IV. Where Indonesia is Now 2017

II. WHERE INDONESIAIS NOW

GRIPS_2016 1www.slideshare.net/Ginandjar

THIRD LARGEST DEMOCRACYMARKET ECONOMY

GDP PER CAPITA US$3.836

16TH LARGEST ECONOMY MEMBER OF G-20 GLOBAL COMPETITIVENESS RANK : 37

FROM 148 COUNTRIES**) Turkey (51), South Africa (49), Mexico (57), Brazil (75), the Philippines

(47), India (55), Vietnam (56)

Source: World Economic Forum, 2016


IN 2016, INDONESIA’S REAL GDP GROWTHRANKED NUMBER THREE AFTER CHINAAND INDIA–AS SHOWN IN THE CHART.


REAL GDP GROWTH 2016

6.67.6

4.9-0.8

3.42.7

3.33.1

1.7-3.3

0.12.8

-4 -2 0 2 4 6 8 10

China

India

Indonesia

Russia

Slovak Rep.

South Korea

Turkey

Poland

Chile

Brazil

South Africa

Israel

GDP

GDP

Source: IMFGRIPS_2017 4www.slideshare.net/Ginandjar

ALTHOUGH INDONESIA’S ECONOMY, ATAROUND 5% IS NOT GROWING AS FAST ASCHINA OR INDIA,OVER THE PAST DECADE OR SO,INDONESIA HAS HAD THE LOWEST VOLATILITY INECONOMIC GROWTH AMONG OECD COUNTRIESOR AMONGST THE BRICS (BRAZIL, RUSSIA,INDIA, CHINA AND SOUTH AFRICA).


INDONESIA’S ECONOMY SURVIVED THE2008/2009 GLOBAL FINANCIAL CRISIS ALMOSTINTACT, AFFECTED BUT ONLY MINIMALLY.


GDP GROWTH

SOURCE: Bappens BPS,

GRIPS_2017 7

YoY%

-10

-5

0

5

10

15

20

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

USA

Japan

China

Indonesia

www.slideshare.net/Ginandjar

ANOTHER IMPORTANT INDICATOR ISMACROECONOMIC MANAGEMENT.

INDONESIA RELENTLESSLY PURSUESCAUTIOUS AND PRUDENT FISCAL POLICY ASREFLECTED IN THE DISCIPLINED APPROACHTO FISCAL SPACE, SACRIFING HIGHERECONOMIC GROWTH FOR ECONOMICSTABILITY—AS INDICATED AMONG OTHERSIN INFLATIONARY RATE—AS A MATTER OFPRINCIPLE.


INDONESIA’S FISCAL DEFICIT HAD ALWAYSMOSTLY BEEN UNDER 2%, AND NOW MOVETO MORE THAN 2%.


FISCAL DEFICIT (%)

-0.5

-0.9

-1.3

-0.1

-0.7

-1.1

-1.9

-2.3-2.2

-1.9

-2.1

-2.35-2.5

-2

-1.5

-1

-0.5

02005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Source: BPS


MORE GENERAL IS THE COUNTRY’S DEBTPROFILE. IN 2005 IT WAS 47% OF GDP, ANDCOINCIDING WITHPOST-CONSTITUTIONAL-AMANDMENTDEMOCRATIC CONSOLIDATION, IT WAS GOINGDOWN RATHER STEEPLY REACHING 24% IN2012, AND BY 2014 IT WAS 20%. IT INCREASEDA BIT IN 2016 TO AROUND 28%.


DEBT TO GDP

82.7 80.175.8

80.686.6

99.3

118.6 118.6126.1 123.5

129.7

142.6

162.2

54.350.6 52.9 56

68.573.6

83.3

106.7

126.2

142.4

163.6167.4

163.156.6

47.3

39

35.233.1

26.524.4

23.1 2324.9 24.7

27.4 28.3

0

10

20

30

40

50

60

0

20

40

60

80

100

120

140

160

180

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Government

Private

GDPIn tr

illio

n ID

R

%G

DP


DEBT* TO GDP RATIO

56.6

47.3

3935.2 33.1

26.5 24.4 23.1 23 24.9 24.727.4 28.3

0

10

20

30

40

50

60

0

500

1000

1500

2000

2500

3000

3500

4000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Bond

Loan

GDPTrill

ion

IDR

%G

DP

GRIPS_2017 13

*Sovereign date


DEBT TO GDP RATIO 2016

27

32.9

36.8

43.9

51.3

54

69

69.49

98.2

104.17

176.9

229.2

0 50 100 150 200 250

IndonesiaTurkey

AustraliaChina

PolandMalaysia

IndiaBrazil

UKThe USGreece

Japan

Source: IMFGRIPS_2017 14www.slideshare.net/Ginandjar

NEXT, POVERTY REDUCTION, WHICH HASALWAYS BEEN A PRIORITY EVEN DURING THESUHARTO’S AUTHORITARIAN ERA, WHENPOVERTY INCIDENCES WAS REDUCED FROM55% IN 1976 TO 11% IN 1996.


