JAKARTA (ANN/THE JAKARTA POST) – Indonesia’s push to become one of the world’s leading economies is showing results, with the country climbing seven spots in the 2024 IMD World Competitiveness Ranking.
This marks the highest jump in six years, placing Indonesia 27th out of 67 countries, up from 34th in 2023. In Southeast Asia, Indonesia now ranks third, behind Singapore and Thailand.
Coordinating Economic Minister Airlangga Hartarto attributed this success to the government’s focus on improving the ease of doing business and creating a favourable investment climate, particularly through the implementation of the Job Creation Law.
The rise in the competitiveness ranking is supported by improvements in business efficiency (from 20th to 14th place), government efficiency (from 31st to 23rd place) and economic performance (from 29th to 24th place). However, Indonesia must continue to focus on improving infrastructure.
In detail, some factors that have driven improvements in business efficiency include the availability of labor (ranked 2nd), corporate management (ranked 10th) and societal behaviour (ranked 12th).
Furthermore, the improvement in government efficiency, which rose by eight places, is partly due to the government’s efforts in business legislation, which improved from 49th place in 2023 to 42nd place in 2024.
The increase in economic performance is mainly driven by the strength of the domestic economy (ranked 10th) and maintained price levels (ranked 12th).
According to data from Statistics Indonesia (BPS), Indonesia’s economic growth in Q1-2024 increased by 5.11 per cent year on year (yoy), compared to the previous quarter’s growth of 5.04 per cent yoy.
A country’s rise in the competitiveness ranking certainly has significant effects, particularly on investor attractiveness.
A high competitiveness ranking enhances a country’s reputation and positive image in the eyes of global investors, who often consider these rankings in their investment decisions. Additionally, a higher competitiveness ranking will increase investor confidence in a country’s economic stability and growth potential.
In line with this, Indonesia’s investment realisation by the end of Q1-2024 has shown a positive trend, reaching IDR401.5 trillion (USD24.56), an increase of approximately 22.1 per cent yoy, with foreign direct investment (FDI) reaching IDR204.4 trillion, growing around 15.5 per cent yoy.
The Indonesian government will continue to strive to create a better investment climate. To improve the ease of doing business, the government is refining regulations through the Job Creation Law and its derivative regulations, including Government Regulation No 5/2021 on the Implementation of Risk-Based Business Licensing.
Currently, amendments to Government Regulation No 5/2021 are in the finalisation stage to improve the business process for basic requirements, procedures (NSPK: Norms, Standards, Procedures and Criteria) for risk-based business licensing and to strengthen the implementation of risk-based business licensing supervision, expected to be completed by July 2024, or before the end of President Joko “Jokowi” Widodo’s term.
Concurrently, the government continues to improve services through the enhancement of the OSS (Online Single Submission) system.
Overall, Indonesia’s improved competitiveness ranking will significantly impact foreign investor interest in the country.
This not only increases capital inflows but also accelerates national development and economic recovery after COVID-19.
Enhanced competitiveness reflects a more conducive business environment, better economic stability and more positive growth prospects, which are key attractions for foreign investors.
