Indonesia Development: Growing Without Welfare
Hendri Saparini, DIRECTOR OF THE ECONIT ADVISORY GROUP
Sumber : JAKARTA POST, 25 November 2011
It seems that we will not run out of stories when we talk about poverty in Indonesia. We can write about them in dozens of novels or hundreds of essays. It may be about a poor family in a big city, or a deprived family in a coastal area.
The setting and background of those two stories might be different, but the message and the problems are almost the same: limited opportunities to change their living standards.
Based on Central Statistics Agency (BPS) data, the number of impoverished people living in Indonesia in 2011 is only around 30 million. However, other data illustrates that the welfare levels of Indonesians is still relatively low.
The number of people eligible to get raskin (rice for the poor), for instance, is around 76 million people (32 percent of population), almost the same number as those who are eligible for health services for the poor.
Substandard welfare in the society has also been reported by several international institutions. The World Bank reported that the amount of Indonesians who could be said to live close to the poverty line totaled 40 percent of the population.
While the Asian Development Bank (ADB) reported that the number of people living in poverty has increased by 2.7 million people during the last three years: from 40.4 million in 2008 to 43.1 million people in 2010.
This makes Indonesia the only ASEAN country to have experienced an increased number of its population living below the poverty line. In the same vein, the United Nations Development Program (UNDP) has confirmed that Indonesia’s Human Development Index (HDI) is below world standards.
It is true that there are different definitions of a “poverty line standard” among different countries and institutions, but the figures pertaining to public welfare in Indonesia as illustrated above are hard to comprehend, given the degree of economic development in Indonesia.
Data on public welfare is in contrast with the country’s economic growth during the last couple of years. The country’s economy has increased to a relatively high level, growing by 6.1 percent in 2010, and even 6.5 percent in the third quarter of 2011.
During the time of crisis in 2009, the country’s economy proudly grew at 4.5 percent, becoming one of only three countries to experience positive growth — the other two being India and China.
Therefore, we have to ask a question: What does high growth mean amid the concurrent insignificant development of public welfare?
Considering the contradictory data and facts, it is understandable when people question the BPS figures and credibility, as well as the 6 percent growth claimed by the government.
Some people even suspect the authorities of lying on the data. However, there should also be concerns about the figures themselves, given that up until today, there is no other institution capable of performing these kinds of survey other than the BPS.
Be that as it may, it is very possible that the Indonesian economy can grow at 6 percent since the potential far exceeds it. Look at the private consumer share of gross domestic product (GDP) at more than 55 percent, which has been growing by an average of 5 percent during the last several years; look at export growth, as well as investment in various sectors. In light of these factors, 6 percent growth is a perfectly acceptable figure for Indonesia.
Is anything amiss? Not if one refers to macroeconomic indicators. The economy keeps on growing, financial stability is well-managed, exports are increasing, and investments are flowing in.
But, things could be said to be awry when we see that, currently, 70 percent of the country’s exports are dominated by primary products, while in the 1990s there was already a large proportion of highly competitive manufactured products being exported.
Things are also awry if 60 percent of the benefits from national development is being enjoyed by less than 16 percent of the population, which indicates unjust and unfair development.
We have to consider it wrong when after more than 40 years, the number of people living in poverty is still enormous, compared to other countries that have successfully implemented progressive development as well as improved public welfare in a short period of time.
Take China, for example; according to the ADB, China has reduced its poverty rate from 65 percent of the population in 1985 to only 7 percent in 2007.
What is worth noting is the increased size of the middle class during recent years, accounting for 66 percent of the population. It was not an easy task for China to achieve; a great deal of strategy and policy was implemented to eradicate poverty.
One thing to be underlined is that China has put a great effort into creating jobs, both on a massive scale and in a sustainable way.
The BPS recorded that in 2010 the number of unemployed people who were uneducated and unskilled accounted for only 3.8 percent; a relatively small figure compared to the 11.9 percent of highly educated people.
This is understandable, as those people who are less educated or unskilled must work every day, since the little they can get today will be used for immediate necessities. Many impoverished people are not lazy.
On the contrary, they will do whatever they can, like selling fruit, banana leaves, papaya leaves, firewood, or whatever they have in their backyard.
As a last resort, they will move to the cities offering their muscle power if there is no other choice.
Unfortunately, this picture of the “employed” poor is not captured clearly by the BPS. In its National Economic Survey, the BPS would ask whether someone had worked for an hour within the previous week; the answer to this question would almost definitely be “yes”.
Some may have worked more than one hour; others may have worked a whole day, or even for 24 hours at a stretch. Consequently, many people would not have been recorded by the BPS as unemployed.
That is the reason for the “low” unemployment rate in Indonesia: only 6.8 percent (8.12 million people) in 2011, which, also unsurprisingly, tends to decrease.
However, according to BPS data, the number of people underemployed is quadruple that of the unemployed: around 33 million. The BPS confirmed that jobs created in 2006-2010, around 41 percent, were in the public sector, such as laundry services, electronics services, car and motorcycle mechanics, and so on.
Although these people have jobs, most of them are unlikely to be able to meet their daily basic needs.
Indonesia is experiencing high economic growth, but exclusively. Therefore, public welfare has not significantly improved. There is no other choice for the government but to honestly admit that the country’s current economic development is being misdirected.
