2019 Index of Economic Freedom

Indonesia

overall score65.8
world rank56
Rule of Law

Property Rights52.2

Government Integrity39.5

Judicial Effectiveness53.5

Government Size

Government Spending91.4

Tax Burden83.7

Fiscal Health88.1

Regulatory Efficiency

Business Freedom69.3

Labor Freedom49.3

Monetary Freedom77.4

Open Markets

Trade Freedom79.8

Investment Freedom45.0

Financial Freedom60.0

Create a Comparison Chart

See how Indonesia compares to another country using any of the measures in the Index.

vs
Close
Download PDF
Quick Facts
  • Population:
    • 262.0 million
  • GDP (PPP):
    • $3.2 trillion
    • 5.1% growth
    • 5.1% 5-year compound annual growth
    • $12,377 per capita
  • Unemployment:
    • 4.2%
  • Inflation (CPI):
    • 3.8%
  • FDI Inflow:
    • $23.1 billion

Indonesia’s economic freedom score is 65.8, making its economy the 56th freest in the 2019 Index. Its overall score has increased by 1.6 points, with sharp increases in business freedom, investment freedom, and judicial effectiveness outpacing declines in monetary freedom and labor freedom. Indonesia is ranked 11th among 43 countries in the Asia–Pacific region, and its overall score is above the regional and world averages.

The government’s efforts to improve Indonesia’s business environment and attract foreign direct investment by upgrading power and other infrastructure, prosecuting corruption cases more aggressively, and taking other steps to improve the regulatory environment are aimed at sustaining economic development and diversification. Remaining constraints include an inflexible labor market, long-standing protectionist rules governing trade and foreign investment in extractive sectors, and subsidies to numerous state-owned enterprises. Improvements in the legal and regulatory framework would strengthen the rule of law.

Close

Background

Indonesia is the world’s most populous Muslim-majority country. Since 1998, when long-serving authoritarian ruler General Suharto stepped down, Indonesia’s 262 million people have enjoyed a wide range of political freedoms, and participation in the political process is high. Joko Widodo, former businessman and governor of Jakarta, won a five-year presidential term in 2014. Indonesia is Southeast Asia’s largest economy. Key exports include mineral fuels, animal or vegetable fat, electrical machinery, rubber, machinery, and mechanical appliance parts. Continued improvements in infrastructure should help to reduce high transport and logistical costs. Indonesia has significant untapped maritime resources that could spur future development, but barriers to international trade and investment undermine prospects for growth.

Rule of LawView Methodology

Property Rights 52.2 Create a Graph using this measurement

Government Integrity 39.5 Create a Graph using this measurement

Judicial Effectiveness 53.5 Create a Graph using this measurement

Property rights are generally respected. Enforcement is uneven, and property is sometimes difficult to register, although the government recently reduced the transfer tax to make registration easier. The judiciary is independent but subject to corruption and outside influence. Despite reforms, endemic corruption remains a problem. Anticorruption efforts are resisted from within the government itself and lack widespread public support.

Government SizeView Methodology

The top individual income tax rate is 30 percent, and the top corporate tax rate is 25 percent. Other taxes include value-added and property taxes. The overall tax burden equals 10.4 percent of total domestic income. Over the past three years, government spending has amounted to 16.9 percent of the country’s output (GDP), and budget deficits have averaged 2.5 percent of GDP. Public debt is equivalent to 28.9 percent of GDP.

Regulatory EfficiencyView Methodology

Indonesia has improved its regulatory environment over the past year, implementing measures to reduce the cost of launching a business, but a lack of transparency remains an impediment. The labor market is not overly rigid, but minimum wages have been rising in recent years. Although it earned praise in 2016 for fuel subsidy reforms, the government announced a freeze on further fuel subsidy cuts in 2018.

Open MarketsView Methodology

The combined value of exports and imports is equal to 39.5 percent of GDP. The average applied tariff rate is 2.6 percent. As of June 30, 2018, according to the WTO, Indonesia had 110 nontariff measures in force. The reform-minded government has moved to dismantle some of the previously imposed barriers to foreign investment. Overall, the financial system’s efficiency has increased. The state still owns several banks.

Country's Score Over Time

View Chart of Scores over Time

Regional Ranking

rank country overall change
1Hong Kong90.20.0
2Singapore89.40.6
3New Zealand84.40.2
4Australia80.90.0
5Taiwan77.30.7
6Malaysia 74-0.5
7South Korea72.3-1.5
8Japan72.1-0.2
9Macau710.1
10Thailand 68.31.2
11Indonesia65.81.6
12Kazakhstan65.4-3.7
13Azerbaijan65.41.1
14Brunei Darussalam65.10.9
15Philippines63.8-1.2
16Bhutan62.91.1
17Kyrgyz Republic 62.3-0.5
18Fiji62.20.2
19Samoa62.20.7
20China58.40.6
21Papua New Guinea58.42.7
22Cambodia57.8-0.9
23Tonga57.7-5.4
24Laos57.43.8
25Sri Lanka56.4-1.4
26Vanuatu56.4-13.1
27Bangladesh 55.60.5
28Tajikistan55.6-2.7
29Mongolia55.4-0.3
30Vietnam55.32.2
31India55.20.7
32Pakistan 550.6
33Solomon Islands54.6-2.9
34Nepal53.8-0.3
35Burma53.6-0.3
36Uzbekistan53.31.8
37Maldives53.22.1
38Micronesia51.9-0.4
39Afghanistan51.50.2
40Turkmenistan48.41.3
41Kiribati47.3-3.5
42Timor-Leste44.2-3.9
43North Korea5.90.1
See Entire Region List ›

View all countries ›

Back to Top