Indonesia Improves in WEF's Global Competitiveness Index 2014-2015

The World Economic Forum (WEF) defines competitiveness as "the set of institutions, policies, and factors that determine the level of productivity of a country. The level of productivity, in turn, sets the level of prosperity that can be reached by an economy. The productivity level also determines the rates of return obtained by investment in an economy, which in turn are the fundamental drivers of its growth rates. In other words, a more competitive economy is one that is likely to grow faster over time."

To define the level of nations' competitiveness the WEF uses twelve pillars: institutional environment, infrastructure, macroeconomic environment, health and primary education, higher education and training, labour market efficiency, financial market development, technological readiness, market size, business sophistication, and innovation.

For the sixth straight year, Switzerland tops the Global Competitiveness Index, followed by Singapore and the United States.

Global Competitiveness Index 2014-2015:

Country	Ranking
Switzerland	1
Singapore	2
United States	3
Finland	4
Germany	5
Taiwan	14
Malaysia	20
Thailand	31
Indonesia	34
Philippines	52
Vietnam	68
Cambodia	95

^{Source: Global Competitiveness Report 2014-2015}

Regarding the performance of Indonesia, which is currently in the stage categorized as efficiency-driven, the WEF states that Southeast Asia's largest economy continues to make progress in the overall rankings, climbing four notches to 34th place. The WEF expects this improvement in competitiveness to contribute to sustaining the country’s impressive GDP growth momentum - its GDP grew by 5.8 percent annually since 2004. However, most analysts would not agree that Indonesia has managed to sustain its GDP growth momentum as the country's economic growth has hit a six-year low of 4.67 percent (y/y) in Q2-2015.

The WEF also states that Indonesia’s overall performance in the index remains uneven. The country's infrastructure as well as connectivity continue to improve in the ranking, up five places from last year, while the quality of the country's public and private governance is also strengthening (Indonesia is up 14 places to 53rd as a result of an improvement in 18 of the 21 indicators composing this pillar). Rather remarkably, Indonesia ranks 36th for government efficiency. Meanwhile, corruption remains prevalent (87th) but this negative phenomenon has been declining in recent years.

Although Indonesia's macroeconomic situation deteriorated between 2012 and 2013 on the back of a higher current account deficit, it remains satisfactory (34th, down eight) according to the WEF. However, the situation of its labor market (110th, down seven positions) remains by far the weakest aspect, owing to rigidities in terms of wage setting as well as hiring and firing procedures. Furthermore, the participation of women in the workforce remains very low (112th). Another matter of concern is Indonesia's public health (99th). The incidence of communicable diseases and the infant mortality rate are among the highest outside sub-Saharan Africa. Turning to the more sophisticated drivers of competitiveness, Indonesia’s technological readiness is lagging (77th). In particular, the use of ICTs by the population at large remains comparatively low (94th, down 10).

Further Reading:

• Global Competitiveness Report

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Lex McGuir | 30 September 2015 13:06

Indonesia mining is stalled, commodities are down, corruption is rampant, nationalistic spirit means foreign companies cannot operate them, employment is declining, and the government cannot implement their planned changes,the government has violated contracts that were made with foreign companies. Yes, everything is looking great!