La autonomía estratégica para Europa requiere crecimiento económico VS Impulsando la productividad de Indonesia

 

1-Strategic autonomy for Europe requires economic growth Luis Garicano 

 Europa solo puede responder con fuerza económica: un crecimiento más rápido de la productividad, energía más barata, un mercado continental genuino y liderazgo tecnológico.

2- : Reaching high income by 2045

 La clave de todo esto son los buenos empleos

1-Strategic autonomy for Europe requires economic growth

 
 

 

The return of Donald Trump to the White House confronts Europe with an existential challenge. His administration’s willingness to weaponise trade – treating even NAFTA partners as adversaries – makes clear that transatlantic economic relations have become entirely transactional. The same is true for all the other aspects of the US–EU relationship, including the critical security dimension. Europe faces this challenge from a position of weakness, after two decades of relative decline. Hence this shock demands a fundamental economic renewal. Without addressing the structural causes of this weakness, Europe cannot achieve the strategic autonomy it desperately seeks.

The actions of the European institutions – the Commission, the Council and the Parliament – must respond to the Trump shock along three dimensions:

  1. Growth: Europe’s stagnation undermines the continent’s ability to respond to external shocks. Europe must grow again.
  2. Trade: The best response to the increasing world fragmentation and difficulty of trading outside the EU is to deepen the Single Market and eliminate the many remaining barriers to trade between member states.
  3. Defence: While there is a role in defence for the EU and its institutions, the EU must concede that main action here must take place at a broader level.
 El regreso de Donald Trump a la Casa Blanca plantea a Europa un desafío existencial. La disposición de su administración a utilizar el comercio como arma —tratando incluso a los socios del TLCAN como adversarios— deja claro que las relaciones económicas transatlánticas se han vuelto totalmente transaccionales. Lo mismo ocurre con todos los demás aspectos de la relación entre Estados Unidos y la Unión Europea, incluida la dimensión crítica de la seguridad. Europa afronta este desafío desde una posición de debilidad, tras dos décadas de relativo declive. Por lo tanto, esta conmoción exige una renovación económica fundamental. Si no se abordan las causas estructurales de esta debilidad, Europa no podrá alcanzar la autonomía estratégica que busca desesperadamente.

Las acciones de las instituciones europeas —la Comisión, el Consejo y el Parlamento— deben responder a la conmoción de Trump en tres dimensiones:
 
  • Crecimiento: el estancamiento de Europa socava la capacidad del continente para responder a las conmociones externas. Europa debe volver a crecer.
  •  Comercio: la mejor respuesta a la creciente fragmentación mundial y a la dificultad de comerciar fuera de la UE es profundizar en el mercado único y eliminar las numerosas barreras que aún existen al comercio entre los Estados miembros.
  • Defensa: aunque la UE y sus instituciones tienen un papel que desempeñar en materia de defensa, la UE debe reconocer que la acción principal en este ámbito debe tener lugar a un nivel más amplio.

The Trump shock meets European economic weakness

In May 2025, President Trump proposed a 50% tariff on EU imports. Whether this ends up being imposed or not, his administration’s economic attack has arrived at Europe’s most vulnerable moment. As Draghi (2024) points out, the EU–US gap in GDP per capita widened from 15% in 2002 to 30% in 2023, and 70% of the shortfall reflects weaker European labour productivity. Italy’s performance is an extreme example: its 2023 real GDP per head remained at 2000 levels. 1

This dismal performance has multiple origins, but four merit special attention: energy costs, innovation, regulation, and the Single Market. I discuss the first three in this section.

En mayo de 2025, el presidente Trump propuso un arancel del 50 % sobre las importaciones de la UE. Independientemente de si finalmente se impone o no, el ataque económico de su administración ha llegado en el momento más vulnerable de Europa. Como señala Draghi (2024), la brecha entre la UE y EE. UU. en cuanto al PIB per cápita se amplió del 15 % en 2002 al 30 % en 2023, y el 70 % de ese déficit se debe a la menor productividad laboral europea. El caso de Italia es un ejemplo extremo: su PIB real per cápita en 2023 se mantuvo en los niveles de 2000. 1

Este pésimo rendimiento tiene múltiples orígenes, pero cuatro merecen especial atención: los costes energéticos, la innovación, la regulación y el mercado único. En esta sección analizo los tres primeros.

Energy

In 2024, EU firms faced industrial electricity prices 2.5 times higher than the US and natural gas prices five times higher (Heusaff 2024). While this gap partly reflects Europe’s lack of natural resources and Russia’s weaponisation of gas flows after the 2022 invasion of Ukraine, fundamental market design and regulatory choices exacerbate the problem. The April 2025 Spanish blackout – when the country lost all electricity for hours – demonstrated how renewable integration without adequate grid stability can create catastrophic vulnerabilities (Garicano 2025b). The Europe-wide Dunkelflaute (the winter doldrums with no sun, no wind, and lots of heating demand) is likely to become a feature of the transition. High and unpredictable energy costs have contributed to the loss of over 500,000 European manufacturing jobs since 2022, accelerating deindustrialisation in sectors that once formed Europe’s industrial backbone. According to a Financial Times article, German energy-intensive firms are producing 20% less than before the Covid-19 pandemic and corporate distress is at levels last seen during the height of the pandemic.

Europe must deal with its energy problem. Approving the 25,000 km of pending cross-border transmission lines would cut wholesale prices by double digits and harden the grid against blackouts. Moreover, Europe must adopt a much more pragmatic posture concerning nuclear energy and gas. Both will be necessary for stability.