IT WENT UP AGAIN TO ALMOST 50% DUE THEECONOMIC CRISIS IN 1998, WHICH BROUGHTDOWN THE SUHARTO’S GOVERNMENT.UNDER THE DEMOCRATIC GOVERNMENT, ITCAME DOWN TO 11.47% IN 2013, REACHINGTHE SAME PRE-CRISIS LEVEL AS IN 1996. IN2014 IT WENT DOWN A LITTLE TO 11.00%. ITIS PROJECTED TO GO DOWN TO 8% IN 2018.


POVERTY

54.2

42.2 42.340.6

35

3027.2 25.9

22.5

49.548

38.7 37.9 38.4 37.3 36.1 35.1

39.337.2

3532.5

31 30 29.9 29.1 28.6 28.1 28.6 28.3 27.7 28.6 28.528.01

40.1

33.3

28.626.9

21.6

17.415.1

13.711.3

24.2 23.4

19.1 18.4 18.2 17.4 16.7 1617.7 16.6 15.4 14.1 13.3 12.5 12.4 12 11.7 11.4 11.5 11.3 11 11.2 11.1 10.86

0

10

20

30

40

50

60

Number Million)

Incidence (%)


UNEMPLOYMENT IS ANOTHER IMPORTANTPARAMETER. WHILE MANY OTHER COUNTRIES AREHAVING DIFFICULTIES IN KEEPING JOBS, DUE TO THE2008/2009 GLOBAL FINANCIAL CRISIS,UNEMPLOYMENT IN INDONESIA KEEPS GOINGDOWN, EVEN DURING THE GLOBAL CRISIS, TO 6.25%IN 2013.

IN 2014 IT REACHED 5.9%. IT GOES DOWN TO 5.5% IN2016, THE LOWEST IN THE LAST 15 YEARS.


UNEMPLOYMENT (%)

SOURCE: BPS

10.26 10.459.75

8.46 8.147.4

6.8 6.45.9 5.7 5.9 6.2

5.5

0

2

4

6

8

10

12

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Aug-2015

Feb-16


STATE OF PERSONAL FINANCES(2010 Datapoint indexed to 100)


ALSO SIGNIFICANT IS THE RISE OF THEMIDDLE CLASS, CONTRIBUTINGSIGNIFICANTLY TO INDONESIA’S ECONOMICGROWTH, POVERTY REDUCTION, ANDUNEMPLOYMENT.

50 MILLION NEW MIDDLE CLASS WERE BORNBETWEEN 2003-2013.


RISING NUMBER OFMIDDLE CLASS

37.7%2003

70%2015

= 74 MILLIONThe rising population share of Indonesia’s middle class those who

spend US$2 – US$20 per day (% of population)SOURCE: WORLD BANK


E-GENERATION


DEMOGRAPHICDIVIDEND

“Demographic bonus”

Note:The smaller dependency ratio• The bigger proportion of productive age• The higher economic productivity

“Demographic Bonus” in the period is having morequality as there is an increasing number of trainedlabours (assumption: average level of education ishigher than before)

Basic asset for the development of domestic market capacity and enhancement of economic productivity


BY 2030, INDONESIA COULD BECOME THESEVENTH-LARGEST ECONOMY IN THE WORLDAFTER CHINA, THE UNITED STATES, INDIA,JAPAN, BRAZIL, AND RUSSIA-OVERTAKINGGERMANY AND THE UNITED KINGDOM.

