OECD is no magic lamp

The Organisation for Economic Co-operation and Development (OECD) is not a magic solution for Indonesia's economic woes, despite President Prabowo Subianto's ambition to join the prestigious club. While Indonesia ratified the ASEAN-led Regional Comprehensive Economic Partnership (RCEP) with major trading partners like China, Japan, and South Korea, the country has not fully benefited from the agreement.

Rather than pursuing new international clubs, Indonesia should focus on extracting economic value from the trade architecture it already has.

The World Trade Organization is now overshadowed by unilateral and minilateral trade approaches, which makes relying on multilateral frameworks for economic growth a risky bet. Indonesia's bid for OECD membership, launched in 2023, aims to provide access to a vast export market of 38 members, accounting for roughly 75 percent of global trade.

However, the path to full membership is expected by early 2025. OECD officials believe the membership will push Indonesia to adopt regulatory reforms, competition, and integrity standards, but these expectations are unrealistic in the short term.

Accessing OECD membership will require extensive deregulation and institutional overhaul, similar to the IMF-imposed reforms during Indonesia's 1997-1998 financial crisis. The current resistance to such sweeping changes within Indonesian government and regulatory bodies presents a significant barrier to progress. As OECD Secretary-General Mathias Cormann has stated, the benefits of joining include regulatory improvements, market competition, and enhanced institutional integrity. However, these high standards remain far beyond Indonesia's current capabilities.