By all accounts, Indonesia has global ambitions. Government officials often speak of Jakarta’s transformation into a leading Southeast Asian tech hub, capable of drawing in high-end manufacturing, digital startups, and global capital. This aspiration is not merely domestic cheerleading; it is echoed in policy speeches, investment roadshows, and national strategy documents. The country sees itself as a rising force in the regional economy, often drawing parallels to Singapore, a close neighbor widely seen as the benchmark for efficiency, openness, and innovation-led growth.
Yet the reality, as shown in the 2025 International Trade Barrier Index (TBI), tells a different story. Indonesia ranks last out of 122 countries, signalling the most closed and protectionist trade environment among all economies studied. This stands in stark contrast to Singapore, which is ranked second globally for its trade openness. Indonesian trade policy is marked by high tariffs, tight restrictions on services, and increasing digital trade barriers — all of which run counter to the idea of seamless integration with global markets.
This article explores the growing gap between rhetoric and regulatory reality, showing how these trade policies shape consumer access, limit foreign participation, and ultimately raise questions about the economic model Indonesia is choosing — and what that means for its future.
"Indonesia wants Singapore’s outcomes, but not the openness that created them. Until that changes, ambition alone won’t drive economic leadership."
Strategic Barriers: Indonesian Trade Policy by Design, Not by Default
Indonesia’s low ranking in the Trade Barrier Index is not a technical oversight. It is the result of a deliberate, long-standing policy approach built on the principles of economic nationalism, import substitution, and protection of strategic domestic sectors. These foundations have guided the structure of Indonesian trade policy for decades, shaping regulations designed to insulate local industries and retain national control over key parts of the economy.
Tariffs on a wide range of goods remain high, increasing the cost of imports for consumers and businesses alike. At the same time, Indonesian trade regulations often mandate complex compliance requirements, such as local content rules. The ban on iPhone 16 imports, triggered by unmet domestic sourcing quotas, is just one visible example of how such rules raise costs and reduce product availability. Beneath the surface, these policies deter innovation and limit foreign participation, particularly in high-value service sectors like finance, telecommunications, and infrastructure development, which remain largely closed to international competition.
From a political lens, these strategies are understandable. They serve to generate government revenue, promote domestic champions, and reinforce economic sovereignty. In a diverse, populous country, they also offer a buffer against the volatility of global markets.
However, this model increasingly clashes with the reality of today’s integrated global economy. By limiting openness, Indonesian trade policy introduces friction that slows supply chains, reduces investor confidence, and weakens long-term competitiveness. While it may protect selected sectors in the short term, it risks isolating the broader economy from opportunities that require scale, agility, and global trust. In doing so, it reflects a vision of economic development that may no longer align with the direction of regional and international growth.
Domestic Impact: High Trade Barriers Limit Talent and Drive Up Consumer Costs
While Indonesian trade policy is often framed around protecting national interests, the most immediate impact is felt within its own borders — by consumers, workers, and businesses navigating the consequences of restrictive economic design.
For consumers, trade barriers translate into higher costs and fewer choices. Everyday goods like electronics, vehicles, healthcare products, and even specialty groceries are often significantly more expensive in Jakarta than in cities like Bangkok or Kuala Lumpur. This is not merely a logistical issue. It is the result of a layered protectionist framework: import tariffs, local content mandates, and licensing regulations that disincentivize international firms from entering or scaling in the Indonesian market. Consumers ultimately bear the cost, not just in price, but in limited access to global standards of quality and innovation.
The impact on the talent economy is more structural. Strict services restrictions limit the ability of foreign firms to operate in high-value sectors such as finance, consulting, and telecom. This reduces demand for international expertise and restricts local exposure to global best practices. For Indonesian professionals, this means fewer opportunities to engage with cross-border teams, limited skill development in frontier industries, and a career path that is strong domestically but often weak in international adaptability.
Foreign professionals face a different but related challenge. Visa regulations, professional licensing hurdles, and employment caps complicate hiring and relocation. This leads to short assignments, high churn, or full avoidance by foreign talent altogether. Multinational companies often choose to base regional teams in more open economies, bypassing Indonesia despite its market size.
These dynamics reveal a larger truth: trade policy is not just about goods or capital. It defines who gets to compete, contribute, and grow in the economy — and who gets left out.
