JAKARTA, Indonesia – Southeast Asia’s largest country continues to improve its overall competitiveness, according to the 2014 Global Competitiveness Report released by the World Economic Forum (WEF) on Wednesday, September 3, though its performance remains uneven.
Indonesia was ranked 34th among 144 countries, up from 38th in 2013 and 50th in 2012. In particular, the country performed well in terms of governance and government efficiency.
"This improvement in competitiveness will probably contribute to sustaining the country’s impressive momentum — its GDP grew by 5.8% annually since 2004 — under the new leadership," the report said.
With businesses as respondents, the survey grades countries based on 12 categories or “pillars.”
These include institutions, infrastructure, macroeconomic environment, health and primary education, higher education and training, goods market efficiency, labor market efficiency, financial market development, technological readiness, market size, business sophistication, and innovation.
Despite the improvement, Indonesia still lags behind some of its “ASEAN 5” peers in competitiveness. Singapore ranked 2nd, Malaysia 20th, Thailand 31st, and the Philippines 52nd.
The WEF reported that the ASEAN 5, along with Japan and China, all improved their rankings this year.
"The 5 largest Southeast Asian economies (ASEAN-5) all feature in the top half of the rankings, and all of them have made strides in this edition: Malaysia gains 4 places, Thailand is up 6, Indonesia 4, the Philippines 7, and Vietnam advances 2 places. Since 2009, they have improved their group performance in every edition," the report said.
Elsewhere in the world, the US climbed places for the second consecutive year on the back of better institutional framework and innovation. In Europe, countries severely hit by the economic crisis such as Spain, Portugal and Greece made strides.
Improvements in governance, efficiency
The quality of public and private governance is strengthening in Indonesia, according to the report, with the country up 14 places to 53rd as a result of improvement in 18 of the 21 indicators composing this pillar.
"In particular, Indonesia ranks a remarkable 36th place for government efficiency," the report said.
While corruption remains prevalent, the report notes it has been receding for several years.
Indonesia also improved in terms of infrastructure and connectivity, moving up 5 places from last year and 20 places since 2011.
While the macroeconomic situation deteriorated between 2012 and 2013 on the back of a higher deficit, the report says it remains satisfactory at 34th place, down 8 spots.
Weak labor market
Indonesia's weakest aspect in terms of competitiveness is its labor market, ranked 110th and down by 7 places, according to the report.
The report blamed this on "rigidities in terms of wage setting and hiring and firing procedures—for instance, the World Bank estimates that, on average, the cost associated with making a worker redundant is equivalent to 58 weeks of salary (139th)".
The participation of women in the workforce, ranked 112th, and public health, ranked 99th, also remain low.
"The incidence of communicable diseases and the infant mortality rate are among the highest outside sub-Saharan Africa," the report added.
Technological readiness is also lagging at 77th place, as "the use of ICTs by the population at large remains comparatively low".
Here’s a list of the most problematic factors for doing business in Indonesia: