The long-term strategies that will help Indonesia build a modern economy

Khoon Tee Tan, senior partner in McKinsey’s Jakarta office, identifies the opportunities that Indonesian leaders can consider to reimagine and reform the country in a post-COVID-19 world.

What long-term strategies will help Indonesia build a modern economy?

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COVID-19 is an unprecedented challenge for humanity and a global economic crisis like no other before. In Indonesia, we see the opportunity to re-imagine and reform the economy for a post-COVID world by focusing on a few critical priorities.

Firstly, building national resilience. Like many countries, Indonesia’s health care sector is highly reliant on imported medical equipment. Hence, to boost the resilience of the health care sector, it is important to expand domestic manufacturing capacity and local supply chains for medical technology.

Secondly, accelerating economic transitions. Micro-enterprises and SMEs (small- and medium-enterprises) account for over half of Indonesia’s GDP. Digitizing MSMEs can unleash productivity on a massive scale, for example, by implementing digital capability centers across the country.

Thirdly, boosting tourism. When countries reopen, Indonesia will have to compete for fewer tourists and fewer tourist dollars globally. However, Indonesia’s vast geography and large population gives it the opportunity to encourage domestic tourism as a way to reboot this critical part of the economy.

Fourthly, enable fundamental change. By 2030, we expect Indonesia to be short of nine million digital workers. Building on recent online learning habits during this pandemic, Indonesia can roll out large scale capability building programs to re-skill and up-skill its population and prepare the work force for the future.

Furthermore, investing in physical infrastructure and digital infrastructure will be needed in order to improve the competitiveness of the economy. As Indonesia looks to the future, we see the current crisis as both a challenge and an opportunity to transition to a more modern and resilient Indonesian economy that is fit for the future.

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