STRONG POLITICAL AND ECONOMIC STABILITY
A country's stability comes down to two main questions: how dependable are its institutions, and will the country be able to pay its bills? Indonesia's functioning democracy and investment-grade credit ratings provide important foundations for both.
Statistics Indonesia's (BPS) Indonesia Democracy Index (IDI), which tracks democratic performance over time, measures Indonesia's progress in three main aspects: freedom, equality, and the capacity of democratic institutions. The IDI assesses democratic performance through recorded events, news reports, focus groups and government documents, bringing together evidence of how democracy operates in practice.
In 2021, the IDI gave Indonesia a score of 78.12 out of 100 for its national-level democratic performance, placing the country in the “medium” category, just shy of the “high” category, a score above 80. At the central level, Indonesia scored 81.33, placing it in the “high” category. That distinction matters for investors: the central government plays a key role in shaping investment policy, from the Positive Investment List to tax incentives. Its democratic performance therefore offers relevant context for the institutions responsible for shaping the investment environment.
From an international perspective, the Economist Intelligence Unit’s (EIU) Democracy Index assesses democratic performance across five areas: electoral process and pluralism, functioning of government, political participation, political culture, and civil liberties. In its 2024 edition, Indonesia scored 6.44 out of 10, above the global average of 5.17. Its strongest results were in electoral process and pluralism, at 7.92, and political participation, at 7.22. These results highlight electoral competition and public participation as strengths within Indonesia’s democratic framework. While BPS and EIU use different methods and scales, the two indices offer complementary domestic and international perspectives on Indonesia’s democracy.
Moreover, Indonesia has maintained investment-grade sovereign credit ratings, all within investment grade, from the three major agencies: BBB from S&P Global Ratings, Baa2 from Moody's and BBB from Fitch. This is crucial because it reflects their assessments of Indonesia’s capacity to repay sovereign debts, supporting access to financing and opening the door to large institutional funds whose mandates only allow investment-grade holdings. For investors committing capital over many years, sovereign creditworthiness is an important part of assessing the country's financial resilience. A functioning democratic framework and a government with investment-grade credit standing: this is what stability looks like for long-term investment in Indonesia.