Indonesias Aspiration to Join OECD for Economic Growth

Indonesia has made a resolute commitment to become a member of the Organisation for Economic Co-operation and Development (OECD). This pledge was reaffirmed during a meeting held on October 10th in Paris, where key representatives, including Febrio Kacaribu, Head of the Fiscal Policy Agency (BKF), and Sri Mulyani Indrawati, the Minister of Finance of the Republic of Indonesia, were present. The gathering took place during a special session titled "Update on Indonesias Request to Start the OECD Accession Process" at the OECD headquarters.

OECD is an international organization comprised of 38 member countries, representing approximately 80% of global trade and investment. It is recognized as a vital knowledge center worldwide, serving as an international standard-setting body for the development of tools, analysis, and policy standards aimed at enhancing equality, opportunity, well-being, and prosperity across the globe.

Indonesia, represented by the Coordinating Minister for Economic Affairs, officially expressed its intention to join OECD on July 14, 2023. Indonesias OECD membership is expected to support the ongoing structural reforms in the country, fostering a resilient, sustainable, inclusive economy that aligns with Indonesias Vision 2045. This intention was met with enthusiasm, first through a letter from the OECD Secretary-General and then with a visit by the OECD Secretary-General to Jakarta on August 10, 2023, where a meeting was held with the President of Indonesia, Joko Widodo.

The relationship between Indonesia and the OECD has evolved significantly since 2007, including Indonesias active role in supporting OECD cooperation with Southeast Asian nations through the establishment of the OECD Southeast Regional Program (OECD SEARP). Indonesia, together with Japan, served as Co-chairs of SEARP from 2014 to 2017. The collaboration between Indonesia and the OECD is further reflected through the Joint Work Program (JWP) initiated in 2017, culminating in the signing of the 4th Joint Work Program (JWP) for 2022-2025. The JWP covers several priority policy areas, such as macroeconomic policies, tax compliance, good governance, the business climate, digitalization, human capital, social inclusion, and sustainable development.

During the OECD Council meeting in Paris, Sri Mulyani highlighted various achievements in Indonesias structural reforms since the Asian Economic Crisis of 1997/1998. These reforms encompassed improvements in the quality of democracy, policy transparency and accountability, budget policy strengthening, social protection programs for vulnerable groups, competition policy enhancement, central bank independence, and numerous other policy reform initiatives. Indonesia also affirmed its commitment to continue these structural reforms and transformation in green economic development policies, as manifested in recent national budgets, including energy transition policies through the implementation of the Energy Transition Mechanism (ETM).

"The implementation of a series of structural reforms in Indonesia over the past 20 years and the deepening cooperation between Indonesia and the OECD are essential assets for Indonesias confidence and readiness to undergo the accession process to become an OECD member," stated Sri Mulyani.

Indonesia acknowledges that the accession process to become an OECD member will be multi-year and will require the nation to meet OECD policy standards for new member candidates. To support this process, the Indonesian government will establish a National Committee comprising various relevant ministries and agencies. The committees focus will include policy and regulation identification to meet OECD standards, oversight of the preparation process, collaboration with relevant stakeholders, development of internal and external communication strategies, and other activities needed to facilitate Indonesias membership process. Domestic coordination will also involve other stakeholders, including academia, NGOs/CSOs, and the private sector.

"Indonesias commitment to joining the OECD is in line with the constitutional mandate that encourages Indonesia to play an active role in international cooperation. Indonesia is ready to work with OECD members and other international partners to strengthen multilateral cooperation," added Sri Mulyani. This commitment aligns with Indonesias consistent approach while serving as the G20 Presidency in 2022 and holding the ASEAN Chairmanship in 2023.

At the OECD Council meeting, all OECD members warmly welcomed and supported Indonesias intention to join the organization. Indonesia will become the third Asian country after Japan and Korea and the first ASEAN member to join the OECD. Indonesias OECD membership is anticipated to benefit not only Indonesia but also the OECD itself. Several OECD member countries offered to share their experiences and transfer knowledge to assist Indonesia during the accession process.

Indonesias OECD membership is poised to drive economic reforms and better national governance, ultimately leading to sustainable economic growth. This, in turn, is expected to create more jobs, improve living standards for the Indonesian people, and potentially result in higher incomes. An improved economy can attract foreign direct investment (FDI), which can generate employment opportunities and stimulate economic development. OECD membership can facilitate trade agreements and partnerships, providing better access for Indonesian businesses to international markets, thereby boosting exports and domestic company growth. All of these positive developments require a firm commitment from the Indonesian government to uphold OECD principles, implement necessary reforms, and actively participate in OECD initiatives.

Indonesias intention to join the OECD was discussed during the series of OECD Council meetings held from September to October 2023 and will continue in subsequent meetings until December 2023. These discussions will play a crucial role in OECD member countries decision regarding Indonesias intention. If the OECD Council decides to accept Indonesias intention, a work program will be established to initiate the process toward Indonesias OECD membership. The OECD Council meetings are chaired by the OECD Secretary-General, who concurrently serves as the Chair of the OECD Council. The meetings are attended by the Permanent Representatives of OECD member countries in Paris.