Indonesia needs a new development strategy, which emphasizes the involvement of all levels of society and prioritizes national interests. ●
The setting and background of those two stories might be different, but the message and the problems are almost the same: limited opportunities to change their living standards.
Based on Central Statistics Agency (BPS) data, the number of impoverished people living in Indonesia in 2011 is only around 30 million. However, other data illustrates that the welfare levels of Indonesians is still relatively low.
The number of people eligible to get raskin (rice for the poor), for instance, is around 76 million people (32 percent of population), almost the same number as those who are eligible for health services for the poor.
Substandard welfare in the society has also been reported by several international institutions. The World Bank reported that the amount of Indonesians who could be said to live close to the poverty line totaled 40 percent of the population.
While the Asian Development Bank (ADB) reported that the number of people living in poverty has increased by 2.7 million people during the last three years: from 40.4 million in 2008 to 43.1 million people in 2010.
This makes Indonesia the only ASEAN country to have experienced an increased number of its population living below the poverty line. In the same vein, the United Nations Development Program (UNDP) has confirmed that Indonesia’s Human Development Index (HDI) is below world standards.
It is true that there are different definitions of a “poverty line standard” among different countries and institutions, but the figures pertaining to public welfare in Indonesia as illustrated above are hard to comprehend, given the degree of economic development in Indonesia.
Data on public welfare is in contrast with the country’s economic growth during the last couple of years. The country’s economy has increased to a relatively high level, growing by 6.1 percent in 2010, and even 6.5 percent in the third quarter of 2011.
During the time of crisis in 2009, the country’s economy proudly grew at 4.5 percent, becoming one of only three countries to experience positive growth — the other two being India and China.
Therefore, we have to ask a question: What does high growth mean amid the concurrent insignificant development of public welfare?
Considering the contradictory data and facts, it is understandable when people question the BPS figures and credibility, as well as the 6 percent growth claimed by the government.
Some people even suspect the authorities of lying on the data. However, there should also be concerns about the figures themselves, given that up until today, there is no other institution capable of performing these kinds of survey other than the BPS.
Be that as it may, it is very possible that the Indonesian economy can grow at 6 percent since the potential far exceeds it. Look at the private consumer share of gross domestic product (GDP) at more than 55 percent, which has been growing by an average of 5 percent during the last several years; look at export growth, as well as investment in various sectors. In light of these factors, 6 percent growth is a perfectly acceptable figure for Indonesia.
Is anything amiss? Not if one refers to macroeconomic indicators. The economy keeps on growing, financial stability is well-managed, exports are increasing, and investments are flowing in.
But, things could be said to be awry when we see that, currently, 70 percent of the country’s exports are dominated by primary products, while in the 1990s there was already a large proportion of highly competitive manufactured products being exported.
Things are also awry if 60 percent of the benefits from national development is being enjoyed by less than 16 percent of the population, which indicates unjust and unfair development.
We have to consider it wrong when after more than 40 years, the number of people living in poverty is still enormous, compared to other countries that have successfully implemented progressive development as well as improved public welfare in a short period of time.
Take China, for example; according to the ADB, China has reduced its poverty rate from 65 percent of the population in 1985 to only 7 percent in 2007.
What is worth noting is the increased size of the middle class during recent years, accounting for 66 percent of the population. It was not an easy task for China to achieve; a great deal of strategy and policy was implemented to eradicate poverty.
One thing to be underlined is that China has put a great effort into creating jobs, both on a massive scale and in a sustainable way.
The BPS recorded that in 2010 the number of unemployed people who were uneducated and unskilled accounted for only 3.8 percent; a relatively small figure compared to the 11.9 percent of highly educated people.
This is understandable, as those people who are less educated or unskilled must work every day, since the little they can get today will be used for immediate necessities. Many impoverished people are not lazy.
On the contrary, they will do whatever they can, like selling fruit, banana leaves, papaya leaves, firewood, or whatever they have in their backyard.
As a last resort, they will move to the cities offering their muscle power if there is no other choice.
Unfortunately, this picture of the “employed” poor is not captured clearly by the BPS. In its National Economic Survey, the BPS would ask whether someone had worked for an hour within the previous week; the answer to this question would almost definitely be “yes”.
Some may have worked more than one hour; others may have worked a whole day, or even for 24 hours at a stretch. Consequently, many people would not have been recorded by the BPS as unemployed.
That is the reason for the “low” unemployment rate in Indonesia: only 6.8 percent (8.12 million people) in 2011, which, also unsurprisingly, tends to decrease.
However, according to BPS data, the number of people underemployed is quadruple that of the unemployed: around 33 million. The BPS confirmed that jobs created in 2006-2010, around 41 percent, were in the public sector, such as laundry services, electronics services, car and motorcycle mechanics, and so on.
Although these people have jobs, most of them are unlikely to be able to meet their daily basic needs.
Indonesia is experiencing high economic growth, but exclusively. Therefore, public welfare has not significantly improved. There is no other choice for the government but to honestly admit that the country’s current economic development is being misdirected.
Indonesia needs a new development strategy, which emphasizes the involvement of all levels of society and prioritizes national interests. ●
