Jakarta, IO – The road to achieve “developed-country” status is indeed a long and winding one. However, every developing country certainly harbors the desire to become a member of the “rich-country club”, regardless of their political system. By becoming a developed country, the dignity and status of their citizens will be elevated, as they become more prosperous. The World Bank classifies developed countries as countries with per capita income upward of US$13,845.
As a rising economic powerhouse, Indonesia also dreams to join the big league. In 2023, however, Indonesia’s per capita income was only US$4,920 (35.5 percent of the threshold to be categorized as a developed country according to the World Bank standard). The country needs strategic efforts and hard work to get there. Thus, Indonesia has set a target that by 2045, when it celebrates its 100th anniversary, it will have transformed into a developed country with the fifth-largest economy in the world. Realizing this ambition will certainly not be easy, but is well within reach, especially given that Indonesia still has 20 years to go down the road.
As the key measure is per capita income, government policies need to be focused on achieving this mark. Indonesia, like it or not, has to accelerate its economy in the next two decades. This effort needs to be carried out in a strategic and comprehensive manner, by implementing a national economic development roadmap properly and consistently.
Indonesia’s desire to join the Organization of Economic Cooperation and Development (OECD) is one of those strategic steps. Created in 1961, OECD is an intergovernmental organization with a mission to achieve a “stronger, cleaner, fairer world economy” by shaping policies that foster “prosperity, equality, opportunity, and well-being for all”.
Sure, joining OECD does not automatically make Indonesia a developed country. However, considering that members of that organization are developed countries, Indonesia’s potential accession will make it more likely for the country to achieve its strategic goals. This is because the OECD has a good reputation and track record in promoting governance best practices, transparency, an anti-corruption drive, equality and environmental protection. All of these aspects are important prerequisites for realizing a better economic institution in Indonesia, in accordance with the developed world’s high standards.
Institutional improvements
Indonesia’s OECD bid will allow it to accelerate institutional improvements and benchmark them against the standards of developed countries. One of the major challenges that become a drag on Indonesia’s economic acceleration today is institutional, in the form of vast, labyrinthine and unwieldy bureaucracy, creating unnecessary red tape that tends to hinder economic movement. Indonesia was ranked 115th out of 180 in 2023 Corruption Perception Index (CPI), scoring only 34 on the scale of 100 (Transparency International, 2024). This is a wake-up call for the country to immediately fix its public sector institutions (government agencies, law enforcement, and bureaucracies at all levels of administration) so that they do not become a stumbling block in Indonesia’s quest to become a developed country.
Institutional performance improvement, especially in corruption eradication, was seen in 2019 when Indonesia managed to score 40. While there is still much left to be desired, at least it demonstrates the country’s consistent efforts to improve, compared to pre-2019 era. Unfortunately, since the pandemic, Indonesia’s CPI has been on a downward trajectory, as can be seen in Figure 1 below.
The reputation of OECD countries that are committed to fight corruption, promote transparency and strengthen law enforcement to achieve equitable and sustainable economic goals can be a lesson for Indonesia, moving forward. Along with cleaner and more transparent economic governance in line with OECD standards, it is hoped that more investment will flow in, boosting economic growth to 6 or 7 percent.
In other words, Indonesia’s bid to join the OECD is actually geared more toward improving its institutions as an intermediary strategy to reach the final goal, namely, economic benefits through a higher inflow of investment and broader trade cooperation. Without meeting OECD standards, achieving these goals and reaping the ensuing economic benefits will be difficult. Joining the OECD will allow Indonesia to tap into a deep wellspring of knowledge about how each member country achieved their transformation. Without efforts to encourage standardization of economic policies, it will be difficult for Indonesia to achieve a position on a par with other OECD countries. As a case in point, the economic policies crafted by OECD members are fine-tuned to win investor trust and confidence. This is a valuable lesson that Indonesia can draw from and emulate to court more offshore money.