Indonesia's Economic Potential and Competitiveness Amid Tightening Global Rivalry
Denpasar - Professor Dr. IB Raka Suardana, a senior lecturer at Undiknas’ Faculty of Economics and Business and Vice Chairman of Kadin Bali for 2025-2030, has stated that Indonesia’s decline in the IMD World Competitiveness ranking from 40th to 48th is a significant signal that should not be viewed as a mere statistical change. The competitiveness ranking reflects a country’s ability to create an environment that supports productivity, investment, innovation, and sustainable economic growth. He noted that an eight-place drop in a single year indicates structural challenges requiring immediate attention.
Interestingly, the decline did not occur due to weak macroeconomic fundamentals. In recent years, Indonesia has maintained relatively stable economic growth, controlled inflation, and preserved economic resilience amid global uncertainty. However, these macroeconomic strengths have proven insufficient to sustain competitiveness without adequate institutional quality, infrastructure, and business efficiency.
One key area of concern is the quality of government institutions. The business sector requires legal certainty, regulatory consistency, ease of licensing, and a bureaucracy responsive to investment needs. When administrative processes are perceived as complicated or subject to frequent policy changes, investors tend to assess the risk of doing business as higher. In an increasingly tight global competition, where investment destinations compete to offer certainty and convenience, Indonesia must pursue continuous institutional reform.
Infrastructure quality also remains a critical task. Although the development of toll roads, ports, airports, and other public facilities has progressed significantly over the past decade, challenges of equitable distribution and efficient utilisation persist. Infrastructure is not only about physical construction but also encompasses digital connectivity, logistics, energy, and public services that can lower economic costs. If logistics and distribution costs remain high compared to competitor nations, the competitiveness of Indonesian products and services will be directly affected.
Business efficiency is another determining factor. The business world now faces competition increasingly based on technology, innovation, and speed of decision-making. Consequently, improving human resource quality, adopting digital technology, enhancing labour productivity, and facilitating access to financing are urgent necessities. Without efficiency gains, national companies will struggle to compete in regional and global markets.
From an investment perspective, a decline in competitiveness can influence foreign investors’ perception of Indonesia’s prospects. Investors typically consider various indicators before committing capital, including policy stability, infrastructure quality, bureaucratic efficiency, and ease of doing business. If these indicators deteriorate, investment flows may shift to other countries deemed more competitive. Therefore, this drop in the competitiveness ranking should serve as a momentum for evaluation and improvement. Indonesia possesses vast economic potential, a large domestic market, and abundant resources. However, this potential can only be optimally realised if accompanied by strengthened institutions, accelerated quality infrastructure development, and enhanced business efficiency. Through such measures, Indonesia can restore its competitiveness and reinforce its position as a major economic power in the region and the world.