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Indonesia surpasses Japan and UK, rises to 27th in competitiveness rankings
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I
ndonesia's efforts to become one of the world's largest economies are increasingly paying off. This is demonstrated by the rise of Indonesia's competitiveness ranking by seven places in 2024, the highest in the past six years.
In the Institute for Management Development (IMD) World Competitiveness Ranking (WCR) 2024, Indonesia ranks 27th out of 67 countries compared to 34th in 2023. In Southeast Asia, Indonesia's competitiveness has entered the top three, following Singapore and Thailand.
"This is a concrete manifestation of the government's efforts to improve the ease of doing business and to create a good investment climate for investors through the implementation of the Job Creation Law," said Coordinating Economic Minister Airlangga Hartarto.
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 behavior (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 percent year on year (yoy), compared to the previous quarter's growth of 5.04 percent 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 realization by the end of Q1-2024 has shown a positive trend, reaching Rp 401.5 trillion (US$24.56), an increase of approximately 22.1 percent yoy, with foreign direct investment (FDI) reaching Rp 204.4 trillion, growing around 15.5 percent 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 finalization 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.
This article was published in collaboration with Coordinating Ministry for Economic Affairs Republic of Indonesia
