Indonesia's challenge is productivity, not investment volume: Ministry

Jakarta (ANTARA) - Indonesia’s challenge in promoting sustainable economic growth is not simply attracting more investment, but ensuring capital boosts productivity, the Finance Ministry said on Wednesday.

Speaking at a discussion organized by the National Development Planning Ministry (PPN/Bappenas) and Asian Development Bank Institute (ADBI), Economic Stabilization Strategy Director Noor Faisal Achmad said investment remains crucial for growth.

However, investment alone is insufficient to generate high and sustainable economic growth, he said.

Indonesia needs to focus more on improving productivity and investment efficiency so incoming capital can generate greater economic value, Achmad said.

He cited structural challenges including skills gaps, widespread informality, limited and costly financial intermediation, and business and labor regulations that need greater predictability.

These issues are interconnected, he said. Skills gaps can reduce corporate productivity, while low productivity constrains formal wage growth and the tax base. Suboptimal financing can also hamper business expansion.

In the long term, the Finance Ministry is encouraging stronger manufacturing as a driver of productivity, exports, technological learning and formal job creation.

“Manufacturing needs to regain momentum as an engine of productivity, exports, technological learning and formal job creation,” Achmad said.

Manufacturing development should go beyond expanding processing activities to generating greater domestic value, strengthening technological capabilities and diversifying markets, he said.

Achmad said policies for priority sectors should deliver three measurable outcomes: higher investment and exports; lower reliance on strategic imports; and more decent jobs.

Achmad also stressed the need to maintain fiscal rules, improve government revenue and spending, ensure policy consistency internationally, and raise total factor productivity and investment efficiency.

Policy should not focus solely on the size of capital accumulation, but also on investments’ ability to generate productivity gains, he said.

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Indonesia's challenge is productivity, not investment volume: Ministry - ANTARA News Jawa Timur