(McKinsey Global Institute, 2012)


INDONESIA’S STEADY PROGRESS TOWARDECONOMIC GROWTH HAS BEEN ATTRIBUTABLETO:NATURAL RESOURCES

POPULATION ―240 MILLIONHuman ResourcesMarket

―OIL/GAS―MINERALS―AGRICULTURE―BIO-DIVERSITY―NATURAL

ATTRACTION

EXPLAINING THE SUCCESSES

⅔ WORKING AGE


STRATEGIC POSITION:GEOGRAPHICALLYAMONG EMERGING ECONOMIESDYNAMIC, STABLE AND DEVELOPMENT ORIENTED

REGION ASEAN ECONOMIC COMMUNITY (AEC)POLITICAL STABILITYFUNCTIONING DEMOCRACYGOOD POLICIES


POLITICAL STABILITY ANDDEMOCRATIC CONSOLIDATION


INDONESIA HAS BEEN A DEMOCRATICLATECOMER (LATE 1990S).

BASED ON THE CATEGORY OFHUNTINGTON (1991) INDONESIABELONGS TO THE THIRD WAVE OFDEMOCRATIZATION.


THE FIRST WAVE OF THIS PROCESS STARTEDIN SOUTHERN EUROPE IN 1974.

IT SPREAD TO MILITARY REGIME OF SOUTHAMERICA IN THE LATE 1970S ANDCULMINATED IN 1980S.

IT REACHED EASTERN EUROPE IN THE LATE1980S.


DEMOCRATIZATION REACHED THE SHORE OFEAST AND SOUTHEAST COUNTRIES IN THE1990S.

– The Philippines in 1986– South Korea 1987– Thailand 1992– Indonesia 1998


TWO STAGES OF DEMOCRATIZATION:DEMOCRATIC TRANSITION: AUTHORITARIAN

REGIMES REPLACED BY DEMOCRACIES.DEMOCRATIC CONSOLIDATION:

– A regime that comprises popular legitimacy– Diffusion of democtaric values– Neutralization of anti-system actors– Civilian control over the military– Elimination of authoritarian enclaves– Judicial reform

(Schedler, 1998)


DEMORATIC CONSOLIDATION

IF ONE USED THE CRITERIA OF CONSOLIDATEDDEMOCRACY, AS:– The “only game in” town (democratic values have

become part of the culture) *– There is no danger or threats of reversal (going back

to autoritarian regime) IT CAN BE SAFELY ASSUMED THAT WITH THE

ELECTIONS OF 2014 DEMOCRATIC CONSOLIDATIONIN INDONESIA HAS REACHED ITS FINAL STAGE. * in Palma, Linz, Stepan, 1996


ABSENCE OF POLITICAL VIOLENCE THE MOST VISIBLE TRAIT OF DEMOCRATIC

CONSOLIDATION IN INDONESIA IS THE ABSENCE OFCOMMUNAL OR POLITICAL VIOLENCE

SHORTLY AFTER THE FALL OF SUHARTO, THEREWERE MANY COMMUNAL AND ETHNIC VIOLENCESIN VARIOUS PARTS OF THE COUNTRY

– Aceh, Maluku, West Kalimantan– The loss of East Timor– Some analysts speculated that Indonesia would

be broken down into pieces alongside theethnic and religious lines


POLITICAL OPENING AS WELL ASDECENTRALIZATION REMARKABLY: Reduced political violence Channeling potential conflicts into ballot

ELECTIONS ARE ALMOST TOTALLY FREE OFVIOLENCE OR PHYSICAL CONFLICTS AMONGPARTIES OR FOLLOWERS OF CANDIDATES

Respect for the: General Elections CommitteeConstitutional Court


SETBACKS


BUT THERE ARE ALSO SETBACKS THAT ARECAUSED BY: BAD POLICY GOOD POLICY, BUT

→INEFFECTIVE IMPLEMENTATION→BAD IMPLEMENTATION

NO POLICY


ON THE ECONOMY: CREATING THE ENVIRONMENT FOR

CARTEL FOR COMMODITIES TRADE:OILAGRICULTURE PRODUCTS

ENVIRONMENT: FOREST EXPLOITATION FOR THE SAKE OF

EXPORT, INDUSTRIALIZATION ORGROWTH

BAD POLICY


POLITICS: POLITIZING THE BUREAUCRACYRIGHTS WITHOUT RESPONSIBILITY

EXCESS OF FREEDOM OF EXPRESSION ABUSE OF SOCIAL MEDIA

BAD POLICY


FORESTS FIRE HAZE : THE LOSSES AMOUNTING TO 2% GDP

(IN FIVE MONTHS)BETWEEN 2001 AND 2014 INDONESIA

LOST 18.5 MILLION HECTARES OF TREECOVER. LAND CLEARING FOR PALM OIL

PLANTATION PALM OIL ACCOUNTS FOR 4.5% GDP

BAD POLICY


GOOD POLICY,INEFFECTIVE IMPLEMENTATION

New Phenomena

BUREAUCRATIC REFORM: Is still the core of many problems in Indonesia

FIGHTING CORRUPTION: Independent committee on corruption

eradication The system and supporting machinery in place,

but corruption is still rampant→ Bureaucratic→ Political Corruption


CORRUPTION IN INDONESIA

INDONESIA HAS THE INSTITUTIONS IN PLACE TOPREVENT AND DEAL WITH CORRUPT PRACTICES –MORE THAN IN MANY OTHER COUNTRIES.