Innovation

Europe’s innovation deficit further weakens its position. Only four of the world’s 50 largest tech companies are European. No firm founded in Europe in the past half-century has reached a €100 billion valuation. EU startups attract just 6% of global AI funding, versus 61% for the US (Draghi 2024). This innovation gap means Europe increasingly depends on foreign technology for its digital transformation, creating new vulnerabilities.

The response to this problem has two main axes. We must improve our innovation system, and we must facilitate creative destruction. I focus here on one useful solution to the innovation finance gap proposed by both Draghi and by Enrico Letta (Letta 2024): a single ‘28th regime’ corporate statute covering venture financing, stock-option taxation, and insolvency would allow start-ups to scale across the continent.

El déficit de innovación de Europa debilita aún más su posición. Solo cuatro de las 50 empresas tecnológicas más grandes del mundo son europeas. Ninguna empresa fundada en Europa en el último medio siglo ha alcanzado una valoración de 100 000 millones de euros. Las empresas emergentes de la UE atraen solo el 6 % de la financiación mundial en inteligencia artificial, frente al 61 % de Estados Unidos (Draghi, 2024). Esta brecha en materia de innovación significa que Europa depende cada vez más de la tecnología extranjera para su transformación digital, lo que crea nuevas vulnerabilidades.


La respuesta a este problema tiene dos ejes principales. Debemos mejorar nuestro sistema de innovación y facilitar la destrucción creativa. Me centro aquí en una solución útil al déficit de financiación de la innovación propuesta tanto por Draghi como por Enrico Letta (Letta 2024): un único estatuto corporativo, el «28º régimen», que abarque la financiación de empresas, la fiscalidad de las opciones sobre acciones y la insolvencia, permitiría a las empresas emergentes expandirse por todo el continente.

Regulation and compliance

As Draghi (2024) documented, Europe’s weakness is in part the result of the increasingly complex regulatory environment. These regulations, often well-intentioned, serve some potentially important purposes from privacy protection to environmental standards. But it is increasingly recognised that they impose large cumulative costs on EU companies and make market entry and exit, as well as firm growth, extremely hard. The Corporate Sustainability Reporting Directive (CSRD) alone requires companies to track 1,052 data points, with compliance costs estimated at 12.5% of mid-cap firms’ annual investment budgets. During 2019-2024, the EU passed approximately 13,000 Acts compared to 3,500 pieces of legislation at the US federal level. This regulatory density, combined with national variations in implementation, creates a complex operating environment that particularly burdens smaller firms.

No one who has read the Draghi Report can have any doubt that Europe must significantly reduce its regulation. At a minimum, the Omnibus proposal now in Council would trim mandatory CSRD data points and defer low-materiality disclosures. But Europe must go much further. The entire regulatory apparatus must be examined and pruned – particularly to facilitate competition inside the Single Market, as I discuss next.

Europe’s interconnected weaknesses – high energy costs, innovation deficits, and regulatory complexity – make it particularly vulnerable to Trump’s economic coercion. Europe’s response to the Trump shock must begin with economic renewal. Without internal economic strength, Europe cannot credibly pursue strategic autonomy or maintain its social model. But there is one more critical element to the response: the Single Market.

Como documentó Draghi (2024), la debilidad de Europa se debe en parte al entorno normativo cada vez más complejo. Estas normativas, a menudo bienintencionadas, cumplen algunos objetivos potencialmente importantes, desde la protección de la privacidad hasta las normas medioambientales. Sin embargo, cada vez se reconoce más que imponen grandes costes acumulativos a las empresas de la UE y dificultan enormemente la entrada y salida del mercado, así como el crecimiento de las empresas. Solo la Directiva sobre la divulgación de información corporativa en materia de sostenibilidad (CSRD) exige a las empresas el seguimiento de 1052 puntos de datos, con unos costes de cumplimiento estimados en el 12,5 % de los presupuestos de inversión anuales de las empresas de mediana capitalización. Durante el periodo 2019-2024, la UE aprobó aproximadamente 13 000 leyes, frente a las 3500 leyes aprobadas a nivel federal en Estados Unidos. Esta densidad normativa, combinada con las variaciones nacionales en su aplicación, crea un entorno operativo complejo que supone una carga especial para las empresas más pequeñas.

Nadie que haya leído el Informe Draghi puede tener ninguna duda de que Europa debe reducir significativamente su regulación. Como mínimo, la propuesta ómnibus que se encuentra ahora en el Consejo recortaría los datos obligatorios de la CSRD y aplazaría las divulgaciones de baja importancia. Pero Europa debe ir mucho más allá. Es necesario examinar y recortar todo el aparato regulatorio, en particular para facilitar la competencia dentro del mercado único, como expongo a continuación. 

Las debilidades interconectadas de Europa —los elevados costes energéticos, el déficit de innovación y la complejidad normativa— la hacen especialmente vulnerable a la coacción económica de Trump. La respuesta de Europa al impacto de Trump debe comenzar por la renovación económica. Sin fortaleza económica interna, Europa no puede perseguir de forma creíble la autonomía estratégica ni mantener su modelo social. Pero hay otro elemento fundamental en la respuesta: el mercado único.

The trade shock and the Single Market crisis

The best response to the sudden increase in external barriers and the consequent external trade fragmentation would be to reduce internal barriers. Yet the EU’s crowning achievement – the Single Market – is deeply flawed. The IMF calculates that hidden barriers within the EU are equal to a 45% tariff on goods and a 110% tariff on services, exceeding the Trump administration’s most aggressive China tariffs.

