Challenges for Indonesia to Become a Developed Country Will Be Harder Than South Korea

MRT Jakarta phase 2 construction
MRT Jakarta phase 2 construction

Indonesia is in a determined race towards achieving the status of a developed country by 2045. However, Finance Minister Sri Mulyani Indrawati has cautioned that this journey will be challenging, perhaps even more so than the path taken by South Korea. She emphasized that the obstacles Indonesia faces could be more formidable.

Sri Mulyani highlighted that some Asian countries, such as Japan, Hong Kong, and Taiwan, have successfully transitioned from middle-income to high-income status. “We can see that the process of becoming a developed country can be relatively short, around a decade or less,” she remarked during her presentation to Commission XI of the Indonesian Parliament on Wednesday, June 5, 2024.

Contrasting these success stories, Sri Mulyani pointed to Argentina as an example of a nation that has struggled to escape the middle-income trap. Although Argentina once achieved developed country status, it regressed and is now classified as a middle-income country.

She also discussed South Korea’s impressive journey to becoming a developed country within a relatively short timeframe. “South Korea’s take-off period occurred from 1980 to 1994,” she said.

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The country’s rapid development was driven by substantial growth in the manufacturing sectors of electronics and transportation. “At that time, investments grew by 10.6% in manufacturing, particularly in electronics and transportation,” she noted.

However, Sri Mulyani acknowledged that the conditions faced by Indonesia in the 2020s differ significantly from those South Korea encountered during its development period. Today, electronic technology has advanced substantially, incorporating artificial intelligence. She stressed the importance of adapting South Korea’s strategies to fit Indonesia’s current context. “We can use South Korea as a comparison, but we also need to adapt to the challenges of today,” she explained.

In a broader economic context, both Bank Indonesia Governor Perry Warjiyo and Finance Minister Sri Mulyani expressed concern over the global economic uncertainties expected to persist until 2025. These uncertainties are likely to affect Indonesia’s economy.

“Global economic conditions are very uncertain with many dynamics, and these challenges will impact Indonesia’s economy this year and in the years ahead,” Perry said during a working meeting with Commission XI at the Parliament Building in Jakarta, as quoted on Thursday, June 5, 2024.

Sri Mulyani outlined six major challenges the world faces: high interest rates, tighter trade restrictions, commodity price volatility, geopolitical tensions, an aging global population, and the severe impacts of climate change.

Furthermore, Sri Mulyani reflected on Indonesia’s potential to overcome these obstacles by drawing lessons from other countries while tailoring strategies to its unique conditions. She believes that Indonesia’s large and diverse economy holds the potential for growth and resilience, provided that appropriate policies and investments are made.

The Finance Minister’s presentation emphasized the importance of strategic investment in key sectors to drive growth. For instance, she suggested focusing on technology and innovation to enhance productivity and competitiveness. Additionally, she highlighted the need for improving infrastructure, education, and healthcare to support sustainable development.

Moreover, Sri Mulyani stressed the importance of political stability and good governance in achieving economic goals. She argued that transparency and accountability in government operations would foster a conducive environment for economic growth and development.

In conclusion, while the path to becoming a developed country by 2045 is fraught with challenges, Indonesia can draw inspiration from the success stories of other nations. By leveraging its strengths and addressing its weaknesses, Indonesia can navigate the complex landscape of global economic dynamics.

Sri Mulyani’s insights underscore the need for adaptive strategies, robust investments, and a commitment to sustainable development. As Indonesia strides towards its ambitious goal, it must remain vigilant and proactive in managing both domestic and international challenges.