Indonesia needs outward-looking policies to boost economic growth

Economist Didik J. Rachbini of INDEF argues that Indonesia's economic growth remains moderate at approximately 5 percent because current policies are too inward-looking. He suggests that the nation's focus on domestic markets, import substitution, and domestic consumption prevents the country from achieving higher growth targets of 7 to 8 percent.

To reach these higher growth levels, Rachbini asserts that Indonesia must transform its economic orientation to be outward-looking. This shift would involve utilizing the foreign sector as a primary engine for structural transformation and industrialization. By prioritizing export-oriented policies, improving infrastructure, and creating efficient bureaucracy, Indonesia could attract more foreign direct investment (FDI) to grow alongside domestic investment.

Comparing Indonesia to Vietnam, which has achieved annual growth rates of up to 8.3 percent, Rachbini notes that a change in policy direction is essential. Without moving away from a reliance on domestic resources and markets, he warns that the country will likely remain at moderate growth levels, making ambitious economic promises difficult to fulfill.