Indonesia’s Ranking Improved in the World Economic Forum (WEF)’s Global Competitiveness Report 2017-2018

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In the 2017-2018 edition, a total of 140 countries are analyzed (using 12 pillars of competitiveness) and ranked by World Economic Forum, a Swiss non-profit foundation. This year – ten years after the global financial crisis – the World Economic Forum sees signs of economic recovery across the world. However, policymakers and business leaders remain concerned about the prospects for future economic growth. According to the World Economic Forum such concerns due to a widespread failure on the part of leaders and policy-makers to put in place reforms necessary to underpin competitiveness and bring about much-needed increases in productivity.

In the introduction of its Global Competitiveness Report 2017-2018, the World Economic Forum emphasizes that “this year the Global Competitiveness Index (GCI) points to three main challenges and lessons that are relevant for economic progress, public-private collaboration, and policy action: (1) financial vulnerabilities pose a threat to competitiveness and to economies’ ability to finance innovation and technological adoption; (2) emerging economies are becoming better at innovation but more can be done to spread the benefits; and (3) labor market flexibility and worker protection are needed for competitiveness and shared prosperity in the Fourth Industrial Revolution”.

The 12 pillars that are analyzed and used to rank the countries are:

(1) institutions
(2) infrastructure
(3) macroeconomic environment
(4) health and primary education
(5) higher education and training
(6) goods market efficiency
(7) labor market efficiency
(8) financial market development
(9) technological readiness
(10) market size
(11) business sophistication
(12) innovation

Global Competitiveness Index 2017-2018:

Country Ranking
Switzerland      1 =
United States      2 ↑
Singapore      3
Netherlands      4 =
Germany      5 =
Malaysia     23 ↑
Thailand     34 ↑
Indonesia     36 ↑
Vietnam     55 ↑
Philippines     56 ↑
Cambodia     94 

Regarding Indonesia, the World Economic Forum notes that the country is inching its way up the competitiveness ladder as it has improved its performance across all of its pillars. Its position in the rankings is driven mainly by its large market size (9th) and a relatively robust macroeconomic environment (26th). Ranking 31st and 32nd in innovation and business sophistication respectively, Indonesia is one of the top innovators among the emerging economies.

In contrast, Indonesia is lagging quite far behind in terms of technological readiness (80th), despite having made steady progress on that front over the last decade. Significant advances are also needed in the nation’s labor market efficiency pillar (96th), which is dragged down by excessive redundancy costs, limited flexibility of wage determination, and a limited representation of women in the labor force.

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