tl;dr colonisation is in a bad state of affairs and what can be done about it

First a disclaimer: having played for the last month as Mexico and Spain, the game in 1.12 is genuinely fun. I feel it has been very fun since Charters of Commerce. Even with the newest agriculture methods focused in exploited regions, colonisation still is severely underthought of, waiting for its actual mechanics to arrive.

The migration system doesn't have a suitable mechanic for colonisation in populous regions

The core problem is migration attraction. Colonial Resettlement gives +50% migration attraction to unincorporated states - great for empty land, useless for anywhere with existing population. Try getting Japanese or Russians around Manchuria. In a populous state, that high attraction keeps locals from leaving, while your primary culture won't move there either because they're not benefiting from the economic concentration in your core states and they see themselves competing with massive local pops for jobs - at least from the migration attraction indicator.

You can have ethnostate or multiculturalism enacted - I actually tried ethnostate for the first time in a run to check if the reason was too much acceptance. You can't separate "attract my people here" from "keep locals here." It's one indicator doing two contradictory jobs, independent of acceptance. And investing in Colonial Affairs doesn't scale this in any meaningful way despite Resettlement and Frontier Colonisation being tied to it - being an useless institution if you stopped getting decentralised land. In the end, you'll never get Japanese in Korea, English people in India, or Portuguese into Angola through game mechanics. Historically inaccurate and not making a lot of sense with the citizenship laws in place. (I'm sure I got something wrong about the general acceptance pipeline, but probably right in the end result).

Colonial concentration subjects don't concentrate political power

Entities like the Dutch East Indies or the British East India Company are meant to represent aggregated exploitation presences. But they have no interest in annexing their vassals, which is against what their overlords supposedly want - more concentrated political power in their regions. If Netherlands conquers something in Southeast Asia, it won't transfer it to the Dutch Indies, leaving Borneo Island fragmented for no good reason. England annexes Burma or Sindh and has no mechanics that makes the AI (or the player) want to funnel the provinces through the India Company.

These companies are different in their objective from holdings like Spain's Puerto Rico, Cuba and Phillipines, which liked separated political divisions and wanted to get their primary pops there. And different from Portuguese views of Africa - places and peoples to be more integrated with the empire than the English view of empires, and if you try to incorporate the provinces you get less migration attraction there, the contrary of your main objective.

Whatever blob your New Guinea looks like can't be solved by scramble dynamics or conferences

There's nothing resembling the Berlin Conference or any system for powers to actively compete over colonial spheres. You spend 30 infamy to get all the little provinces of Netherlands or France which will send whole stacked armies for you with no chance of an agreement or winning diplomatically if the nation isn't friendly with you, which isn't a big possibility if they want your half-colonies. You just wait for the auto-colonisation system to fill in the map. Late-game lacks any mechanics that make colonial competition feel like the strategic race it historically was. As an example, you could be obliged to keep your troops mobilised or throw economic power there - investing in colonial posts or normal constructions with the 60% penalty you probably have in colonial provinces.

A game in the period of mass cultures has no mechanics for mass cultures to happen

A little off-topic, but since the subject is related, I will add some thoughts. In the period of the game, what we understand as cultures started to change from your language and homeland to be defined by habits and practices. The Victorian era was defined, among other things, by mass culture emerging through shared markets: railways connecting people, consumer goods creating shared habits, print culture spreading language, urbanization mixing populations. Those interactions within the market mechanics are however very loosely related - and only through - migration. You should be punished for having fragmented cultures in a province, as you, the player, represent somewhat the state and fragmentation doesn't help the management of your population. Shouldn't the game consider fine art, or mass art in books, journals (could be produced in the Arts Academy, or some tradeoff within university for the innovation points) as cultural accelerators, as well as the level of urbanisation, railroads and general infrastructure not only to help late-game lags, but to properly reflect how minoritarian regional cultures got merged in big cities, as well as the rapid cultural assimilation of majoritarian cultures? Luxury products and obsessions could play a part in this.

For a period defined by 1) monopolisation of markets, 2) communication advancements that lead to political concentration and 3) colonisation, it feels weird how much this part of the game isn't fair to what colonisation meant and what practices there were, as only a sketch in what is then again a 3-year-game. Hope giving this topic more attention will help getting future updates to prioritise this.