Indonesia ranked 34th on the 2023 IMD Global Competitiveness Index. Despite a significant improvement in overall ranking compared to last year, the report highlighted low scores in many of the competitiveness indicators. In the domain of government efficiency, Indonesia ranked 39th on institutional framework, 46th in business legislation, and 44th in societal framework.
The scores reflect challenges in Indonesia’s current institution where inefficient bureaucracy, ineffective public service, regulatory burden and overlap, high rates of corruption, and poor law enforcement still very much present. A survey conducted by the World Economic Forum among Indonesian entrepreneurs in 2017 mentioned corruption and inefficiencies in government bureaucracy are key factors that obstruct business development.
Studies have also pointed out the strong correlation between the quality of state institution and the level of economic growth. Countries who achieve high economic growth are those with efficient and well-functioning government institutions. Thus, studies have also suggested the critical importance of institutional reform to boost economic growth.
The Indonesian government from different period of leadership have put institutional reform as priority and established initiatives and policies to ensure a reform. This research shows there has been positive yet slow improvement in the performance of Indonesia’s governance based on different indicators taken from World Bank data from 1996-2021.
This research will conduct comparative analysis on the different institutional reform by Indonesia and other countries. It will use the Worldwide Governance Index (WGI) reference as a barometer of governance performance. The research aims to produce a sound policy recommendation on institutional transformation.