Iman Pambagyo – The Investor Daily newspaper, in its February 6, 2025 edition, published an article and an editorial that should serve as a wake-up call for all of us – the notion that the government will deliver 8 percent economic growth in the coming years is nothing more than a beautiful dream – one that ignores structural weaknesses in our economy.

The article reported that Indonesia's economy continues to be disrupted by a significant decline in productivity, largely due to a shrinking middle class and a slowdown in the manufacturing sector. In simple terms, deindustrialization is taking hold, and Indonesia's manufacturing competitiveness is weakening.

Meanwhile, our ASEAN neighbors – with their stronger competitive advantages – are outperforming Indonesia in attracting foreign direct investment (FDI) in industries where we once had an edge, such as textiles, apparel, and footwear. They have also successfully attracted investment in key emerging sectors that drive sustainable growth, including artificial intelligence, the digital economy, healthcare, and green industries.

The government's response: Short-term fixes over long-term solutions

In response to public concerns that the economy in 2024 "wasn't doing just fine," Finance Minister Sri Mulyani Indrawati argued that government spending played a crucial role as a "shock absorber" to sustain public consumption, safeguard economic stability, and support national development programs.

Similarly, Coordinating Minister for Economic Affairs Airlangga Hartarto said that to achieve the 2025 growth target of 5.2 percent, the government will rely on stimulus measures tied to Ramadan and Eid al-Fitr festivities, as well as rice assistance for 16 million families.

Other government strategies include the free nutritious meal program, small business credit disbursement (KUR), and additional measures to "maintain" – rather than enhance – Indonesia's competitiveness under President Prabowo Subianto's leadership.

This approach reflects a troubling pattern: our economic growth is heavily dependent on seasonal factors such as religious holidays, year-end shopping booms, and even general elections – which consume enormous portions of the state budget without triggering productive sectors in a sustainable way. In short, we are stuck in a cycle of seasonal extravagance.

Rethinking Indonesia's growth strategy

The goal of achieving the Indonesian Golden Vision 2045 cannot be realized through short-term spending bursts or by relying on state-owned enterprises and debt issuance as growth pillars. These are not sustainable strategies, nor are they silver bullets for solving our long-term economic challenges.

The state-owned pawn company Pegadaian is known for its slogan: "Overcoming problems without creating new ones." Unfortunately, that principle does not apply here. The lack of consistent implementation of good public governance principles has trapped Indonesia in a vicious cycle – where the same economic challenges resurface, each time with more complex and severe consequences.

To make matters worse, several ministers have acted without coordination, introducing "experimental" policies that have increased reliance on government aid rather than fostering economic independence.

Instead of creating a business-friendly environment, recent policies have made it increasingly difficult for enterprises – especially small and medium-sized businesses – to thrive. The government's development agenda remains unclear and fragmented, leaving both businesses and investors struggling to grasp a holistic strategy.

Three months into the new administration, we should have already laid the groundwork for strong, sustainable growth. Instead, many businesses – including large manufacturers and foreign investors – have entered survival mode. Some are now considering layoffs, downsizing operations, or relocating to other ASEAN countries due to policy uncertainties and unaddressed economic challenges.

Good governance as the cornerstone of sustainable growth

The public strongly expects adherence to Clean and Good Public Governance (CGPG) principles, which encompass:

• Transparency and accountability
• Public participation and the rule of law
• Efficiency, fairness, and economic competitiveness
• A stable yet innovative business climate
• Social development and corruption eradication
• Human rights protection

If properly implemented, these governance principles will foster trust between the public and the government, ensure equitable resource distribution, and protect citizens' rights without exception. More importantly, they will enable effective policies that drive real economic prosperity – rooted in transparency and accountability, rather than corruption, collusion, and cronyism.

A final warning: Break the cycle or fall behind

Albert Einstein once said, "Insanity is doing the same thing over and over again yet expecting different results."

We cannot continue relying on the same outdated policies – especially when they are seasonal in nature. If our leaders fail to change their mindset, Indonesia will fall further behind other nations. Even worse, instead of acknowledging our weaknesses, we have a tendency to blame other countries for our own policy failures – introducing reactionary regulations that only further isolate us from global progress.

Hard work is crucial, but under current circumstances, thinking critically before taking action is even more important. Indonesia's path to sustainable, high-quality economic growth depends on it.

[Iman Pambagyo is the Trade Ministry's Director of International Trade Negotiations (2012-2014, 2016-2020) and Indonesia's Ambassador to the WTO (2014-2015). The views expressed in this article are those of the author.]

Source: https://jakartaglobe.id/opinion/stop-relying-on-seasonal-factors-for-economic-growt