Indonesia’s Economic Ranking Plummets, Malaysia Surges Ahead

Indonesia has experienced a significant decline in global competitiveness, dropping sharply in the World Competitiveness Ranking. The nation now ranks 40th, a stark contrast to its previous standing, raising concerns about economic growth and investment.

Rapid Descent

The recent report, released in June, reveals that Indonesia has fallen thirteen places from the prior year, when it held the 27th position. This downturn places the country behind Malaysia, which impressively advanced to 23rd place.

Bhima Yudhistira Adhinegara, Executive Director of the Center for Economic and Law Studies (Celios), pointed to the lack of economic diversification and failure to attract strategic investments as key contributors to Indonesia’s falling rank. He emphasized the need for extensive industrialization, mirroring Malaysia’s strategy of developing industries beyond palm oil, like semiconductors, during an interview on June 23, 2025.

According to Bhima, Malaysia has effectively drawn global technology investors, while also maintaining a consistent policy environment. “Policy certainty deserves credit in Malaysia,” said the University of Bradford alumnus.

The International Institute for Management Development (IMD) report underscored Malaysia’s robust performance, including one of the highest economic growth rates globally. The nation also successfully reduced unemployment and controlled inflation, which are critical factors in enhancing competitiveness.

In 2024, Malaysia was ranked 34th, while Indonesia was 27th. However, in 2025, Indonesia declined to 40th, while Malaysia climbed to 23rd.

Comparing Strategies

Malaysia has seen notable success by attracting foreign investment and fostering a stable policy climate. This approach is markedly different from Indonesia’s current economic trajectory, leading to a substantial divergence in global rankings. The contrast highlights the importance of diversification and consistent policies.

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“So, the massive industrialization development is needed,”

—Bhima Yudhistira Adhinegara, Executive Director of the Center for Economic and Law Studies (Celios)

A recent study by the World Bank indicates that countries with diverse economies and strong investment attract more foreign capital (World Bank, 2025).

Indonesia’s fall in the rankings underscores a pressing need for strategic shifts to enhance economic competitiveness. Diversifying industries and attracting investment can improve the nation’s position on the global stage.