La mejor respuesta al repentino aumento de las barreras externas y la consiguiente fragmentación del comercio exterior sería reducir las barreras internas. Sin embargo, el mayor logro de la UE, el mercado único, adolece de graves deficiencias. El FMI calcula que las barreras ocultas dentro de la UE equivalen a un arancel del 45 % sobre los bienes y del 110 % sobre los servicios, lo que supera los aranceles más agresivos impuestos por la Administración Trump a China

Figure 1 Barriers to EU internal trade: 2020 tariff equivalent

Figure 1 Barriers to EU internal trade: 2020 tariff equivalent

Source: IMF (2024).

También según el FMI, desde mediados de la década de 1990, los costes comerciales de los bienes han descendido un 16 % para las importaciones no comunitarias, pero solo un 11 % para el comercio dentro de la UE. La intensidad del comercio intracomunitario sigue siendo un 50 % inferior a la del comercio entre los estados de EE. UU. (FMI, 2024). Esto significa que a las empresas europeas a menudo les resulta más fácil expandirse en América que en los países vecinos de la UE. Como resultado, según el FMI, el comercio interno de servicios de la UE y su comercio externo de servicios tienen aproximadamente el mismo tamaño en términos de porcentaje de la economía de la UE. En un verdadero mercado único, el comercio interno debería ser mucho mayor. En un mundo en el que la escala es cada vez más importante (los servicios incluyen negocios que requieren una gran escala, como la inteligencia artificial, las finanzas y las tecnologías de la información), esta fragmentación del mercado único es muy perjudicial.

Figure 2 Intra- and extra-EU trade in the European Union

Figure 2 Intra- and extra-EU trade in the European Union

Source: IMF (2004).

The harmonisation trap

EU legislation frequently worsens rather than solves market fragmentation. New directives pile atop existing national rules rather than replacing them. Research on capital market regulation shows countries actually diverge more after EU harmonisation attempts (Ewens and Farre-Mensa 2020) – stronger regulatory countries maintain their standards while weaker ones add EU requirements without removing national ones.

Banking illustrates this layering problem. The Single Supervisory Mechanism oversees banks, but national central banks impose additional capital and liquidity requirements. French banks operating in Belgium, for example, face French, Belgian, and European regulators simultaneously, eliminating cross-border synergies.

Data protection creates similar absurdities. Despite the General Data Protection Regulation (GDPR) being an EU regulation, Austria banned Google Analytics while neighbouring countries permit it. Italian authorities threatened US data transfers that remain legal elsewhere. Publishers operating EU-wide must maintain separate systems for different countries.

Professional mobility remains constrained despite decades of EU directives. Portuguese engineers with EU-recognised qualifications face lengthy German equivalency checks. Architects and other professionals navigate regional requirements within single member states. Small firms often abandon cross-border expansion rather than fight bureaucratic battles.

Enforcement collapse

La Comisión Europea ha abandonado su obligación, recogida en el Tratado, de supervisar el mercado único. Los casos de infracción se redujeron a 658 en diciembre de 2024, lo que supone un descenso del 21 % desde 2020. Los nuevos casos se redujeron a 173 al año, una cuarta parte del volumen de hace una década. Al mismo tiempo, la duración de los casos se alargó hasta los 46 meses, un 31 % más que en 2019.

Figure 3 Total infringement actions of the European Commission, by year

Figure 3 Total infringement actions of the European Commission, by year

Source: European Commission Single Market Scoreboard.

This decline reflects the Commission’s evolution. Styling itself as “geopolitical” (von der Leyen 2019), it seeks influence in defence, housing, and foreign policy while neglecting core obligations. Confronting member states over market violations undermines the political cooperation needed for these expanded ambitions.

Without enforcement, the Single Market erodes. Small companies in particular cannot afford legal battles against national authorities claiming health or safety exceptions. The original mutual recognition principle – that products legal in one member state should circulate everywhere – has become meaningless without credible enforcement.

Europe must restore mutual recognition as the default rule and dramatically increase enforcement actions. Products and services legal anywhere in the EU should face no additional barriers elsewhere unless governments prove concrete risks. The Commission must choose between political expansion and its constitutional duty to maintain Europe’s economic foundation.

Defence and strategic autonomy: Finding the right division of labour

As with trade, the Trump administration has made clear that its approach to defence is transactional. This shock demands European strategic autonomy, including in defence. The question this raises is how to organise this effort most effectively.

Arguments for greater EU involvement in defence rest on solid economic logic made in this book, for instance, in the chapter by Armin Steinbach, Guntram Wolff, and Jeromin Zettelmeyer and in the chapter by Ethan Ilzetzki. Defence procurement shows significant economies of scale, and defence R&D generates substantial spillovers to civilian technology. The current fragmentation – Europe operates 12 different main battle tanks compared with America’s one – creates inefficiencies that weaken collective defence while raising costs. Coordinated procurement could deliver better capabilities at lower cost.

However, effective European defence faces structural challenges that EU institutions cannot easily overcome. First, the EU is a diverse bloc with very different security and defence postures among its members. It includes traditionally neutral states (such as Ireland, Austria, and Malta) that have not been in NATO or any other military alliance. Member states also hold varied threat perceptions and foreign policy leanings, sometimes influenced by historical or economic ties that can complicate unified action, particularly concerning large powers like Russia. With respect to this crucial player, the EU members’ attitudes run the gamut from slavish submission (Hungary) to bold defiance (Poland and Estonia). Foreign policy and defence decisions typically require unanimity – a high bar that often leads to slow or lowest common denominator outcomes, ill-suited to the pace of geopolitical events

Second, a successful defence posture requires including NATO and non-EU actors. Key European security actors, including the UK (a major military power), Norway (critical for North Atlantic security), and Turkey (a large NATO ally in a strategic region), are outside the EU. Canada, another G7 nation, is also a vital NATO partner currently with one foot outside of the US defence umbrella. An EU-centric defence policy risks duplicating efforts and alienating these crucial allies.

