City A.M. understands that the supermarket giant has been examining an entry strategy for the region’s most populous country for over a year and, with its withdrawal from Japan announced last week, could be ready to launch its push into new territory.
If Tesco does pursue the opportunity, its strategy is likely to involve building the business from scratch due to a lack of suitable assets for purchase.
The move would set it head to head with its main rival in the region, French supermarket chain Carrefour.
Indonesia, which is in the grip of a commodities boom and has a growing middle class, is an attractive market for multinationals.
But it could prove hard to dislodge Carrefour, which has partnered with Indonesian billionaire Chairul Tanjung in order to smooth its path to growth.
Tesco already has a presence in China, Thailand, India, Malaysia and South Korea but received a setback in Thailand last year when it missed out on buying Carrefour’s assets as its rival withdrew from the country.
The setback left Tesco with capital to deploy in the region and the exit from Japan will supply further firepower.
A spokesman for Tesco said: “We don’t comment on speculation.”