Jakarta. Indonesia has moved up in the global competitiveness ranking, thanks to improvements in its institutions, infrastructure, technology adoption, economic stability and business climate, the World Economic Forum said in its Global Competitiveness Report, published on Wednesday.
Indonesia moved to 45th place out of 140 countries this year, up two spots from its adjusted position – 47th out of 135 countries – last year.
This year's report introduced a new set of measurements, dubbed Global Competitiveness Index 4.0, that gauge the challenges to productivity countries face amid rising automation and digital connectivity across all industries, commonly known as the Fourth Industrial Revolution. It also assessed five more countries this year and removed two from last year's backcast assessment.
"The Fourth Industrial Revolution has become a living reality for millions of people around the world and is creating new opportunities for business, government and individuals. Yet, it also threatens a new divergence and polarization within and between economies and societies," Klaus Schwab, founder and executive chairman of the WEF, said in the report.
The sheer size of its $1-trillion economy and its macroeconomic stability remain Indonesia's biggest drivers for competitiveness.
The report highlights the country's connectedness (ranked 50th with a score of 61.1 out of 100) thanks to its rapid adoption of information and communication technology. Most adults in Indonesia own mobile phones, while one in four is connected to the internet.
"This bodes well with a vibrant entrepreneurial culture and overall business dynamism [69.0, 30th]," the WEF said in the report.
The country has high social cohesion and its government is seen to be keen to adapt its regulations to facilitate development.
Still, the country's poor capacity for innovation and an inadequate public health system affect its competitiveness.
"Research and development activities remain extremely limited, with R&D spending amounting to less than 0.1 percent of gross domestic produc]," the WEF said, noting Indonesia's 112th place ranking in that regard.
Also, "a newborn in Indonesia can expect to live only 62 years in good health, one of the lowest figures outside sub-Saharan Africa," the WEF said.
The think-tank said the competitiveness result strongly correlates with income level. This suggests that countries with performance far below the trend line – such as Indonesia Malaysia, India and Mexico – would able "to promote higher and sustained levels of income" just by maintaining their competitiveness.
But it also called for these countries to place more emphasis on creating ecosystems that enhance innovation.
"It is no longer possible to rely solely on efficiency and cost-cutting for economic success: innovation, flexibility and adaptation to change are becoming the key ingredients," the WEF said.