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View all search resultsStrategic imperatives for restoring Indonesia’s global competitiveness
After previously receiving recognition for its consistent progress in global competitiveness, the country has now encountered a notable reversal.
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A customer uses a smartphone on May 6, 2024, to scan a Quick Response Indonesia Standard (QRIS) code to complete a digital transaction at Klojen Market in Malang, East Java. (Antara/Ari Bowo Sucipto)
I
ndonesia's economic prospects have come under serious concern following the release of the 2025 World Competitiveness Ranking (WCR) by the IMD World Competitiveness Center (WCC).
After previously receiving recognition for its consistent progress in global competitiveness, the country has now encountered a notable reversal. In the most recent assessment, Indonesia fell 13 positions, declining from 27th place in 2024 to 40th out of 69 economies in 2025. This represents a significant downturn compared to the steady improvements recorded in prior years, when the nation advanced from 44th in 2022 to 34th in 2023.
This is not merely a fluctuation in numbers; the fall signals deeper and systemic vulnerabilities that have been exacerbated by a mix of global headwinds and unresolved domestic structural issues. As the IMD report, which draws from 262 quantitative indicators and surveys of over 6,000 executives worldwide, makes clear, Indonesia now faces a critical moment.
Policymakers, business leaders and civil society must reflect on the factors behind the decline and act swiftly to reposition the country on a more competitive and sustainable growth trajectory.
Indonesia has been adversely affected by external dynamics, including ongoing tariff wars aimed at this region. The fallout from trade tensions, especially between major powers, has been particularly harsh on export-reliant economies. While Indonesia previously benefited from robust commodity exports, including oil, gas and palm oil, shifts in global demand and geopolitical uncertainty have revealed the economy’s vulnerability.
Yet, the real alarm lies in internal weaknesses, as identified by the WCR 2025. Indonesia registered declines in three out of four main pillars of competitiveness: Government Efficiency, Business Efficiency and Infrastructure. Only Economic Performance showed mild resilience, buoyed slightly by indicators like gross domestic product (GDP) per capita and real growth. However, even here, the international investment subcomponent weakened, reflecting eroded investor confidence. The complexity and costliness of starting a business remain key concerns.
Education, a cornerstone of long-term productivity, ranked 62nd, while the country’s health and environmental services fared even worse, at 63rd. Also noteworthy are indicators like foreign currency reserves per capita and the strength of the Indonesian passport, both of which reflect broader institutional credibility. These affect not just economic efficiency but also global perception and ease of travel for talent and business.
