Analysis of the Implementation of Economic Freedom in Indonesia

Daftarsbmptn.com – Economic freedom is a key indicator in measuring the extent to which a country provides space for businesses to innovate and contribute to economic growth. In Indonesia, the implementation of economic freedom continues to expand in line with government efforts to promote ease of doing business, investment, and regulatory efficiency. However, behind these positive dynamics, major questions arise regarding its implications for environmental sustainability.

Economic policies that overemphasize growth and deregulation often have negative impacts on ecosystems. This phenomenon has prompted many parties, including academics, environmental activists, and policymakers, to conduct a deeper analysis of the relationship between economic freedom and environmental sustainability in Indonesia.

According to the Heritage Foundation’s Index of Economic Freedom 2025, Indonesia ranks 62nd globally with a score of 63.7, categorized as “moderately free.” This ranking indicates an improvement compared to previous years, particularly in terms of regulatory efficiency and ease of investment. However, rapid economic growth has not been fully matched by strong environmental protection.

Economic Freedom and the Pace of Development

In recent years, the Indonesian government has continued to expand pro-market policies, including through simplification of business permits, bureaucratic reform, and the implementation of the Job Creation Law. The main goal is to attract investment, create jobs, and accelerate infrastructure development.

Coordinating Minister for Economic Affairs Airlangga Hartarto emphasized that economic freedom is key to boosting national competitiveness. “We want to create a conducive business climate, where investors feel safe, the licensing process is fast, and regional economies can grow,” he said at an economic forum in Jakarta on Thursday (November 7, 2025).

However, despite these achievements, concerns have arisen that deregulation policies have actually opened up more room for the exploitation of natural resources. Some argue that the ease of licensing is often accompanied by weak oversight of environmental impacts. This can trigger ecosystem degradation, deforestation, and water and air pollution in various regions.

Environmental Impact and Oversight Challenges

Environmental activists have highlighted that the implementation of economic freedom without strong environmental governance can have serious consequences. Data from the Ministry of Environment and Forestry (KLHK) shows that throughout 2024–2025, there has been an increase in cases of forest and land destruction due to industrial activities, particularly in the mining, plantation, and infrastructure development sectors.

“Economic growth is important, but it shouldn’t be at the expense of the environment. We often see industrial expansion carried out without thorough environmental assessments,” said Nurul Fitri, a researcher from the Indonesian Forum for the Environment (WALHI). She added that most environmental violations are caused by weak law enforcement and low corporate commitment to sustainable practices.

Furthermore, the issue of climate change is also a major concern. Carbon emissions from the energy and transportation sectors continue to increase along with increasing economic activity. Without strict controls, Indonesia risks failing to achieve its net-zero emissions target by 2060.

Balancing Economic Freedom and Environmental Sustainability

Several economists believe that economic freedom and environmental sustainability are not necessarily incompatible. If implemented properly, the two can actually go hand in hand.

Economist from the University of Indonesia, Prof. Faisal Basri, believes that economic freedom must be balanced with regulations that ensure environmentally friendly business practices. “Economic freedom does not mean limitless. The government needs to enforce regulations that encourage corporate social responsibility and energy efficiency,” he said.

The government itself has begun adopting policies that integrate environmental aspects into economic policies. One concrete step is the implementation of a green economy framework that emphasizes the importance of sustainable investment, renewable energy, and a circular economy.

This program aims to ensure that every major investment must have adequate environmental safeguards. Through instruments such as carbon taxes and green incentives, the government hopes that businesses will be more committed to environmental sustainability.

Government Initiatives and Multisector Collaboration

In an effort to strengthen the balance between economic growth and environmental sustainability, the government is also collaborating with various stakeholders, including the private sector and civil society. The Ministry of Environment and Forestry, together with the Ministry of Investment, is promoting the implementation of the ESG (Environmental, Social, and Governance) concept as a new standard in business activities.

Investment Minister Bahlil Lahadalia stated that investment projects that do not meet sustainability criteria will be evaluated more stringently. “We are no longer just looking at investment value, but also its ecological and social impacts. Going forward, environmentally friendly investments will be prioritized,” he emphasized.

In addition to government policies, community participation is also a crucial factor. Programs such as forest rehabilitation, community-based waste management, and increasing environmental awareness at the local level contribute to maintaining a balance between development and environmental sustainability.

Towards a Sustainable, Free Economy

Although still facing various challenges, Indonesia’s policy direction toward a free but responsible economy is increasingly clear. The biggest challenge is ensuring that economic freedom does not become an excuse to ignore the principles of environmental sustainability.

Private sector involvement in green innovation, investment in renewable energy, and increased production efficiency are key to an inclusive and environmentally friendly economic future.

Environmental expert from the Indonesian Institute of Sciences (BRIN), Dr. Yulianto Prabowo, emphasized the importance of this balance. “Sustainable economic development can only be achieved if pro-market policies are accompanied by strong environmental law enforcement and responsible changes in business behavior,” he said.

As we approach 2026, Indonesia faces a crucial choice: maintain rapid economic growth or ensure that every step of development does not come at the expense of future generations. With the right strategy, economic freedom and environmental sustainability are not polar opposites, but rather two key pillars towards a developed and sustainable Indonesia.