Outpaced by Vietnam and Malaysia, Indonesia Now Overhauls Regulation to Win Tech Investor Money

The government has identified conflicting regulations between institutions as the main obstacle to capital entering the technology sector, an admission that comes as neighboring countries move more aggressively to capture investment from global corporate giants.

Deputy for Macro Development Planning at the Ministry of National Development Planning (PPN/Bappenas), Eka Chandra Buana, said an initial diagnosis of investors' reluctance to put money into Indonesia had found long-entrenched structural problems. "It turns out the main obstacle is institutional regulation," he said when met at Menara Bappenas, Jakarta, Wednesday (16/9/2026).

The finding explains why Indonesia often lags in the race for technology investment in Southeast Asia. Thailand and Vietnam are aggressively offering tax incentives to semiconductor manufacturers, while Tesla is reported to be setting up a subsidiary in Ho Chi Minh City with capital of around Rp52.78 billion. Malaysia has long cemented its position as the world's sixth-largest semiconductor exporter, focusing on high-computing-power chip packaging.

For investors who have long monitored Indonesia's business climate, the regulatory problem is nothing new. Overlapping rules among ministries, agencies, and regional governments create uncertainty that lengthens permitting processes and raises compliance costs. In the context of regional competition, that condition is a direct disadvantage because capital is mobile and will flow to the jurisdiction that provides certainty fastest.

The government has made governance transformation one of the pillars of the National Long-Term Development Plan (RPJPN) 2025-2045. The steps being prepared include a comprehensive regulatory overhaul, the establishment and strengthening of a single agency to manage regulation, and the acceleration of information-technology-based public services. This approach targets the root of the problem, rather than merely adding incentive packages that have long been the mainstay.

"The policy is not business as usual," Eka stressed, describing the direction of transformation pursued in the RPJPN.

Beyond regulation, the government highlights the quality of human resources as a determinant of investment appeal. Eka argues that labor productivity cannot be separated from education, health, infrastructure, and the quality of regulation itself. Digitalization is seen as an instrument to lift productivity, not merely an indicator of technological progress.

Technological disruption is also framed as an opportunity for new expertise to emerge. The government is pushing to strengthen STEM (Science, Technological, Engineering, and Mathematics) from early education so that Indonesian graduates can fill the needs of an increasingly complex technology industry. According to Eka, innovative human resource transformation will ultimately strengthen Indonesia's position in attracting foreign capital.

For market players and professionals in Indonesia, this policy direction implies three things. First, regulatory certainty will be a key indicator watched by technology investors, especially for capital-intensive sectors such as data centers and semiconductors. Second, the establishment of a single agency to manage regulation could cut permitting times, but its effectiveness depends on central-regional coordination. Third, investment in STEM education and digital infrastructure will determine how quickly Indonesia can move up from being merely a consumer market to a base for production and innovation.

What remains unanswered is how quickly this governance transformation will proceed. Without consistent execution, Indonesia risks remaining a spectator while neighboring countries lock in long-term commitments from global technology companies. The question is no longer one of intent, but whether orderly regulation can change Indonesia's appeal in the eyes of investors before the next investment wave moves to another jurisdiction.