En segundo lugar, una postura defensiva eficaz requiere la inclusión de actores de la OTAN y ajenos a la UE. Los principales actores europeos en materia de seguridad, entre ellos el Reino Unido (una gran potencia militar), Noruega (fundamental para la seguridad del Atlántico Norte) y Turquía (un gran aliado de la OTAN en una región estratégica), se encuentran fuera de la UE. Canadá, otro país del G7, es también un socio vital de la OTAN que actualmente se encuentra al margen del paraguas de defensa de los Estados Unidos. Una política de defensa centrada en la UE corre el riesgo de duplicar esfuerzos y alienar a estos aliados cruciales.

Third, the EU treaties offer a limited basis for a common defence policy in the traditional sense. While initiatives like the European Defence Fund, the Permanent Structured Cooperation (PESCO), and the European Peace Facility represent important steps in bolstering defence industrial cooperation and supporting partners, they do not equate to a centralised EU defence command or foreign policy execution power vested in the Commission.

A more effective approach to European security involves ‘coalitions of the willing’ within NATO or through ad-hoc groupings. Guntram Wolff, Armin Steinbach, and Jeromin Zettelmayer (2025) have recently proposed a groundbreaking European Defence Mechanism (EDM) that exemplifies this approach (Wolff et al. 2025). Their proposal envisions an intergovernmental institution open to all European democracies – both EU and non-EU members – where participants would pool resources to collectively procure defence equipment and services. The EDM would issue bonds to finance joint defence procurement and common defence assets, with members paying for their shares of jointly procured defence goods when delivered.

The proposal addresses both fiscal and operational realities. It provides a framework to integrate national and EU defence policy through flexible interpretation of fiscal rules, collective arms procurement, and centralised investments. By allowing non-EU states like the UK, Norway, and potentially Switzerland to participate, it acknowledges that European security transcends EU membership.

The key insight is that European security requires flexible geometries. The EU can contribute significantly through defence industrial policy, research coordination, and single market benefits for defence firms. The European Defence Fund and PESCO represent important steps. But operational defence coordination must include all European security stakeholders, not just EU members. Forcing defence into EU structures risks excluding key allies and creating inefficient parallel organisations.

Conclusion: Economic power or strategic irrelevance

Trump’s return makes European strategic autonomy not just desirable but necessary. Yet, autonomy without economic strength is an illusion. A Europe that cannot compete economically cannot defend its interests or values globally. The mathematics are simple: declining GDP and innovation ability equals strategic irrelevance.

The Trump administration’s tariffs target weakness. Europe can answer only with economic strength: faster productivity growth, cheaper energy, a genuine continental market, and tech leadership. Every hidden barrier, every reporting burden, and every fragmented defence project hands leverage to Washington. Completing the tasks above would add at least 8% to EU GDP within five years and narrow the strategic gap with the United States.

Europe has the talent, resources, and institutional framework to compete globally. Its universities produce excellent graduates, its companies hold leading positions in many industries, its legal framework provides stability and predictability. What it lacks is the political will to dismantle internal barriers and create the conditions for growth. Given the external pressures Europe now faces, it is, truly, now or never. 

Conclusión: poder económico o irrelevancia estratégica

El regreso de Trump hace que la autonomía estratégica europea no solo sea deseable, sino necesaria. Sin embargo, la autonomía sin fuerza económica es una ilusión. Una Europa que no puede competir económicamente no puede defender sus intereses o valores a nivel mundial. Las matemáticas son sencillas: la disminución del PIB y la capacidad de innovación equivalen a la irrelevancia estratégica.

Los aranceles de la administración Trump apuntan a la debilidad. Europa solo puede responder con fuerza económica: un crecimiento más rápido de la productividad, energía más barata, un mercado continental genuino y liderazgo tecnológico. Cada barrera oculta, cada carga informativa y cada proyecto de defensa fragmentado le da ventaja a Washington. Completar las tareas anteriores añadiría al menos un 8 % al PIB de la UE en cinco años y reduciría la brecha estratégica con Estados Unidos.

Europa tiene el talento, los recursos y el marco institucional para competir a nivel mundial. Sus universidades producen excelentes graduados, sus empresas ocupan posiciones de liderazgo en muchos sectores y su marco jurídico proporciona estabilidad y previsibilidad. 

Lo que le falta es la voluntad política para desmantelar las barreras internas y crear las condiciones para el crecimiento. 

Dadas las presiones externas a las que se enfrenta Europa en la actualidad, es, verdaderamente, ahora o nunca. 

References

Draghi, M (2024), The future of European competitiveness, European Commission.

Ewens, M and J Farre-Mensa (2020) “The deregulation of the private equity markets and the decline in IPOs”, The Review of Financial Studies 33(12): 5463-5509.

Garicano, L (2024), “The Compliance Doom Loop”, Silicon Continent, November.

Garicano, L (2025a), “The Myth of the Single Market: Why Europe’s internal barriers are higher than Trump’s tariffs”, Silicon Continent, May.

Garicano, L (2025b), “Anatomy of an Error: On Spain’s Blackout and EU Energy Policy”, Silicon Continent, April.

Heussaff, C (2024), “Decarbonising for competitiveness: four ways to reduce European energy prices”, Policy Brief 32/2024, Bruegel

IMF (2024), A Recovery Short of Europe’s Full Potential, Regional Economic Outlook, Europe 2024.

Letta, E (2024), Much more than a market: Empowering the Single Market to deliver Europe’s future and prosperity, Report to the European Council.

Von der Leyen, U (2019), “Speech by President-elect Ursula von der Leyen at the 2019 Paris Peace Forum”, 12 November.