INDONESIA HAS LAYERS AND LAYERS OF AGENCIESWHOSE JOB IS TO PROTECT THE COUNTRY AND THEPEOPLE FROM BAD GOVERNANCE.

SPECIAL INDEPENDENT AND POWERFUL ANTI-CORRUPTION AGENCY

BUT, THE OUTCOMES OF THE FIGHT AGAINSTCORRUPTION ARE STILL FAR FROM SATISFACTORY.


Central Government

MinistriesMinistries

InternalGovernment Audit

Agency (BPKP)

CorruptionEradication

Commission (KPK)

Police

AttorneyGeneral

OversightCommittee

OversightCommittee

ConstitutionalCourt

JudicialCommission

Commission onAnti Monopoly

Practices (KPPU)

CommissionAgainst Money

Laundering(PPATK)

SpecialAnti Corruption

Court

Independentcommission toprotect whistle

blowers

Government

InspectorGenerals

Independentcommissionsconstituted

by laws

RegionalInspectors OmbudsmanRegional

Governments

Parliament

SupremeCourt

Stated in theConstitution

SupremeAudit Board

(BPK)



GOOD THEORY POOR PRACTICE


POOR PRACTICEGOOD THEORY

Basic Human Rights

Democracy

Decision Making

Participation :i. Grass Root,ii. Empowerment,iii. Responsiveness

Prevent disintegration

Disunity

Warlordism

Nepotism

Exclusivism

Local Elites



Debureaucratization Efficiency Effectiveness Span of Control License and Permit Client Interaction Representativeness Populism/Pluralism Differentiated Public Better:

i. Planningii. Executioniii. Supervisioniv. Monitoring

Weak Institution

Limited Human

Resources

Unclear Responsibility

Decentralization of

corruption



EfficiencyResource OptimizationEquity

i. Resource allocation/distributionii. Povertyiii. Closing disparityiv. Opportunityv. EmpowermentDemonopolizationEntrepreneurshipEnvironmentInter-Regional CooperationInter-Regional CompetitionOwnership of Development

Rich Region Richer Poor Region Poorer Regional Barrier to

Commerce Environment knows no

Administrative border National vs Local Rules National vs Local Taxes



Efficiency in Delivery ofi. Educationii. Healthiii. Other social

services.

Local Capabilities inService DeliveryResponsive to Local

i. Needsii. Potentialiii. Shortcomings

Social CohesivenessSocial Solidarity

Different Level & Quality ofi. Educationii. Healthiii. Social

services.

Social Immobility



PluralityDiversityPreservation of local:

i. Languageii. Artsiii. Tradition

DignitySelf EsteemConfidenceLocal Wisdom

Primordialism

Local vs Modern Values


CORRUPTION ANDDECENTRALIZATION

• 3169 MEMBERS OF LOCAL PARLIAMENT WEREINDICATED TO BE INVOLVED IN CORRUPTIONFROM 2005 TO 2014 (MINISTRY OF HOMEAFFAIRS).

• 343 LOCAL EXECUTIVE (GOVERNORS, MAYORSOR DISTRICT HEADS) WERE INVOLVED INCORRUPTION FROM 2010-2014 (MINISTRY OFHOME AFFAIRS)


POLITICALREFORM

BUREAUCRATICREFORM

GOOD GOVERNANCE

POLITICALCORRUPTION

BUREAUCRATICCORRUPTION

DEMOCRACYEXCESSES

BUREAUPATHOLOGY


ANY DISCOURSES ON INDONESIAN POLITICSCAN NOT IGNORE THE ROLE OF ISLAM ORPOLITICAL ISLAM AND THE ROLE OF THEMILITARY.

FOOT NOTES: ROLES OF POLITICAL ISLAMAND THE MILITARY


ISLAM AND DEMOCRACY


THERE ARE LOT OF QUESTIONS REGARDINGTHE COMPATIBILITY BETWEEN ISLAMICVALUES AND WESTERN DEMOCRACY.

