FOR more than three decades, Indonesia has languished in the economic twilight zone known as the middle-income trap. Having entered this bracket in the early 1990s, the archipelago has yet to make the leap to high-income status. Current projections suggest the wait will continue until at least 2038, and perhaps as late as 2045.
Escaping this gravity well is no small feat, notes Susiwijono Moegiarso, secretary of the co-ordinating ministry for economic affairs. History offers few success stories. Japan broke through in 1964. The four "Asian Tigers", comprising Singapore, Hong Kong, Taiwan and South Korea, followed suit. Most others remain stuck.
In South-East Asia the race is uneven. Malaysia, with a gross national income (GNI) per person of $11,670, is poised to graduate by 2028. Thailand, earning $7,120 per head, may cross the threshold a decade later. Indonesia trails behind. With a GNI of just $4,910, its graduation relies heavily on future growth rates.
The symptoms are familiar. Mr Susiwijono points to slowing growth, stagnant productivity and a lack of innovation. Weak institutions compound the problem. The prescription is equally clear. Deep structural reform is required to foster sustainable expansion.
Yet the macroeconomic vitals remain robust. Investment from the first to the third quarter of 2025 hit 1,434trn rupiah, a 13.7% rise on the previous year. Quarterly investment has consistently topped 450trn rupiah since late 2024. Mr Susiwijono views this as a vote of confidence in political stability and government policy.
To speed things up, Jakarta is knocking on the door of the OECD, a club of mostly rich countries. Membership is seen as a seal of approval that would force better governance and open markets. The accession process is under way. An initial memorandum was submitted in Paris in June, and OECD officials visited Jakarta earlier this month to offer support. Whether this external anchor can pull Indonesia up the ladder remains to be seen.