Wolff, G, A Steinbach and J Zettelmeyer (2025), “The governance and funding of European rearmament”, Bruegel Policy Brief.


 https://cepr.org/voxeu/columns/strategic-autonomy-europe-requires-economic-growth
 

2-Impulsar la productividad de Indonesia: Alcanzar una renta alta en 2045

Indonesia está clasificada actualmente como un país de renta media-alta. En 2019, el Gobierno anunció su ambición de conseguir que el país alcance la categoría de renta alta en 2045. El objetivo es ambicioso. Requeriría una tasa de crecimiento sostenido del PIB del 5,5% anual desde el reciente promedio del 5,0%, y aumentar el crecimiento de la productividad en 1,6 veces a medida que se ralentiza la expansión de la fuerza laboral. El país se enfrenta a numerosos retos, como la ralentización del crecimiento de la productividad, que ha pasado de alrededor del 3% anual entre 2002 y 2016 a aproximadamente el 2% anual. También hay indicios de que el crecimiento de la clase media se ha ralentizado, lo que podría llevar al país a la denominada trampa de la renta media.

El McKinsey Global Institute (MGI) publicó recientemente un informe -The enterprising archipelago: Propulsar la productividad de Indonesia- que profundiza en cómo Indonesia podría alcanzar su ambición para 2045. En esta entrevista de El futuro de Asia, Phillia Wibowo habla con dos de los autores, Kevin Russell y Khoon Tee Tan, para averiguar qué debe hacer Indonesia para convertirse en un país de renta alta en 2045.

Phillia Wibowo: Hola. Soy Phillia Wibowo, socia de la oficina de McKinsey en Indonesia, donde dirijo nuestra Práctica de Personas y Organización para el Sudeste Asiático.

La aspiración de Indonesia de convertirse en una economía de altos ingresos para 2045 es una ambición audaz que no será fácil, pero creemos que podría ser posible. Alcanzar este objetivo exigirá que el crecimiento de la productividad se acelere 1,6 veces, lo que requerirá un cambio fundamental en el panorama empresarial de Indonesia, que pasará de estar dominado por las microempresas a convertirse en un vibrante ecosistema de medianas y grandes empresas. Esto no puede lograrse mediante el crecimiento económico tradicional y exigirá una transformación estratégica de la forma en que el país cultiva y despliega los recursos. No es posible utilizando un solo capital, sino cinco: financiero, humano, institucional, infraestructural y empresarial. Para que Indonesia crezca significativamente, todo el desarrollo debe producirse en tándem en todo el archipiélago.

Hoy están conmigo dos de los coautores del informe del MGI: Kevin Russell, que es senior fellow del MGI, y Khoon Tee Tan, socio director y senior de la oficina de McKinsey en Indonesia.

Khoon Tee, en el informe mencionas que Indonesia necesitaría un 60% de crecimiento de la productividad para convertirse en un país de renta alta. Se trata de una cifra ambiciosa. ¿Cuáles son las palancas más prometedoras para la productividad?

Khoon Tee Tan: El motor de crecimiento más importante para un país de renta media-alta que aspira a convertirse en un país de renta alta es la productividad a nivel de empresa, ya que son las empresas las que explican el crecimiento de la productividad en una economía. Una de las principales palancas es el número de empresas medianas y grandes. Nuestra investigación ha revelado que Indonesia tiene menos grandes empresas que los países de renta alta. Indonesia necesita aumentar el número de pequeñas y medianas empresas (PYME) para convertirlas en medianas y grandes empresas. Estas empresas pueden aumentar su productividad invirtiendo en la fabricación de productos de mayor margen o adoptando la excelencia operativa y comercial basada en la tecnología.

  • https://www.mckinsey.com/featured-insights/future-of-asia/future-of-asia-podcasts/propelling-indonesias-productivity-reaching-high-income-by-2045?hsid=025278de-b7c3-465b-8248-343b538ad0db 

Indonesia is currently categorized as an upper-middle-income country. In 2019, the government announced its ambition of getting the country to high-income status by 2045. The goal is ambitious. It would require a sustained GDP growth rate of 5.5 percent per year from the recent 5.0 percent average, and increasing productivity growth by 1.6 times as expansion of the labor force slows. The country is faced with many challenges, including a slowdown in productivity growth from about 3 percent per year from 2002 to 2016 to about 2 percent per year. There are also indications that the growth of the middle class has slowed, possibly tipping the country into the so-called middle-income trap.

The McKinsey Global Institute (MGI) recently published a report—The enterprising archipelago: Propelling Indonesia’s productivity—that takes a deep dive into how Indonesia could achieve its 2045 ambition. In this Future of Asia interview, Phillia Wibowo talks to two of the authors, Kevin Russell and Khoon Tee Tan, to find what Indonesia needs to do to become a high-income country by 2045.


Phillia Wibowo: Hello. I am Phillia Wibowo, a partner based in McKinsey’s Indonesia office, where I lead our People & Organization Practice for Southeast Asia.

Indonesia’s aspiration to become a high-income economy by 2045 is a bold ambition that will not be easy, but we think it could be possible. Achieving this goal will require productivity growth to accelerate 1.6 times, which will necessitate a fundamental shift in Indonesia’s business landscape from one dominated by microenterprises to a vibrant ecosystem of medium-size and large enterprises. This cannot be achieved through traditional economic growth and will demand a strategic transformation in how the country cultivates and deploys resources. It is not possible using just one capital, but five: financial, human, institutional, infrastructural, and entrepreneurial. For Indonesia to grow significantly, all development must take place in tandem across the archipelago.

Today, two of the coauthors of the MGI report are with me: Kevin Russell, who is a senior fellow at MGI, and Khoon Tee Tan, the managing partner and a senior partner in McKinsey’s Indonesia office.

