Indonesia's Productivity Blueprint 2026–2040
Indonesia’s “Golden Indonesia 2045” vision represents the nation’s aspiration to celebrate a century of independence as a developed, sovereign, fair, and prosperous nation, with a per capita GDP target of $30,000 USD. To achieve this, the economic engine must run at full capacity.
Following the COVID-19 pandemic, which saw GDP contract by 2.07 per cent in 2020, Indonesia’s economy has recovered and demonstrated resilience. The Central Statistics Agency recorded growth of 5.31 per cent in 2022 driven by a commodity export boom and sustained average growth of approximately 5 per cent during 2021–2025.
However, beneath this macroeconomic optimism lies a structural fragility that cannot be ignored. The International Institute for Management Development’s World Competitiveness Yearbook 2025 presents a sobering reality: Indonesia’s competitiveness ranking has sharply declined from 27th in 2024 to 40th in 2025 globally. This sharp drop signals an urgent need for structural reform.
The root cause of declining competitiveness stems from one chronic problem: low labour productivity. Currently, Indonesia’s labour productivity stands at approximately $32,384 per worker according to the World Competitiveness Ranking cited by IDN Financials. Compare this with ASEAN neighbours: Malaysia’s productivity has reached $77,352 (2.4 times higher), whilst Singapore achieves $196,237 per worker (6.1 times higher).
This reality exposes the inadequacy of a development model relying solely on cost advantages through cheap labour and natural resource exploitation to propel Indonesia to a higher economic level.
Demographic Timebomb and Labour Market Paradox
Time is not on our side. Indonesia currently sits at the peak of its demographic dividend, with over 60 per cent of the population in productive age (15–64 years) and historically low dependency ratios. This presents a monumental opportunity (demographic dividend) theoretically capable of adding 1–2 percentage points to annual GDP growth.
However, this opportunity is also a timebomb with an accelerating tick. Demographic projections show the proportion of productive-age population will begin declining relatively towards 2040. Indonesia thus has only a 15-year runway (2026–2040) for takeoff.
Unfortunately, the quality of the driving engine remains problematic. Indonesia faces a labour market paradox: approximately 57–60 per cent of the total workforce—equivalent to tens of millions—remain trapped in the informal sector. These informal workers operate in zones of extremely low productivity, minimal social protection, and isolated from access to formal training.
Simultaneously, the labour market is being battered by the wave of 4.0 technology disruption. The World Economic Forum forecasts that by 2030 approximately 85 million jobs will be disrupted by artificial intelligence algorithms, whilst 97 million new jobs requiring different competencies will be created.
Gaps in digital infrastructure and weak innovation investment worsen the situation. Indonesia allocates only approximately 0.28 per cent of GDP to research and development, far smaller than South Korea (4.9 per cent) or Malaysia (1.3 per cent). Consequently, innovation capability progresses slowly and adoption of new technology frequently stalls.
TFP and Green Productivity: A New Competitiveness Paradigm
To change its destiny, Indonesia must dare to transform its paradigm. Economic transformation can no longer be achieved merely by injecting capital and increasing the labour force.
The primary weapon for the future is Total Factor Productivity (TFP). TFP measures technological and organisational efficiency, reflecting the extent to which innovation, technology, and managerial systems can be managed. TFP growth demonstrates the intelligent reallocation of resources from less productive sectors to high-value-added sectors.
Therefore, evidence-based productivity measurement through the TFP method must become a mandatory framework for national industry.
Beyond TFP, the broader shift towards a low-carbon economy compels industry to adopt sustainability principles. Here, the Green Productivity (GP) approach developed by the Asian Productivity Organization becomes vital.
Indonesia’s transition opens opportunities for creating millions of green jobs. Initiatives expanding the scope of Green Productivity across industrial value chains do not merely preserve the environment but also ensure business resilience in global trade competition.
Bappenas and the Ministry of Manpower have established important foundations through the National Productivity Master Plan 2025–2029. This is supported by the Professional Certification Agency for Productivity (PCAP) Indonesia as an ecosystem protecting international standards.
PCAP Indonesia is progressively developing Certified Green Productivity Specialists (CGPS) and Certified Productivity Specialists (CPS) from diverse backgrounds, ranging from the private sector to academia. These experts are expected to drive the transformation of national productivity culture at the grassroots level.