Indonesia Urged to Shift From Cheap Labor to Avoid Middle-Income Trap

Indonesia is at risk of falling into the "middle-income trap" if it does not transition its economy from one reliant on cheap labor to one focused on higher value-added industries. This trap describes a situation where a country achieves a certain level of income but fails to develop into a high-income nation, leading to stagnant economic growth. Indonesia's economic growth has historically been driven by manufacturing and resource development, leveraging its abundant young workforce. However, as wages rise, the international competitiveness of these sectors is declining. Without a shift, economic growth is likely to slow, potentially capping improvements in per capita income. Experts emphasize that overcoming this challenge requires significant investment in technological innovation, research and development, and strengthening human capital through education and training. Strategic investments in areas such as the digital economy, green technology, and advanced manufacturing are particularly crucial. These initiatives are expected to boost productivity and create new employment opportunities. Escaping the middle-income trap is a critical objective for Indonesia to achieve sustained economic development and improve the living standards of its entire population. The government must proactively implement policies supporting industrial upgrading and enhance collaboration with the private sector. Source: Antara News (English)