Indef: ASEAN Economy More Competitive as Vietnam, Philippines Move Up Income Bracket
The ASEAN economic map is now increasingly competitive as Vietnam and the Philippines move up to the upper-middle-income country group, according to the Head of the Macroeconomics and Finance Centre at the Institute for Development of Economics and Finance (Indef), M Rizal Taufikurahman.
The World Bank sets a gross national income (GNI) per capita range of 4,636–14,375 US dollars as the threshold for upper-middle-income countries for the 2027 fiscal year. In ASEAN, Vietnam and the Philippines now join Indonesia, Malaysia, and Thailand in this group.
“This means ASEAN is no longer just competing as a low-wage region, but is beginning to enter the competition for productivity, industrialisation, exports, and human capital quality,” Rizal said when contacted by ANTARA in Jakarta on Monday.
For Indonesia, according to Rizal, this could be both a challenge and an opportunity. Competition to attract foreign investment will become increasingly tight because investors will compare Indonesia with Vietnam, which is strong in export-oriented manufacturing, the Philippines, which is strong in services and an educated workforce, and Malaysia and Thailand, which are more mature in industrial supply chains.
On the other hand, this also opens opportunities for ASEAN collaboration as an integrated production base, provided Indonesia is able to penetrate deeper into the regional value chain, rather than merely being a large market and raw material supplier.
Rizal noted that Indonesia’s advantages lie in its economies of scale, large domestic market, strategic natural resources, and downstreaming potential.
However, Indonesia still faces challenges, including labour productivity that is not yet high, logistics and energy costs that remain a burden, frequently changing regulatory certainty, and uneven human resource quality and innovation.
“So, compared to Vietnam and the Philippines, Indonesia excels in terms of market size and natural resources, but still needs to catch up on export manufacturing aggressiveness, bureaucratic efficiency, and workforce quality,” Rizal explained.
He also views Indonesia’s target of becoming a high-income country as still realistic in the long term, but not easy to achieve in the near future.
The World Bank’s high-income country threshold is a GNI per capita above 14,375 US dollars, while Indonesia remains in the upper-middle-income country group.
Therefore, according to Rizal, the key is not simply maintaining 5 percent growth, but driving productivity-based growth, namely value-added industrialisation, manufacturing and modern services exports, vocational education, innovation, investment certainty, and bureaucratic reform.
“Without that, Indonesia risks being trapped in the middle-income trap. Moving up a class statistically, but not yet strong enough to become a developed economy,” Rizal said.