Indonesia is accelerating its efforts to become a full member of the Organisation for Economic Co-operation and Development (OECD), positioning itself as a reform-oriented emerging economy with aspirations for global policy influence, Jakarta Globe reports.

In early June, Coordinating Minister for Economic Affairs Airlangga Hartarto confirmed that Indonesia had submitted its Initial Memorandum (IM) - a critical self-assessment of the country’s compliance with OECD instruments - making it the first among six candidate countries to reach this milestone.

“The IM is Indonesia’s commitment to aligning with OECD standards, and this will be the foundation of a four-year roadmap toward full membership,” Airlangga stated during a June 5 press briefing. He added that the accession process will be included in the next National Medium-Term Development Plan to ensure long-term continuity across administrations, Kompas reports.

The IM submission, consisting of over 1,000 pages, outlines Indonesia’s alignment with more than 250 OECD legal instruments across key areas including taxation, investment, governance, and the environment. According to Airlangga, internal OECD assessments suggest Indonesia has already achieved 80% compatibility, a claim echoed in Bisnis Indonesia and Kompas reports.

Economic rationale

Indonesia’s OECD bid is not just symbolic - it’s a strategic move aimed at breaking out of the middle-income trap, improving governance, and attracting quality investment. OECD membership signals adherence to high standards in policymaking, transparency, and economic regulation. The Jakarta Post quoted Dandy Iswara, Director for OECD Accession at the Coordinating Ministry, as saying that the IM “will serve as a benchmark for how Indonesia adjusts its policies going forward.”

For foreign investors, OECD membership serves as a global seal of confidence. Jakarta’s inconsistent regulatory framework and opaque bureaucracy have long deterred large-scale investment. Alignment with OECD standards - especially in areas such as competition policy, taxation, and corporate governance - could help streamline investor protections and improve dispute resolution mechanisms.

Notably, Indonesia’s entry would make it the first Southeast Asian nation in the OECD, joining a group that currently comprises 38 members, including most developed economies. As the OECD accounts for over 75% of global trade and investment, Indonesia would significantly enhance its global influence—especially in trade negotiations and standard-setting forums.

Legal and regulatory overhaul

Indonesia has taken several preparatory steps to meet OECD standards. The Presidential Regulation (Perpres) No. 79/2023 formalised the accession framework, creating a national secretariat under the Coordinating Ministry for Economic Affairs and instructing all ministries to participate in thematic reviews. As part of the IM drafting, the government coordinated with 48 ministries and institutions, according to statements made by Dandy Iswara and reported in Kompas.

The OECD Accession Roadmap, issued in February 2024, outlines reviews in 26 policy areas. Early themes under review include trade, investment, anti-corruption, tax transparency, corporate governance, and environmental policy. These reviews will culminate in a Final Accession Report, requiring unanimous approval from existing members.

Despite these initiatives, structural challenges remain. Indonesia’s labour market rigidity, informal sector dominance, and underdeveloped competition law stand out as problem areas. The controversial Job Creation Law (Omnibus Law) aimed to liberalise the labour market and streamline business permits, but has been met with protests and judicial scrutiny.

Meanwhile, Indonesia’s tax-to-GDP ratio remains among the lowest in Asia. While recent digitalisation efforts and the establishment of a carbon tax have moved the needle, the OECD expects comprehensive reforms, including international tax rule adoption under the Inclusive Framework on BEPS (Base Erosion and Profit Shifting).

Environmental, social, and political complications

OECD membership will also require progress in environmental and social governance. Indonesia’s economic dependence on coal exports, palm oil, and extractive industries poses a sustainability challenge. The OECD’s environmental review process is expected to scrutinise Indonesia’s emissions policies, deforestation rates, and energy transition efforts.

Socially, ensuring inclusive development and reducing inequality are critical to meeting OECD standards. Indonesia’s uneven access to education, health, and legal services - especially in remote regions - must be addressed in the reform agenda.

On the political front, Indonesia’s upcoming 2024 - 2029 presidential administration will need to commit to the accession process, which is expected to continue into the next RPJMN cycle. Although the process has been designed to outlast political transitions, effective implementation hinges on sustained executive commitment.

Indonesia’s OECD ambitions come as it strengthens ties with both Western and non-Western economic blocs. The country is a founding member of ASEAN, an active participant in the Indo-Pacific Economic Framework (IPEF), and a BRICS member. Analysts have noted that OECD accession may signal a tilt toward Western institutions, even as Indonesia maintains a non-aligned foreign policy.

OECD Secretary-General Mathias Cormann, during his visit to Jakarta in February 2024, praised Indonesia’s leadership in the Global South and its potential to bring a fresh perspective to the OECD. However, critics argue that OECD standards may conflict with Indonesia’s domestic development agenda and political realities.

From aspiration to implementation

Indonesia’s OECD bid is an opportunity to accelerate structural reform, improve international credibility, and solidify its position as a leading voice among emerging economies. But the path ahead is fraught with complexity.

From sectoral reforms to governance transparency and environmental regulation, the country must deliver beyond paperwork. The Initial Memorandum, while a major milestone, is only the start. Over the next four years, Indonesia will undergo intense thematic reviews, followed by negotiation of an Accession Agreement.

As Airlangga noted during the June 5 briefing, “Indonesia’s accession will be a marathon, not a sprint.” The outcome will test not just Indonesia’s reform capacity, but also its diplomatic finesse and policy resilience in an increasingly fragmented global landscape.