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Also, some people just don't consider it, and stick to history.
Because as the leader of a major faction ,you need to think about WHY you want to invade..I invade countries to expand my industry and get stronger, so bigger countries are more of a priority than tiny countries like the netherlands and it's useless colonies.
The reason why most ppl miss this is probably that in HOI3 the benelux was guaranteed from the UK and france when the game started.
That ain't necroposting. THIS is necroposting!
Say I take puppet the colonies, then after about a year I go into a real war with the allies. I now would have to deal with a and convoys, my convoys are gonna get raided, my puppet might get invaded, is way to far and has an ocean to deal with so I NEED convoys and my supply route there is gonna be ♥♥♥♥, the benefits of resources are good, but what the point if you are not gonna be getting the best out of your resouces
its not the Malaysia, there are no land routes, once war start, you NEED convoys to trade, therefore you NEED to defend convoys, if you troops are stationed there, you need convoys to deliver your equipment.
In addition, if british are in war, you have to go all the way around Africa
Pros.:
Oil and Rubber basically 4 free until WW2 kicks off.
Could use Indonesian Manpower for some Templates and save some Manpower.
You could invest into building them up so that they could hold their own but it is a substantial IC commitment and sets you back in your own buildup.
Cons.:
Too much of a hassle to hold on too once WW2 kicks off. Basically useless at this point other than a distraction for Allied War efforts.
Too much World Tension for what it provides, allowing Democracies to get better Economy Laws faster.
Also Japan is a Wildcard if you Puppet Indonesia cause they really like to declare War on them no matter who´s in charge of the Colony.
Last but not Least i found that CZE and the Allies at least in a Historical Game are more likely to deny you the Sudetenland cause of much higher WT generated.
Just my opinion but that´s what i found trying that strat a few times.
I´d recommend if you´re not playing a rush game and want to take your time declare on Denmark asap, then wait for the Soviets to kick off WW2 by invading Poland. WIth a bit of Luck and timing you can manage to trap the British fleet in the Baltic and bomb the ♥♥♥♥ out of em making Sea Lion a lot easier. This way you can also trap a lot of Allied troops in Poland.
Or Invade Sweden for Tungsten and Chromium early on.