Khoon Tee, in the report, you mention that Indonesia would need 60 percent productivity growth to become a high-income country. That is an aspirational number. What are the most promising levers for productivity?

Khoon Tee Tan: The most important driver of growth for a upper-middle-income country aiming to become a high-income country is productivity at company level, as it is companies that account for productivity growth in an economy. One of the biggest levers here is the number of mid-size and large companies. Through our research, we found that Indonesia has fewer large companies compared to higher-income economies. Indonesia needs to scale up more of its small and medium-size enterprises (SMEs) to become medium-size and large companies. These companies can increase productivity by investing to produce higher-margin products or adopt tech-enabled operational excellence and commercial excellence.

Phillia Wibowo: Kevin, which other economies did you look at that have similar aspirations to Indonesia?

Kevin Russell: We looked at countries that had similarly large populations, or at least large enough to be comparable, and that had taken the same journey that we think Indonesia is going to take. These are countries that started with a per person income of $4,000 that reached $14,000 per person when the countries became high income or nearly achieved that status. The success of these countries is why we believe that it could be possible for Indonesia to achieve its 2045 ambition.

The countries that have been fast-growing, middle-income countries over the past 40 years include Chile, China, Korea, Poland, and Turkey. If Indonesia grew at the rate of those countries, high income could be possible by perhaps 2040, faster than the 2045 goal. On the other hand, if Indonesia grew at growth rates similar to some of the countries that have been slower, such as Brazil or South Africa, it would take Indonesia till 2055 to become a high-income country. That’s why we looked at these comparative countries and at their investment levels, which is the main driver of fast growth.

Phillia Wibowo: Khoon Tee, how big should larger and medium-size companies be?

Khoon Tee: In our research, we categorized companies into large, medium-size, small, and micro. Large companies are those that employ over 250 people, medium-size companies employ 50 to 249 people, and small companies have ten to 49 employees. Companies that reach a certain level in terms of formal employment are able to improve productivity as a result of deploying more capital into the business. We found that for Indonesia to become a high-income country, it would need to triple the number of medium-size and large companies.

Phillia Wibowo: In Indonesia, companies can largely be divided into four sectors: manufacturing, resources, services, and agriculture. How do you think things should shift, Khoon Tee, to achieve that productivity level?

Khoon Tee: The most obvious sector for productivity growth is the services sector. In almost every high-income economy, the services sector is the biggest driver of GDP growth. In Indonesia, the services sector forms over half of the economy, but in high-income economies, that figure is over 70 percent. It’s also not just any kind of services that are needed, but higher value-added ones that require a more professional, skilled workforce, cutting across subsectors such as modern retail, tourism, logistics, and professional services such as ICT, legal, financial services, and so on.

The second big driver is the manufacturing sector. In Indonesia over the past years, the manufacturing sector has moved sideways or maybe even declined in terms of contribution to GDP, and the sector remains underutilized. But we found that in this increasingly interconnected world with global and regional supply chains, Indonesia could grow more advanced manufacturing subsectors to integrate into the global value chain. The country already has some good natural resources that are important aspects of the economy, such as nickel, aluminum, palm oil, and so on. There’s also a push toward downstreaming. We think that there is more that can be done to go all the way down to more advanced products.

Phillia Wibowo: If the services and manufacturing sectors need to increase to contribute to a large percentage of future GDP, how would that affect other sectors, and what would be the impact on employment?

Kevin Russell: When you talk about the sectors being part of the growth model, I think Indonesia is unique. This was something that we learned from our research, in part because we were looking at different growth models. Think about the kind of export-oriented manufacturing from some of the smaller East Asian economies; think about resources-driven economies such as Australia, Chile, and Norway. Each of those has a much smaller economy. What we realized when we looked at Indonesia is that it will have to have a multisector model.

First, it will have to do almost everything, because the population is so large that to become a high-income country, the country will need all engines firing. Second, it’s such a big country that each part of the country has its own strengths. There are natural endowments in Kalimantan, Sulawesi, or Sumatra, and then services in places such as Bali and Jakarta. Each of those can reinforce the other. If you have good infrastructure and logistics, you can enable trade between cities and other countries, whether that’s in resources, agriculture, or manufacturing.

The key to all of this is good jobs. What will likely happen is that employment in the agriculture sector, which stands at almost 30 percent of employment in Indonesia today, will likely go down to 12 or 15 percent as Indonesia becomes a high-income country. A lot of Indonesian agriculture is subsistence farming on small farms. As farming becomes more productive with increased mechanization and improved technology to plant and price crops, not as many people will be needed on farms and they can move to cities. At the same time, those who stay farming will see their incomes rise, as they will be able to use more of the capital that needs to come from investment.

Cuando se habla de los sectores que forman parte del modelo de crecimiento, creo que Indonesia es un caso único. Esto es algo que aprendimos de nuestra investigación, en parte porque estábamos analizando diferentes modelos de crecimiento. Pensemos en el tipo de industria manufacturera orientada a la exportación de algunas de las economías más pequeñas de Asia Oriental; pensemos en economías impulsadas por los recursos, como Australia, Chile y Noruega. Cada una de ellas tiene una economía mucho más pequeña. Lo que nos dimos cuenta al analizar Indonesia es que tendrá que adoptar un modelo multisectorial.

En primer lugar, tendrá que hacer casi todo, porque la población es tan grande que, para convertirse en un país de altos ingresos, necesitará poner en marcha todos los motores. En segundo lugar, es un país tan grande que cada parte del mismo tiene sus propias fortalezas. Hay recursos naturales en Kalimantan, Sulawesi o Sumatra, y luego servicios en lugares como Bali y Yakarta. Cada uno de ellos puede reforzar al otro. Si se dispone de una buena infraestructura y logística, se puede facilitar el comercio entre ciudades y otros países, ya sea en materia de recursos, agricultura o manufactura. 


