In 2025, the global economy proved more resilient than many had expected. Growth remained modest, however, as geopolitical tensions, trade frictions and policy uncertainty continued to weigh on the outlook. Indonesia fared relatively well, expanding by 5.11%, supported by investment, net exports and strong demand for commodities such as palm oil, iron, steel and gold. Looser monetary policy and fiscal support helped sustain credit and consumption, while inflation ended the year at 2.92%. The government also pressed ahead with ambitious programmes in education, preventive healthcare, housing and village cooperatives. Yet the quality of growth remains a concern, as much of the increase in employment came from lower-paying, less productive sectors, while heavier public spending has sharpened questions about whether state resources are being used effectively.

The 13th edition of our study examines the competitiveness of the 34 provinces covered by the index, alongside six main regional groupings. Java still dominates the rankings. DKI Jakarta and East Java retained first and second place, while East Kalimantan moved up to third, making it the only non-Java province in the top five. Even so, Jakarta’s lead has narrowed and its grip on the different dimensions of competitiveness is weaker than before. The less encouraging story lies further east. Provinces in Sulawesi and Maluku–Papua remain clustered near the bottom, and the gap between Jakarta and Papua widened slightly in 2025, driven mainly by differences in institutional quality and infrastructure.

This edition also looks at the Riau Islands, where strong investment and rapid growth have not produced enough secure jobs. Capital-intensive industries, skills mismatches and exposure to swings in external demand have left unemployment persistently high. The case points to a broader lesson from the rankings: investment and growth count for less when local workers, institutions and public services are unable to turn them into widely shared gains.

Indonesia’s recent education reforms provide the starting point for this year’s thematic chapter on the country’s human-capital divide. These include the shift from the high-stakes National Examination (Ujian Nasional) to the diagnostic National Assessment (Asesmen Nasional), the introduction of the Merdeka Curriculum and the use of the Rapor Pendidikan school dashboard. Together, they have changed how learning is assessed, how schools identify weaknesses and how teachers and local authorities respond to them. The chapter asks how evenly those reforms have translated into better learning across the country. National literacy and numeracy scores rose between 2021 and 2024, but the gains were spread unevenly. Much of that variation lies in the systems surrounding schools, from the capacity of local government and conditions at home to the fiscal room available and the consistency with which reforms are carried out. Digital readiness runs through many of these differences. Districts with better internet access, wider device ownership and more meaningful use of digital tools tended to make stronger gains, especially in poorer areas where alternatives are scarce. Technology alone will not close Indonesia’s education gap. But without stronger digital foundations, national reforms are likely to travel furthest in the places already best equipped to receive them.

By Adam ROMZI and Hilda KURNIAWATI