Fearful of the 'middle-income trap,' Indonesia pushes for major policy reform

Indonesia's rise as an emerging economy is the latest of Asia's success stories.

Yet the country's Finance Minister Sri Mulyani Indrawati has warned that its yearly 5% GDP growth, higher than the global average of 2%, is "not enough for [Indonesia] to achieve the meaningful progress" needed to become a high-income nation. 

Indonesia's ambition is part of what it calls the "Golden Vision 2045," a grand plan aimed at transforming the country into a skilled workforce on high wages and a way to reduce poverty rates by the time it celebrates its 100-year anniversary.   

"To continue our journey [as a middle-income country aspiring to be a high-income country] ... of high growth based on high productivity, we have to invest more in human capital," the finance minister told CNBC's "Squawk Box Asia" in an interview broadcast last week. 

A country report by the International Monetary Fund published in August underlined that the aspiration for Indonesia is to "increase value added by moving through the value chain from raw commodities, build a skilled population ready for the digital age, and accelerate infrastructure development and institutional reform to support balanced, green, and equitable growth."

Despite a change in political power earlier this year, Indonesia's ambitions remain. More than 200 million voters in the world's most populous Muslim country went to the polling booths in February, ending a decade of President Joko Widodo at the helm with the election of former army general and Defense Minister Prabowo Subianto. 

The new administration will take charge in October for a five-year term. Incoming President Subianto has promised to continue the charge toward making Indonesia a high-income economy.  

Economic reforms passed