Jakarta. Indonesia’s recent promotion to the upper-middle income rank does not mean that the Southeast Asian country should be complacent especially if it aims to be a developed nation by 2045, according to an expert.

The World Bank recently announced that Indonesia’s gross national income (GNI) per capita had jumped 9.8 percent from $4,170 in 2021 to $4,580 in 2022. And so Indonesia finally regained its upper-middle income status after losing it in 2021 due to the Covid-19 pandemic. 

The government’s “2045 Golden Indonesia” blueprint envisions Indonesia as a developed country by its centennial anniversary. Economist Bhima Yudhistira, however, said that Indonesia might get into the high-income band of countries by 2070 —decades later than the target—  if its economy only grows at 5 percent on average.

“Getting promoted from a lower-middle income to an upper-middle income country is not as tough as trying to be classified as high-income,” Bhima, who is the executive director at economic think-tank Celios, recently told reporters in Jakarta.

“We need to book a post-pandemic growth of between 7 and 8.5 percent on average to be an advanced economy. If our economy keeps growing at 5 percent on average, Indonesia would only be able to become a developed country by 2070. We would not achieve the ‘2045 Golden Indonesia’. That also means we could get stuck in the middle-income trap,” Bhima said.

According to the World Bank, Indonesia’s economy is forecast to expand at 4.9 percent in 2023. Indonesia last year posted a 5.3 percent economic growth. 

Will We Attract Investors?
Bhima also commented on Finance Minister Sri Mulyani’s statement that the upper-middle income status could help attract foreign investors into the country. 

“The upgraded status only works for portfolio investment. When it comes to foreign direct investment [FDI], investors would check what Indonesia has done to address corruption. They would ask ‘is it a high-cost economy? What about logistic costs and bureaucratic red tape?’. We should really work on our competitiveness,” Bhima said.

Indonesia has set a goal to attract Rp 1,400 trillion (around $93 billion) in investment this year. As of the first quarter of 2023, Indonesia has already amassed Rp 328.9 trillion in investment, of which 53.8 percent (Rp 177 trillion) came from foreign investors.