(Source: kontan.co.id)

The Trade War’s Ripple Effect: Surge in Industrial Land Demand in Indonesia by 2025
By Adinda Ardita

As trade tensions between the United States and China continue into 2025, their impact on global supply chains and manufacturing strategies becomes more evident. One significant outcome has been the increased relocation of factories and production facilities out of China to alternative markets in Southeast Asia—most notably, Indonesia. This shift is resulting in a major increase in demand for industrial land, especially in designated industrial zones.

Manufacturing Relocation: Why Indonesia?

The trade war, triggered by rising tariffs and tighter regulations on Chinese exports to the U.S., has prompted many multinational corporations to rethink their global manufacturing strategies. Companies are increasingly embracing a “China+1” strategy, where they retain some operations in China but establish additional production bases elsewhere to mitigate risks. Indonesia is emerging as a key destination due to:

  • Competitive labor costs
  • Geographic proximity to major markets
  • Large domestic consumer base
  • Government incentives and improved ease of doing business

“Indonesia offers one of the largest manufacturing markets in ASEAN, and with improved regulations and infrastructure, it’s becoming an attractive option,” said Edwin Dwinanto, an industrial property analyst. (Source: Kontan Insight)

Indonesia, with its strategic location, competitive labor costs, and improving infrastructure, has positioned itself as a top relocation destination. This shift has triggered a notable surge in demand for industrial land in several economic zones across the archipelago.

Industrial Zones in High Demand

Industrial zones in Indonesia are experiencing a significant surge in activity, particularly in areas like Bekasi and Karawang (West Java), which are favored for their proximity to Jakarta and well-established infrastructure. The Batang Integrated Industrial Estate in Central Java, a flagship government-backed project, is also attracting interest due to its ready-to-use land and investment incentives. Additionally, Kendal and Gresik are emerging as key locations being developed to support specialized sectors such as electronics and pharmaceuticals. 

This growth is largely driven by companies in electronics, automotive, textiles, and consumer goods, drawn by robust government support and access to affordable, skilled labor. Riding this momentum, major real estate developers like Jababeka, Suryacipta, and Kawasan Industri Terpadu Batang have reported a spike in inquiries and land purchases. Notably, Jababeka saw a 15% increase in industrial land sales in Q1 2025 compared to the previous year, while Suryacipta has partnered with international logistics firms to build smart warehouses catering to incoming manufacturers.

Government Support and Economic Impact

The Indonesian government has taken significant steps to support the shift in industrial activity, offering tax incentives, simplifying investment regulations, and launching programs like “Making Indonesia 4.0” to attract high-tech industries. These efforts are driving broader economic benefits, including job creation in regional areas, increased foreign direct investment (FDI), and a boost to supporting sectors such as logistics, warehousing, and local small and medium enterprises (SMEs). The increased demand for industrial land is expected to stimulate local economies, generate employment, and elevate Indonesia’s role in the global supply chain. Furthermore, the government’s implementation of tax holidays, import duty exemptions, and streamlined licensing processes is fostering a more investor-friendly environment, enhancing Indonesia’s competitiveness in the global manufacturing landscape.

Challenges Ahead

Despite the optimistic outlook for Indonesia’s industrial growth, several challenges remain that could hinder its progress. Bureaucratic inefficiencies continue to slow down the pace of development, as complex regulations and lengthy approval processes often create delays for foreign investors. Additionally, land acquisition remains a significant obstacle, with legal and ownership issues complicating the process for industrial developers. Labor regulation uncertainties also pose a challenge, as evolving labor laws can create concerns regarding worker rights and industrial relations, affecting investor confidence. 

Furthermore, Indonesia faces intense competition from neighboring countries like Vietnam and Thailand, which are also aggressively courting foreign investment with their own attractive incentives, infrastructure improvements, and business-friendly policies. This competition could potentially divert investment away from Indonesia if these issues are not addressed effectively.

Conclusion

The U.S.-China trade war has become a catalyst for industrial transformation in Indonesia. With rising demand for industrial land and proactive support from both the government and private sector, Indonesia is well-positioned to strengthen its manufacturing base and play a larger role in the global supply chain.  However, sustaining this momentum will require targeted policy reform, infrastructure development, and maintaining investor confidence in the long term.

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