Returning to the Long-Term Agenda

The Times of India, India’s largest media outlet, published a report on 3 June 2026 titled ‘World’s Most Powerful Economies by 2030: Prediction Reveals Future Global Leaders’. The report revisits a 2017 projection by PwC that placed several emerging economies, including Indonesia, among the top 10 global economies by 2030 based on purchasing power parity (PPP). The IMF World Economic Outlook in April 2026 similarly projected Indonesia to be around the seventh-largest economy by GDP-PPP by 2030. This serves as a reminder for global leaders, particularly in emerging economies like Indonesia, to focus on a long-term agenda. High economic growth must be underpinned by productivity growth and innovation, as aggregate GDP alone does not reflect prosperity. The thinking aligns with 2025 Nobel Prize in Economics laureates Philippe Aghion and Peter Howitt, whose Schumpeterian growth paradigm posits that long-term growth is driven by capital accumulation and innovation, where new technology replaces the old. Another 2025 laureate, Joel Mokyr, emphasized that sustainable growth requires a continuous stream of knowledge and technology, citing England’s 1760-1850 industrial revolution as a historical example of progress driven by technological advancement and a quality workforce. However, Indonesia’s Economic Complexity Index (ECI), which measures the diversity and sophistication of a country’s productive knowledge, tells a cautionary tale. While Indonesia’s ECI score improved slightly, its global ranking fell between 2012 and 2024, indicating that other nations are advancing their productive capabilities faster. In contrast, India and Vietnam have significantly improved their ECI rankings, with Vietnam successfully building a manufacturing base for global companies. Japan, China, and the United States remain at the top of the ECI rankings, supported by high levels of research and development (R&D) spending, whereas Indonesia’s R&D spending remains very low. To transform the economy from low-to-medium technology manufacturing to high-tech production, the government should first position downstreaming as part of a broader industrialization strategy, not an end goal. Success should be measured by domestic value addition, local supplier growth, technology mastery, and quality job creation, not just the number of smelters or investment value. Second, the government should provide incentives for the private sector to increase R&D spending.