The government’s preference for state-led solutions not only exacerbates cumbersome governance but also hurts business efficiency – thereby dragging down Indonesia’s global competitiveness.
A worker installs the battery of a Hyundai IONIQ 5 electric car on April 6, 2023, at the Hyundai Motor Manufacturing Indonesia (HMMI) assembly plant in Cikarang, West Java. (JP/Rachmat Kurniawan)
Experts have pointed to the current administration's inclination toward state-centric development as a key factor behind Indonesia’s plunging competitiveness in a recent global ranking, arguing that economic interventionism not only complicates governance but also hurts business efficiency.Economist Intelligence Unit (EIU) Asia analyst Tay Qi Hang told The Jakarta Post on Thursday that external factors did impact the country’s competitiveness, but the drop signified Indonesia-specific concerns born from various policies that “weighed on investor confidence”.
He noted that firms were being “more cautious because the policy direction has become less clear” and big government initiatives reflected how “policymaking is becoming less predictable and more state-directed”.
In its latest World Competitiveness Ranking, the Institute for Management Development (IMD) listed Indonesia in 48th spot out of 70 countries ranked, tumbling from 27th in 2024 and 40th last year.
