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Indonesia has achieved rapid economic growth and substantial poverty reduction over the past five decades, but growth has remained below the 6 percent needed annually to reach high-income status by 2045. The fundamental obstacle is a pattern of market inefficiencies that favor dominant incumbents and state-owned enterprises over more dynamic private firms. Regulatory complexity, limited access to finance, and protectionist trade measures, among other constraints, divert capital away from higher-productivity activities. The Indonesia Country Private Sector Diagnostic (CPSD), prepared by the World Bank Group, looks at three sectors that illustrate how specific reforms can unlock private investment across the economy. The recommended actions could help mobilize as much as US$15 billion in private investment and create up to 300,000 jobs.
Business solar: Corporate green investment mandates and export compliance requirements are driving demand for commercial and industrial solar photovoltaic distributed generation (business solar). Yet, business solar installations have fallen far short of committed and announced volumes. The state's dominant role in the electricity sector, combined with frequently changing regulations and limited transparency in quota allocation, has constrained private investment in the sector. Improving quota allocation, adopting realistic permitting timelines, and updating regulations to allow all forms of business solar beyond rooftop installations could help unlock up to US$780 million in private investment and as many as 94,400 jobs.
Data centers: Indonesia's 180 million internet users and booming digital economy attract strong investor interest, but complex permitting, data localization rules, and restrictions on international submarine cable landings leave the country trailing regional peers. Reforms to expedite permitting, ease equipment imports, clarify cross-border data rules, and allow government agencies to adopt commercial cloud services could help catalyze up to US$13.8 billion in private investment and 143,000 jobs.
Temperature-controlled logistics: Rising consumption of temperature-sensitive goods is driving rapid market growth, yet significant capacity gaps persist across Indonesia—particularly outside Java, where cold chain infrastructure is severely underdeveloped and the largest share of unmet demand is concentrated. Establishing a digital logistics marketplace, expanding reefer plug capacity, streamlining business licensing, and removing import barriers on cold chain equipment could help mobilize as much as US$489 million in investment and up to 70,000 jobs.
