Indonesia competitiveness ranking 2025
Indonesia competitiveness ranking 2025 has fallen dramatically, raising urgent questions about the nation’s economic fundamentals. After years of steady progress, Indonesia now faces a critical test of its global standing.
Indonesia’s Competitiveness Ranking: What Happened in 2025?
Indonesia dropped 13 places in the 2025 World Competitiveness Ranking, falling from 27th to 40th out of 69 countries. This sharp decline comes after several years of improvement, where Indonesia climbed from 44th in 2022 to 27th in 2024. In the Asia-Pacific region, Indonesia now ranks 11th out of 14 economies, and 16th among countries with populations over 20 million.
Key Areas of Decline
- Infrastructure:
Indonesia’s infrastructure rank fell five spots to 57th globally. Basic infrastructure dropped 11 places to 33rd, technological infrastructure 14 places to 46th, and scientific infrastructure five places to 50th. Health and environment, as well as education, also slipped to 63rd and 62nd, respectively. - Government Efficiency:
Government efficiency fell to 34th, with institutional frameworks and regulatory quality cited as major weaknesses. - Business Efficiency:
Business efficiency declined to 26th, hindered by high logistics costs and slow adoption of digital technologies. - Economic Performance:
While economic performance remained relatively stable at 24th, international investment and export of services remain weak points.
Why Did Indonesia’s Ranking Fall?
Several factors contributed to Indonesia’s competitiveness setback:
- External Pressures:
Global trade tensions and tariff wars have hurt Southeast Asian economies, including Indonesia. These external shocks have eroded the benefits of previous policy gains. - Weakening Fundamentals:
Sluggish infrastructure development, especially outside Java, continues to drive up logistics costs and limit economic efficiency. Education and health outcomes also lag behind regional peers. - Structural Issues:
Deep-rooted challenges such as bureaucratic inefficiency, regulatory complexity, and slow digital transformation persist. Institutional reforms have not kept pace with the demands of a modern economy. - Rising Inequality:
Over 66% of Indonesian executives surveyed cited economic opportunity as the main driver of societal polarization, reflecting growing concerns about inequality amid slowing growth.
How Does Indonesia Compare to Its Neighbors?
| Country | 2025 Rank | Change from 2024 | Key Trend |
|---|---|---|---|
| Singapore | 2 | -1 | Slight decline, still top region |
| Malaysia | 23 | +11 | Major improvement |
| Thailand | 30 | -5 | Moderate decline |
| Indonesia | 40 | -13 | Sharp decline |
| Philippines | 51 | +1 | Small improvement |
What Can Indonesia Do to Regain Its Edge?
To restore its competitiveness, Indonesia must:
- Accelerate Infrastructure Development:
Prioritize investment in transport, digital, and scientific infrastructure, especially beyond Java. - Streamline Government and Regulations:
Cut red tape, improve regulatory quality, and strengthen institutional frameworks for business. - Boost Human Capital:
Invest in education and health to create a more productive workforce. - Promote Innovation and Digitalization:
Encourage tech adoption and support research and development across sectors. - Address Inequality:
Implement policies that promote inclusive growth and reduce regional disparities.
Indonesia’s competitiveness ranking 2025 signals a wake-up call. The country must act quickly to address its weaknesses and seize new opportunities. With bold reforms and targeted investments, Indonesia can regain its competitive edge and ensure sustainable growth for the future.
