Indonesia and Vietnam: A Comparison of Economic Strategies for Growth

Indonesia and Vietnam: A Comparison of Economic Strategies for Growth In early 2026, Vietnam’s economic growth data showed an annual achievement of 7.83 per cent. This figure is the highest in the last 16 years for the country. Vietnam’s achievement often serves as a point of comparison with Indonesia, which has so far been grappling with economic growth around 5 per cent. Two decades ago, Indonesia held a far superior position in terms of economic scale, resource wealth, and geopolitical location. However, Vietnam is now demonstrating rapid growth momentum, raising questions about the fundamental differences in strategies between the two countries. Vietnam has chosen an export-oriented industrialisation path. Since the early 2010s, it has consistently positioned itself within the global supply chain. The country not only sells raw materials but has become a production hub for various global commodities such as mobile phones, shoes, textiles, and electronic components for the global market. This approach demonstrates an understanding that high economic growth does not solely come from domestic consumption but also from productivity that can penetrate national borders. On the other hand, Indonesia still relies on the strength of its domestic market. The narrative that ‘a large market is a strength’ is often repeated, but without strong production support, that market risks becoming merely a destination for products from other countries. This creates a significant difference in the direction of economic development between the two countries. Investment Environment and Regulation Vietnam does not merely attract investors but also ensures they feel comfortable investing in the long term. Relatively simple regulations, fast licensing processes, and consistent incentives make Vietnam a magnet for global investment. Major global companies build sustainable production ecosystems there, with the state acting as the primary facilitator. Indonesia actually has various pro-investment regulations, including policy packages, fiscal incentives, and an integrated licensing system (OSS). However, problems often arise in on-the-ground implementation. The gap between policy promises and investment certainty in practice is often too wide, causing hesitation among investors. Labour Productivity The Vietnamese government understands that the advantage of low labour costs must align with quality. They have consistently invested in basic and vocational education to build a disciplined, trained, and industry-ready workforce. As a result, Vietnam has labour that is not only affordable but also highly productive. Indonesia, with its large demographic bonus, has not yet fully converted that potential into an economic bonus. Many workers still lack qualifications suited to industry needs. The ‘link and match’ issue between education and industry remains a challenge that has not been fully realised. Achieving economic growth above 7 per cent is impossible without a drastic increase in labour productivity. Policy Execution and Structural Transformation The most striking difference with Vietnam is the state’s ability in policy execution. Every policy formulated is implemented with discipline, and the bureaucracy functions to accelerate rather than hinder. The state acts as an ‘enabler’, not just a regulator. Indonesia does not lack grand visions, such as downstreaming programmes, economic transformation, and the Golden Indonesia 2045 vision. However, implementation is often hampered by lengthy bureaucracy, weak coordination, and sectoral egos. This becomes a gap where growth potential often ‘leaks’, not because of wrong strategies, but due to inconsistent execution. Challenges Towards 7 Per Cent Growth To break through economic growth above 7 per cent, Indonesia requires comprehensive structural transformation, not just short-term stimuli. First, Indonesia must shift from a commodity-based economy to an industry- and value-added-based one. The downstreaming process must encourage the production of finished goods ready to compete in the global market. Second, investment climate reform must address the core issues, namely legal certainty, licensing speed, and policy consistency. Investors need stability more than just incentives. Third, integration into the global supply chain must be strengthened so that Indonesia becomes an integral part of world production, not just a market. Fourth, human resource development (HRD) must be directed according to industry needs, with priority on vocational education, competency-based training, and technology adaptation. Finally, bureaucratic reform must be realised in real actions, because without an efficient bureaucracy, even the best strategies will be hindered. Vietnam has proven that high growth is the result of the right strategic choices, policy consistency, and the courage to make changes. Indonesia has all the prerequisites such as natural resources, a large market, and a strategic position. However, without changes in mindset and way of working, that potential may not be fully realised.