Jokowi and his team made commendable progress in their first five years. The poverty rate has dropped to less than 10 percent. A light regulatory touch helped propel the world’s fastest growing digital economy, with Go-Jek becoming Southeast Asia’s second decacorn, and Tokopedia, Traveloka and Bukalapak not far behind.

Tourist arrivals jumped from 9 million in 2014 to a projected 14 million last year. Growth remained above 5 percent despite many global headwinds, thanks to steady macroeconomic policy.

But no country can rest on its laurels. Indonesia needs to achieve growth rates of at least 7 percent per annum for the next decade or more to eliminate poverty, absorb new entrants into the workforce, accelerate the growth of the middle class, and reduce income inequality as well as income disparities between Java and most of the provinces of eastern Indonesia.  

One opportunity to address these challenges is to double down on promoting manufactured exports. Jokowi and Industry Minister Airlangga Hartarto launched in 2018 a road map to leverage advanced technologies to catalyze a fourth industrial revolution in manufacturing.

Their timing is good. Trade frictions between the United States and China, and rising wages and other costs in China are causing American and other foreign companies to look elsewhere in Asia where they might diversify their manufacturing sourcing. 

Right now, much of the attention is focused on Vietnam and low-cost producers like Bangladesh.

But Indonesia has the opportunity to attract some of that investment, particularly in the apparel, furniture and electronics sectors.

Jokowi and his team have made respectable progress in improving Indonesia’s road and rail systems, shipping and airports, all of which have helped reduce logistics costs. Wages outside Jakarta remain competitive.

And Indonesia’s growing middle class and domestic market will offer growing market opportunities for years to come.

But Indonesia needs to do more to make its opportunities competitive with those offered by Vietnam, the Philippines and others. Indonesia has improved its ranking on the World Bank’s Ease of Doing Business index from 102 to 73 on the President’s watch, but the country still ranks well below its major ASEAN competitors.

Some improvements can be done relatively easily by benchmarking steps Indonesia’s competitors are taking to reduce regulatory burdens, rethink local content requirements and the role of state-owned enterprises, offer attractive labor laws for investors, and shrink the negative investment list.

Others will require a longer-term focus. But now is the perfect time to initiate more far-reaching reform efforts. President Jokowi’s electoral success, the optimism engendered by recent progress such as the opening of Jakarta’s long-awaited metro system and the fact that Jokowi is term-limited and therefore has greater policy latitude, open a unique window now for Indonesia to tackle longer-term structural challenges that could propel growth and cement Indonesia’s great promise. I would mention two.

First is higher education. Much more needs to be done to prepare Indonesia’s workforce to leverage artificial intelligence, the internet of things, robot and other technologies that will determine future competitiveness.

Few if any Indonesian universities offer this training. Vocational training can help fill the gap, but the future will belong to countries that can train engineers, data scientists and programmers, and can undertake the cutting-edge research necessary for economic success.

American universities still lead the world in these fields and are interested in establishing campuses in Indonesia, as they already have in Singapore, Vietnam and countless other countries.

Indonesian graduate students trained in US universities could form the nucleus of new faculties, to allay nationalist concerns.

The Indonesia-Australia Comprehensive Economic Partnership Agreement cracked open the door for foreign universities. Now is the time to open it fully.

Second is judicial reform. Many foreign companies with significant interests in Indonesia base their operations in Singapore because its strong, independent legal system affords them protection from frivolous law suits, and assurance of a fair hearing in judicial disputes. Indonesia’s ranking of 146 on the World Bank’s Ease of Doing business indicator for contract enforcement does not befit the world’s seventh largest economy in purchasing power terms

Now is the time to summon Indonesia’s best legal minds to think through a strategy to create an independent, merit-based judiciary that can turn a liability into a business asset.

Such mutually reinforcing reforms will provide new opportunities for young Indonesians to lead not just the digital transformation of Indonesia, but boost a fourth industrial revolution and technology-driven growth across the entire spectrum of the economy.

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The writer was the US ambassador to Indonesia in 2013-2016 and is now senior director with McLarty Associates and US co-chair of the US-Indonesia Society Board.

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