The Singapore Illusion: Trade Ambition Without Trade Liberalization
Singapore’s position as one of the most open economies in the world is not a result of geography or luck. It stems from a deliberate, long-term commitment to trade liberalization, regulatory clarity, and global integration. The country’s economic model is structured around the belief that openness fosters trust, and that trust, in turn, attracts capital, technology, and talent at scale.
This belief has been operationalized through clear and consistent policy choices. Singapore maintains zero tariffs on most goods, imposes minimal restrictions on foreign services, and has become a global leader in digital trade agreements, including initiatives like DEPA and CPTPP. Its regulatory environment is optimized for predictability, efficiency, and low friction — features that are critical to businesses looking for a stable base in Asia.
By contrast, Indonesia’s trade policy signals caution. Despite aspirations to emulate Singapore’s economic success, Indonesia has taken a markedly different route. It sustains high tariffs, restricts services sectors, and increasingly champions digital sovereignty through data localization and foreign platform controls. These policies reflect a preference for domestic oversight and economic nationalism over international fluidity.
The disconnect is often attributed to structural differences. Singapore, as a city-state, benefits from centralized governance and limited political fragmentation. Indonesia, with its size and diversity, faces greater internal complexity and political compromise. While these structural factors matter, they do not fully explain Indonesia’s divergence.
The Trade Barrier Index (TBI) makes clear that this is not simply a byproduct of geography or development stage. It is a strategic choice. Indonesian policymakers appear to treat openness as a liability rather than a competitive advantage. Yet without embracing the policy foundations that drive trust and integration, the vision of becoming “the next Singapore” remains more branding exercise than blueprint.
The Global Opportunity Cost of Indonesian Trade Barriers
Trade policy is not only about imposing tariffs or managing imports. It is a mechanism through which governments signal priorities, manage risk, and define access. When a country like Indonesia maintains high trade barriers, it sends a clear message to global investors and partners: engagement will be on restrictive and uncertain terms. That message affects confidence, investment timelines, and long-term commitment.
The cost of this signal is significant. Despite its strategic location, demographic scale, and abundant labor pool, Indonesia has underperformed in global supply chain integration, technology adoption, and digital trade leadership. These missed opportunities are not due to a lack of ambition or resources, but rather to regulatory structures that inhibit participation in fast-moving global markets.
While Indonesia holds firm, competitors in the region are advancing. Vietnam, the Philippines, and Malaysia are integrating more deeply into regional and global trade systems. They are signing liberal trade agreements, modernizing customs, reducing services restrictions, and building reputations as accessible and scalable markets. This creates a widening gap between ambition and competitiveness.
For sectors like fintech, AI, logistics, and advanced manufacturing, time matters. Delays caused by licensing, localization mandates, or shifting regulatory requirements weaken Indonesia’s appeal. These sectors are agile by nature and gravitate toward environments with predictability and ease of entry.
In this light, Indonesia’s trade barriers function like an opportunity tax. They quietly erode growth potential and reduce the country’s standing in global value chains. For businesses evaluating where to invest and scale, regulatory friction can outweigh market size. And for governments aiming to attract innovation and diversify exports, outdated or protectionist trade strategies risk falling behind in a region that is increasingly defined by speed, openness, and digital readiness.
The distance between Indonesia’s economic goals and its current trade strategy is not a misalignment of rhetoric or oversight in planning. It is a reflection of deliberate policy choices. Indonesia’s position at the bottom of the Trade Barrier Index (TBI) is not a function of geography, income level, or institutional inexperience. It is the direct result of prioritizing protection, regulation, and state control over openness, integration, and long-term competitiveness.
This distinction matters. For foreign investors, expatriates, and domestic reformers, understanding that trade barriers are embedded by design — not default — is key to setting realistic expectations. It helps explain persistent frictions in licensing, compliance, and the high cost of imported goods and digital services. It also clarifies why, despite scale and demographic advantage, Indonesia remains under-leveraged in global markets.
If Indonesia is to achieve the stature it seeks — as a Southeast Asian hub for innovation, trade, and technology — it must align policy architecture with its ambitions. That means adopting the discipline of openness, simplifying access for international partners, and embracing regional cooperation.
Without that recalibration, Indonesia will remain a promising economy whose full potential is held back by the very rules designed to protect it.
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