La clave de todo esto son los buenos empleos. Lo más probable es que el empleo en el sector agrícola, que actualmente representa casi el 30 % del empleo en Indonesia, se reduzca al 12 o 15 % a medida que Indonesia se convierta en un país de altos ingresos. Gran parte de la agricultura indonesia es agricultura de subsistencia en pequeñas explotaciones. A medida que la agricultura se vuelva más productiva gracias a una mayor mecanización y a la mejora de la tecnología para plantar y fijar los precios de los cultivos, no se necesitará tanta mano de obra en las explotaciones agrícolas y los trabajadores podrán trasladarse a las ciudades. Al mismo tiempo, aquellos que se queden en la agricultura verán aumentar sus ingresos, ya que podrán utilizar más capital, que deberá proceder de la inversión.

Phillia Wibowo: What about the impact on employment in the services sector?

Kevin Russell: The services sector will be the biggest employer—that’s already true today. The challenge is that the vast majority of work is in informal retail trade. In fact, that has grown recently as urbanization has increased. There is a real opportunity here for businesses to invest and grow to raise productivity, because they’re the ones that are going to create the jobs and services. That could be in retail, construction, transportation, or food and accommodation services, which together account for over half of the services sector. These are areas where investments in buildings and infrastructure and logistics could really lift people’s incomes and create good jobs, while also creating more livable and sustainable cities.

Phillia Wibowo: Khoon Tee said that the number of medium-size or large companies needs to triple. It seems there will need to be a transformational shift toward the services sector and a productivity increase in manufacturing so that people move from a low-wage, low-productivity ecosystem into a high-wage, high-productivity ecosystem. What needs to be different for productivity to be unlocked? Kevin, what is the learning from other economies?

Kevin Russell: Indonesia has grown to the extent that it is currently an upper-middle income country. It now wants to achieve high-income status. That’s where the middle class grows and new possibilities become available to different sectors. The reason we focused on the corporate ecosystem is that this stage of development is where investments in larger companies really can have a big impact. They can serve a broader middle class and move from only investments in basic capital to more innovation. There are exciting possibilities on that supply side if the corporate ecosystem can get going. And, small businesses and large businesses grow productivity hand in hand; it’s not one or the other. Usually when larger firms grow, smaller firms get opportunities to be part of the supply chain or ecosystem. Getting the whole system off the ground is now an opportunity for Indonesia because it sits in the upper-middle-income category, growing into high income.

Illustration of separate building blocks with multiple Indonesian power sources.

The enterprising archipelago: Propelling Indonesia’s productivity

Read the report

Phillia Wibowo: Khoon Tee, what are the five capital enablers of productivity?

Khoon Tee: One of the most interesting insights that we gained from looking into the Indonesian economy benchmarked against high- or higher-income economies is the notion that to move from middle- to high-income status, it is necessary to build five forms of capital, not just one or two.

The most obvious is financial capital, because as the economy grows, it requires more financing, more financial assets, and accumulation of capital.

The second is human capital, which is fundamental to growth. The education levels in the Indonesian economy above high school and into tertiary education need to improve. The workforce also must be reskilled or upskilled to fit organizations’ requirements and the type of sectors needed in the future.

The third form of capital is institutional capital. What differentiates some economies from others is the level of bureaucratization, the simplicity of regulations and permitting, the ease of doing business, and consistency in following through on investment programs, et cetera.

The fourth is infrastructural capital. Indonesia has been growing in leaps and bounds in terms of improving transportation and logistics and urban and digital infrastructure. However, there is still room to continue growing infrastructural capital to make the economy more efficient in terms of logistics and infrastructural costs.

And last, there is entrepreneurial capital. How visionary, how ambitious are people? How much is entrepreneurship encouraged in Indonesia for businesses to start up and scale up?

Phillia Wibowo: Kevin, I’m curious to hear your thoughts on these types of capital when looking at other economies.

Kevin Russell: The reason we talk about these five forms of capital is because, for countries to invest significantly in their growth—which is the central tenet of our research—there has to be a willingness to invest. This depends on whether the environment is good for investment. Those five types of capital are what make investment attractive. Take financial capital, for example—companies will take risks and build new things, such as factories and technologies, when they have access to capital that’s cheap enough for them to do so. And where does that come from? It comes from the country’s savings. Across economies that have grown fast, the vast majority of investment comes from domestic savings.

Indonesia, in fact, has a very high savings rate at over 30 percent of GDP. The challenge is, does that capital go into the corporate ecosystem? Or does it stay in informal businesses as cash, or does it stay in companies that are less willing to make investments and take risks? You need instruments such as long-term pensions that can really enable that capital to go into investment. In Indonesia, there is not a lot of finance going through those types of instruments. So, it’s a matter of getting the flow going through the pipes when it comes to accessing the high savings that are already there.

I think entrepreneurial capital is critical. There’s no shortage of people able to start businesses in Indonesia. There are millions of informal businesses, many of them with self-employed owners. But the challenge is whether formal businesses can open, ones that are really going to lift productivity and increase investment in the country. That takes a certain environment and entrepreneurial spirit that, as the country grows, will likely catch on and increase. Currently this is happening less in Indonesia than, for example, in Brazil, a country that hasn’t grown as fast but has a higher share of formal businesses.

Phillia Wibowo: Are there any lessons from other countries that Indonesia could adopt to unlock human capital?

