UNAIR NEWS – Indonesia is once again grappling with a significant challenge in the global economic arena. In the IMD World Competitiveness Ranking 2025, the nation dropped 13 positions—from 34th to 47th—signaling that structural reforms remain insufficiently implemented.
According to Professor Dr. Rossanto Dwi Handoyo, a senior economist at Universitas Airlangga’s Faculty of Economics and Business, the decline highlights ongoing inefficiencies in bureaucracy and a lack of equitable infrastructure development across the country.
“Our bureaucracy is still widely seen as inefficient and inflexible, with persistent issues of corruption in some areas. This perception creates an unfavorable investment climate and undermines Indonesia’s business competitiveness,” he stated.
Infrastructure growth not aligned with needs
Professor Handoyo also raised concerns about the effectiveness of Indonesia’s large-scale infrastructure expansion in recent years. Despite increased construction of toll roads, ports, and airports, many projects have failed to meet actual demand.
“Numerous new airports remain underused, and the quality of toll roads continues to raise concerns. This suggests that infrastructure growth does not always equate to productivity gains,” he noted.
The IMD report further revealed a drop in Indonesia’s infrastructure quality index, from 28th to 34th place. This decline underscores how recent development efforts have yet to significantly improve logistical efficiency or economic mobility.
Shortcomings in innovation and human capital
A key issue identified is Indonesia’s limited innovation capacity. Prof. Handoyo pointed out that the country’s research and development (R&D) budget remains under 0.5 percent of its Gross Domestic Product (GDP)—a figure that restricts innovation and limits the growth of national patent output.
“Without robust research efforts, it’s difficult to generate added economic value. Compounding this is the fact that our workforce still lacks the capabilities required by many industries,” he explained.
Competitiveness as driver of long-term growth
He emphasized that global competitiveness is essential for attracting long-term investment, sustaining economic growth, and enhancing national welfare. Without substantial progress, Indonesia risks falling into the middle-income trap—where growth stagnates and the country struggles to transition into a high-income economy.
“If we’re truly committed to achieving Indonesia Emas 2045, then structural reform must be pursued consistently. That means not only investing in roads and airports but also strengthening human capital, driving innovation, and improving governance,” he concluded.
Author: Rosali Elvira Nurdiansyarani
Editor : Khefti Al Mawalia
