Jakarta. Domestic reforms are expected to be Indonesia’s greatest challenge in its accession process to the Organization for Economic Cooperation and Development (OECD), according to an analyst.

The OECD recently decided to begin membership talks with Indonesia. Jakarta had long been seeking a seat at the OECD to supercharge its economic growth. The OECD will draft a roadmap for Indonesia to become part of the rich country club. Indonesia will undergo reviews --involving over 20 technical committees-- on areas such as open trade, investment, public governance, and climate, to name a few. 

Muhammad Habib, an international relations researcher at think-tank CSIS Indonesia, recently said that Jakarta had to pay attention to both “domestic and international elements” as the membership talks commenced. This means that Indonesia has to make changes to the policies at home to meet the OECD standards based on the reviews, while also maintaining good ties with the group’s members at the same time.

“Indonesia’s biggest challenge for OECD membership is the domestic reforms, and to what extent is the government politically committed to meet OECD’s technical standards. Although I’m quite skeptical, considering the entrenched interests among our politicians,” Habib recently told the Jakarta Globe.

Reforms related to legal certainty, transparency, and anti-graft are expected to be the most challenging for Indonesia, according to Habib.

“At the same time, there are challenges related to the international system. For instance, the potential rise of populist or hyper-nationalist leaders in OECD countries. And then there is China which can be an alternative partner that does not set any particular requirements,” Habib said.

When asked if he had a specific leader in mind, Habib mentioned Donald Trump who would potentially return to the White House in the upcoming election. He added: “Trump does not really trust international institutions.”

The US is a member of the OECD. Last year, the incumbent US President Joe Biden said that Washington would back Indonesia’s OECD membership. The Trump administration saw the US withdrawing from international agreements, including the Paris climate accord. Trump was also critical of international institutions, including the World Trade Organization (WTO), arguing that they had been treating the US very badly. Despite its substantial economic size, China is not a member of the OECD but has been a key partner in the group

The OECD membership talks announcement came not long after Indonesia held its 2024 election. The latest count of the ballots shows Prabowo Subianto and Gibran Rakabuming are in the lead, claiming over 58 percent of the total votes. However, Habib said it was still too early to comment on how Prabowo's likely victory would impact Indonesia’s OECD candidacy.

Bhima Yudhistira, the executive director of the economic think-tank Celios, recently said that the OECD membership could get Indonesia out of the middle-income trap. However, Bhima admitted that Indonesia had a long to-do list to align with the OECD standards.

“There are many sub-national government regulations, coupled with the laws, that we might need to liberalize, particularly those related to licenses, business competition, and trade,” Bhima said.

“Even Brazil has to harmonize over 200 of its regulations [with OECD standards] when they want to join the group,” he told the Globe.

Brazil is in the process of getting into the OECD with its accession talks commencing in 2022.

It is still too early to tell when Indonesia will complete the accession process. The OECD said that the group had not set a fixed deadline, meaning how long it takes will depend on whether Indonesia can meet its standards. However, it typically takes between 5-8 years before a country can become a full-fledged member of the OECD.

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