Kevin Russell: In our research, we saw there is a question of quantity and quality. For example, are there enough people graduating in Indonesia? Compared to reference economies, the share of secondary school graduates is low. Out of those aged 25 to 34, only 40 percent have completed upper-secondary school. Then there’s a quality question—is Indonesia investing in quality teachers in the right way? Are learning institutions teaching the subjects that are needed for the job pipeline? Those countries that were able to combine these different aspects have seen growth.

What we also found in our research is that even those people with good degrees do not necessarily match the jobs available in Indonesia. That mismatch of the share of the unemployed who have degrees is quite high relative to other countries. That suggests that human capital also has to do with mobility and having the right skills for the right jobs. This is an area where companies can play a role, either by supporting learning programs or training people on the job.

Phillia Wibowo: I think, in addition, problem-solving instincts need to be stronger, as well as softer skills such as the ability to deal with and develop people. Do you have any thoughts on human capital, Khoon Tee?

Khoon Tee: Both the public sector and the private sector play important roles. In the public sector, Kevin mentioned that about 40 percent of people have completed upper-secondary education in Indonesia—this figure is low and needs to improve, because more educated people will provide a bigger formal workforce talent pool, which is necessary for Indonesia to reach high-income economy levels.

From the private sector point of view, we have seen that collaboration between the private sector and universities and tertiary institutions works well to supplement the formal curriculum and to prepare people for the workforce of the future. People need to be ready for jobs, whether in IT, digital, or more advanced manufacturing jobs.

Last, it is important to reskill the existing workforce. In the report, we talk about some of the gaps that we face in this digital age, and Indonesia has made huge progress in this regard. The private sector, however, still needs to reskill the existing workforce.

Phillia Wibowo: I agree. Vocational education should make it easier for people to get employment, but that’s not always the case in Indonesia. The country is working on strengthening that link, but companies need to participate as well, working together with all stakeholders. Two other factors that remain core to all this are the importance of quality, early childhood nutrition and early childhood education—without them, productivity cannot grow as fast as necessary.

The question is, how does Indonesia execute all of this? We have been talking about the huge productivity growth that Indonesia needs to achieve and the five forms of capital that need to be developed in sync to have a multiplier effect. How does Indonesia deliver the outcome it wants?

Khoon Tee: Indonesia is blessed with leaders who are optimistic, driven, and forward-looking, which is a huge asset for the country. There are a few things to build on that base. One is the ability to coordinate regulations across multiple policy-making units to foster a more conducive investment climate. A lot of investors come to Indonesia as they are attracted by the optimism of the country, the growing middle class, and so on. However, many stall when it comes to complex permitting processes and how long it takes to set up a business, and finally go elsewhere to invest. Indonesia needs to fix that because there’s no shortage of people wanting to invest; the country must make it easier for them, from registering to building manufacturing plants or businesses.

Phillia Wibowo: That means a stronger coordination between the central and the regional regions of the country, and recognizing that Indonesia is an archipelago economy. Kevin, what is your view on how Indonesia could deliver the outcome it wants?

Kevin Russell: The premise for the report is that countries that take this high-income journey are ones that invest a lot and whose corporate ecosystem becomes the flywheel that accelerates investment and productivity growth. We’ve talked about the capital enablers, and how leaders need to consider regulation and institutions, but corporate leaders also need to address the situation—both the entrepreneurs who are scaling and creating formal businesses, and the larger corporate leaders who now have the opportunity to boost growth. They can take advantage of the growing middle class, build their capabilities as the five forms of capital strengthen, and find opportunities within growing services and manufacturing sectors where productivity lift is going to be profitable over time. Those are the business leaders who can grow the good jobs in the country.

Phillia Wibowo: If I could summarize, the aspiration to be a high-income economy by 2045 is bold, but it is possible that Indonesia could achieve it. To do so, productivity needs to increase by 60 percent, and the cornerstone of this is company productivity. If companies are to be productive, however, there needs to be a transformational shift in the size of companies, with the number of medium-size and large companies tripling.

The manufacturing sector is the key to being part of the global value chain, but the services sector is also very important for growth, as well as the levels of education to get people into higher-income jobs. Agriculture remains essential, but it needs to be more productive. Resources are at the back end, and the growth enabler is not one form of capital, but five: financial, human, institutional, infrastructural, and entrepreneurial.

There is a lot of disruption in Indonesia, and the transition to shift to a high-income country is not easy. We recognize that. But, as the saying goes, it is better to light a candle than to curse the darkness. Indonesia needs to keep propelling productivity to become the high-income enterprising archipelago it aims to be.

 Phillia Wibowo: Si pudiera resumirlo, diría que la aspiración de convertirse en una economía de altos ingresos para 2045 es ambiciosa, pero es posible que Indonesia lo consiga. Para ello, la productividad debe aumentar en un 60 %, y la piedra angular de este aumento es la productividad de las empresas. Sin embargo, para que las empresas sean productivas, es necesario que se produzca un cambio transformador en el tamaño de las mismas, triplicando el número de empresas medianas y grandes.

El sector manufacturero es clave para formar parte de la cadena de valor mundial, pero el sector servicios también es muy importante para el crecimiento, al igual que los niveles de educación para que las personas puedan acceder a empleos mejor remunerados. La agricultura sigue siendo esencial, pero debe ser más productiva. Los recursos se encuentran en un segundo plano, y el motor del crecimiento no es una sola forma de capital, sino cinco: financiero, humano, institucional, infraestructural y empresarial.


Hay mucha agitación en Indonesia, y la transición para convertirse en un país de altos ingresos no es fácil. Lo reconocemos. Pero, como dice el refrán, es mejor encender una vela que maldecir la oscuridad. Indonesia necesita seguir impulsando la productividad para convertirse en el archipiélago emprendedor de altos ingresos que aspira a ser.

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