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View all search resultsIndonesia's investment crossroads: Time to upgrade the playbook
The comfortable lead Indonesia has enjoyed against its regional peers in attracting foreign investment is beginning to narrow as the competitive map shifts to quality.
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Investment and Downstream Minister Rosan Roeslani, who is also CEO of state asset fund Danantara, addresses a press conference on Dec. 17, 2025, at the Presidential Palace Complex in Central Jakarta. (Antara/Cahya Sari)
F
or much of the past decade, Indonesia has been one of ASEAN's most recognizable investment magnets. The story is compelling: a market of 280 million consumers, a young workforce and a downstream agenda that has lifted nickel and copper into the global battery supply chain.
Yet a string of recent data releases has been a reminder that the competitive map has shifted. Regional peers are quietly catching up, and the comfortable lead we have enjoyed is starting to narrow.
The first signal came from the IMD World Competitiveness Ranking 2026. Indonesia fell eight rungs from 40 to 48 out of 70 economies, among the sharpest drops globally and the deepest in ASEAN. Malaysia jumped eight positions to 15, Thailand and the Philippines each gained four, while Vietnam held firm at 27. Within ASEAN-6, Indonesia now sits at the bottom.
What weighed most was not growth or inflation but business and government efficiency. Business efficiency slid from 14th in 2024 to 50th in 2026 and government efficiency slipped from 23 to 38. Behind those numbers are the quality of institutions and management, the two things investors watch most closely when committing capital for the long haul.
A similar message came from the World Bank Business Ready (B-READY) 2025.
Indonesia sits below the global average in two of the three pillars: regulatory framework at 65.6 and operational efficiency at 59.0, while it only edges slightly above in public services at 62.0. Against ASEAN peers, the country trails in five out of 10 topics that matter most to greenfield investors: business entry, utility services, labor, dispute resolution and financial services.
These are not the headline hurdles that dominate the news. They are the day-to-day frictions that decide whether a factory opens on schedule or quietly relocates to a neighboring jurisdiction.
