foreign Investment Destination
If Indonesia aligns with your FDI goals—whether in digital infrastructure, sustainable manufacturing, or green energy—navigating the setup process efficiently is critical. That’s where InvestinAsia comes in.
As Indonesia’s premier company registration service, InvestinAsia offer:
- Foreign company / PMA registration in Indonesia
- Indonesia representative office registration
- PT PMDN Set Up
- Virtual office setup in Indonesia
- Business registration number in Indonesia
- Indonesian Business Licenses
- Indonesia Trademark Registration
- Indonesia Tax Consultant and Compliance Services
Our end-to-end guidance helps you capture the full value of Indonesia’s investment incentives—seamlessly and on time.
If you are interested in starting a business in Indonesia, you can start by contacting us for FREE consultation.
Vietnam and Indonesia represent distinct value propositions for foreign investors. Vietnam provides a consistent, manufacturing-oriented FDI model rooted in long-term preferential tax rates. Indonesia offers a dynamic, sector-driven framework, superior for tech, sustainability, and high-growth sectors.
For businesses prioritizing agility, green innovation, and digital integration, Indonesia stands out. And with expert partners like InvestinAsia, entering the market becomes not just viable—but strategic.
FAQs
Which country has the lower corporate tax rate?
Vietnam (20%) slightly edges out Indonesia (22%). However, Indonesia offers broader and more generous incentive packages.
Can foreign investors fully own companies in Indonesia?
Yes, particularly in Special Economic Zones (KEKs) and the new capital (IKN), Indonesia permits full foreign ownership in certain industries.
Is Vietnam or Indonesia better for digital startups?
Indonesia provides superior digital sector incentives, including 0% CIT and R&D super deductions.
How long does it take to register a company in Indonesia?
With OSS and InvestinAsia support, the process typically takes 3–5 weeks.
Are there incentives specific to renewable energy?
Yes. Indonesia offers 15-year tax holidays and carbon market participation incentives for green projects.
References:
- ASEAN Briefing. Incentives for Doing Business in Indonesia. https://www.aseanbriefing.com/doing-business-guide/indonesia/why-indonesia/incentives-for-doing-business-in-indonesia
- PWC. Indonesia Corporate – Tax credits and incentives. https://taxsummaries.pwc.com/indonesia/corporate/tax-credits-and-incentives
- Vietnam Briefing. Tax Incentives for Foreign Enterprises in Vietnam. https://www.vietnam-briefing.com/doing-business-guide/vietnam/taxation-and-accounting/tax-incentives-for-businesses
- U.S. Department of State. 2024 Investment Climate Statements: Indonesia. https://www.state.gov/reports/2024-investment-climate-statements/indonesia/
