2027: Indonesia's Turning Point from a Fiscal State to a Productive State

Over the past quarter-century, Indonesia has achieved something far from simple. Amid global financial crises, a pandemic, wars, supply chain disruptions, energy shocks, and persistent geopolitical uncertainty, the national economy has continued to grow. Democracy has endured. Infrastructure has reached regions that were once isolated. Social protection programmes now extend to the village level. The state budget (APBN) has evolved into an ever-larger and more far-reaching instrument of development. The state is far more present than in previous eras. Many developing countries have failed to navigate this phase successfully. Indonesia has managed to do so. Therefore, these achievements deserve recognition as an important foundation for the nation’s journey.

Yet, precisely because of these successes, more pressing questions arise. Why has Indonesia’s economic productivity not grown as rapidly as its potential suggests? Why, after more than two decades of decentralisation, do most regions still depend on transfers from the central government? Why do national logistics costs remain relatively high compared to many Asian countries? Why has rising investment not yet fully translated into leaps in added value and quality employment? And why, every time commodity prices weaken, does national economic optimism falter?

These questions are not meant to dismiss the achievements that have been made. On the contrary, they are necessary so that Indonesia does not fall into the trap of feeling satisfied when there is still ample room to leap much further forward.