The Toffees have been forced to alter their pre-season plans after pulling out of the tournament due to a lack of assurances from the organisers over the competition structure
Galatasaray had already pulled out of the pre-season event and the Toffees have now followed suit after club officials were not convinced by the organisers' plans following the exit of the Turkish club.
Everton were also said to be concerned with logistical, financial and security issues surrounding the tournament.
A club spokesperson said: "Club officials here in the UK and our forward planning/security team deployed to Jakarta at the weekend have repeatedly asked for clarity and assurances from the organisers on the issues but unfortunately have not received the answers we required in the timeframe necessary to ensure our participation.
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"We are grateful for the support today of the Indonesian government in this matter, however the unresolved issues mean that the risk of travelling was too great.
"This decision was not taken lightly and we apologise for the obvious inconvenience caused to our supporters who have made, or were planning to make the trip and to our Indonesian fans who were looking forward to seeing Everton in action.
"The first team squad will now stay in the UK and continue their pre-season preparations."
The Toffees have friendlies against Blackpool, Malaga and AEK Athens scheduled and open their Premier League campaign with a home match against Manchester United on August 20.