Government Responds to Indonesia's Declining Competitiveness Ranking

TEMPO.CO, Jakarta - The Finance Ministry stated that the country's competitiveness remains strong despite the announcement that Indonesia's competition level dropped 13 ranks in the World Competitiveness Ranking 2025 within a year. "We see that the competitiveness is relatively well-managed," said the Director General of Economic and Fiscal Strategy of the Finance Ministry, Febrio Kacaribu, to journalists at Hotel Borobudur, Central Jakarta, on Wednesday, June 18, 2025.

The World Competitiveness Ranking 2025 report published by the International Institute for Management Development World Competitiveness Center (IMD WCC) stated that Indonesia's competitiveness ranking dropped from 27th to 40th out of 69 countries.

Responding to the report, Febrio stated that competitiveness depends on the institution that calculates it. "In terms of competitiveness, we look at how capital inflow occurs," he said.

Febrio mentioned that his ministry is also addressing issues raised by entrepreneurs, mostly related to licensing, supply chains, and infrastructure availability. "We will continue to address those issues."

He stated that the Finance Ministry will boost investments as one of the supporters of economic growth, such as government spending. "The highest aggregate demand comes from the consumption sector, accounting for over 50 percent. However, investment is also considerable, around 30 percent of our GDP," said Febrio.

According to Febrio, investments can provide a significant multiplier effect. "This indicates the addition of Indonesia's capital goods to produce goods and services."

Febrio ensured the government would promote investment opportunities with a new approach, including through Danantara. "We hope that the synergy to create those investment opportunities will increase," he said.

Indonesia's descent in the World Competitiveness Ranking is the first since 2022. In 2022, Indonesia dropped from 37th to 44th position in 2021. Then in 2023, Indonesia rose from 34th to 27th position by 2024.

WCC measures each country's competitiveness using four main aspects: economic performance, government efficiency, business efficiency, and infrastructure. Indonesia's ranking in three aspects decreased consistently, including government efficiency, business efficiency, and infrastructure.

In government efficiency, Indonesia occupies the 34th position decrease of 11 ranks from the previous year. Then, in business efficiency, Indonesia dropped 12 ranks and now occupies the 26th position. As for infrastructure, Indonesia dropped five ranks and currently stands at the 57th position.

Not only Indonesia, but several countries in the Asia Pacific region also experienced a decrease in their ranking. "The South Asian and Pacific regions experienced their first setback since 2022," wrote WCC in its report. Thailand and Australia, for example, both dropped five ranks. Malaysia, on the other hand, experienced an increase, rising 11 ranks to the 23rd position.

The Faculty of Economics and Business Management of the University of Indonesia (LMFEB UI), which is one of WCC's partners, provided several recommendations for Indonesia. "Indonesia needs to develop a productive workforce capable of increasing global competitiveness," wrote LMFEB UI. Indonesia is also deemed to need to integrate a strategic map from upstream to downstream. Additionally, Indonesia needs to comply with global demands regarding sustainable business ethics.

Anastasya Lavenia Y contributed to the writing of this article

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