Indonesia Falls to 40th in 2025 Competitiveness Ranking, Trails Behind Malaysia

TEMPO.CO, Jakarta - Indonesia's position in the World Competitiveness Ranking 2025 has dropped sharply, falling to 40th out of 69 countries, according to a report released in June. This marks a 13-place decline from the previous year, when the country ranked 27th.

The steep drop has put Indonesia behind Malaysia, which made a significant leap to 23rd place.

Executive Director of the Center for Economic and Law Studies (Celios), Bhima Yudhistira Adhinegara, attributed Indonesia’s falling rank to its lack of economic diversification and weak performance in attracting strategic investments. “So, the massive industrialization development is needed,” said Bhima to Tempo on Monday, June 23, 2025, referring to Malaysia’s strategy of developing industries beyond palm oil, such as semiconductors.

Bhima noted that Malaysia has effectively drawn global technology investors and ensured a consistent policy environment. “Policy certainty deserves credit in Malaysia,” said the University of Bradford alumnus.

The International Institute for Management Development (IMD) report highlights Malaysia’s strong performance, including the fourth-highest economic growth globally. The country has also succeeded in reducing unemployment and keeping inflation under control—two key elements for boosting competitiveness.

In 2024, Malaysia was ranked 34th while Indonesia stood at 27th. In 2025, however, Indonesia dropped significantly to 40th, whereas Malaysia climbed to 23rd.

Riani Sanusi Putri contributed to the writing of this article.

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