Foreign Direct Investment (FDI)

The ongoing trade war between major economies such as the United States and China has significantly impacted the global economy. This trade tension not only affects commodity prices and international supply chains but also causes a shift in business strategies among multinational companies. One of the most noticeable effects in 2025 is the increasing demand for industrial land, particularly in developing countries that are seen as alternative global supply chain hubs.

What is Foreign Direct Investment (FDI)?

Foreign Direct Investment (FDI) refers to investments made by companies or individuals from one country into another with the aim of establishing a business or acquiring existing business assets. Unlike portfolio investment, FDI involves long-term ownership and control over a company or assets in the target country. Examples of FDI include building new factories, acquiring a majority stake in a local company, or expanding business operations into international markets.

Shift in Global Production Bases

Over the past few years, many multinational corporations have begun relocating their manufacturing operations from China to other countries in Southeast Asia and other regions that offer attractive incentives. This decision is driven by rising import tariffs, higher labor costs, and increasing geopolitical risks due to the trade war. Countries like Vietnam, Indonesia, Thailand, and Malaysia have become primary destinations for companies seeking to secure their supply chains and avoid high tariff burdens.

Indonesia, as a country with significant potential in the industrial sector, has experienced a surge in demand for industrial land. Rapid infrastructure development, government policies that support foreign investment, and a competitive workforce have made Indonesia an attractive destination for global investors. Industrial zones such as Karawang, Bekasi, Batang, and Kendal have become key areas of interest for companies looking to establish new production facilities.

Government Policies and Investment Incentives

The Indonesian government has actively attracted foreign investment by offering various incentives, such as lower corporate taxes, import duty exemptions on raw materials, and streamlined business licensing processes. In response to the trade war, the government has also accelerated the development of industrial zones to accommodate companies looking to relocate.

One of the policies driving the surge in industrial land demand is the establishment of Special Economic Zones (SEZs), which offer additional benefits to investors. Several new industrial zones have also been developed with an integrated concept, providing adequate logistics facilities and direct access to ports and airports to facilitate export and import activities.

Rising Land Prices in Industrial Zones

With increasing demand, industrial land prices have risen significantly. Reports from various real estate research institutions indicate that industrial land prices in some strategic locations in Indonesia have increased by 15-20% per year since the early 2020s. This price surge is driven by the growing interest of companies in securing strategic locations to avoid supply chain disruptions caused by geopolitical instability.

Additionally, the growth of the e-commerce and logistics sectors has contributed to rising industrial land prices. Logistics and warehousing companies require larger land areas to support their operations, particularly in areas near distribution centers and major ports.

Emerging Industrial Trends

Apart from manufacturing, several other industrial sectors are also experiencing the impact of the trade war and increasing demand for industrial land, including:

• Technology Industry: Companies previously reliant on manufacturing in China are now seeking alternatives in Southeast Asia. Semiconductor factories, electronic assembly plants, and data centers are rapidly expanding in new industrial zones.
• Automotive Industry: Global automotive manufacturers see Indonesia as a strategic production base, particularly with the growing trend of electric vehicles.
• Logistics and E-Commerce Industry: The increasing demand for online shopping has led logistics and warehouse companies to seek larger land areas for their operations.

Challenges and Opportunities for Investors

Although the growing demand for industrial land presents significant opportunities for investors, several challenges need to be considered, such as:

• Regulations and Licensing: Despite government efforts to simplify bureaucracy, some licensing processes are still perceived as complex by foreign investors.
• Infrastructure Availability: Some industrial zones still face challenges related to transportation access, electricity supply, and logistics connectivity.
• Rising Land Prices: While industrial real estate investment prospects are promising, continuously increasing land prices may be a barrier for companies with limited capital.

On the other hand, this situation also creates opportunities for industrial property developers to innovate in providing more efficient and competitive industrial zones. The adoption of technology, such as smart industrial parks and environmentally friendly solutions, has become a key differentiating factor for developers looking to attract more tenants.

Conclusion

The effects of the ongoing trade war in 2025 have significantly impacted global supply chain shifts and increased demand for industrial land, particularly in Indonesia. With pro-investment government policies, rapid infrastructure development, and opportunities across various industrial sectors, the industrial land market is expected to continue growing in the coming years.

For investors and business players, understanding market trends and dynamics is crucial in making strategic decisions to capitalize on opportunities amid the rapid global changes.