INDONESIA IS A PROVEN CASE IN WHICHBOTH CAN CO-EXIST HARMONIOUSLY INTHE SOCIETIES.


INDONESIA – THE COUNTRY WITH THELARGEST MUSLIM POPULATION – IS NOTAN ISLAMIC COUNTRY

IT HAS ALWAYS BEEN A PLURALISTICSOCIETY CHARACTERIZED BY RELIGIOUSMODERATION AND TOLERANCE.


JAKARTA GUBERNATORIAL ELECTION 2017

1. AGUS YUDHOYONO-SYLVIANA MURNI– SUPPORTED BY: DEMOKRAT, PKB, PAN,

PPP2. BASUKI TJAHAYA PURNAMA (AHOK)-

DJAROT WAHYUDI– INCUMBENT– SUPPORTED BY: PDIP, GOLKAR, NASDEM,

HANURA3. ANIES BASWEDAN-SANDIAGA UNO

– SUPPORTED BY: PKS AND GERINDRAMitsubishi_2017 57www.slideshare.net/Ginandjar

GRIPS_2017 58

RALLY ON 4 NOVEMBER 2016 TO PROTEST AHOK WHO WASALLEGED TO HAVE INSULTED ISLAM BY CRITICIZING HISOPPONENTS' USE OF A QURANIC VERSE IN A SPEECH.

POLICE ESTIMATED MORE THAN 200.000 MUSLIMS JOINED THEMASS PROTEST (CNN).


GRIPS_2017 59

SECOND RALLY WAS HELD ON 2 DECEMBER 2016.

POLICE ESTIMATED MORE THAN 400.000 MUSLIMS JOINED THEMASS PROTEST (CNN).


INDONESIA HAS BEEN A TARGET OFTERRORIST ATTACKS, BOTH FROM WITHINTHE COUNTRY AS WELL AS WITH SOMEELEMENTS OF FOREIGN INVOLVEMENT.

BUT IT DOES NOT CHANGE THE CHARACTERAND CONFIGURATION OF POLITICAL ISLAMIN INDONESIA.


THE LATEST TERORRIST ATTACK LINKED TOISIS IN CENTRAL JAKARTA, NEAR THEPRESIDENTIAL PALACE HAPPENED ON 14JANUARY 2016

CASUALITIES:3 PEOPLE DEATH (CIVILIAN), 5

PERPETRATORS DEATH32 PEOPLE INJURED


ISLAMIC INTELLECTUALS INDEED HAVE PLAYED APIVOTAL ROLE IN INDONESIA’S DEMOCRATIZATION.

IN EVERY ELECTION FROM THE FIRST TIME IN 1955UP TO THE LAST ONE IN 2014, THE MAJORITY OFINDONESIAN MUSLIMS ALWAYS VOTE FOR PARTIESNOT BASED ON RELIGION→ LESS THAN 40% VOTEDFOR ISLAMIC PARTIES.

IN 2014 THE ISLAMIC PARTIES COMBINEDRECEIVED 32.39% OF THE TOTAL VOTES.


SO FOR MOST INDONESIAN MUSLIMS THEPOLITICAL SENTIMENT IS BEST SUMMED UP BYA LEADING ISLAMIC SCHOLAR AND A LEADERIN ISLAMIC CIVIL SOCIETY, THE LATENURCHOLIS MAJID: “ISLAM, YES. ISLAMICPARTY, NO.”


BOTH NAHDLATUL ULAMA (WITH 30% OFPOPULATION) AND MUHAMMADIYAH (3% OFPOPULATION), THE TWO LARGEST ISLAMICORGANIZATIONS IN INDONESIA HAVESUPPORTED DEMOCRACY AND PARTICIPATED INPRESERVING AND CONSOLIDATINGDEMOCRACY.


THE SUPPORT (AND SURVIVAL) OF DEMOCRATICSYSTEM IN INDONESIA ESSENTIALLY COMESFROM THE MAINSTREAM OF MUSLIMCOMMUNITY, AND ITS LEADERS.

HOWEVER, THE PROCESS OF ISLAMICMAINSTREAMING REFLECTS BROADER CHANGEIN THE POLITY. ISLAMIC PARTIES PROJECTTHEMSELVES AS ‘OPEN’ PARTIES, WHILESECULAR PARTIES BECOME MORE ‘ISLAMIC’.

– Example: Introduction of Islamic (Sharia) Law inAceh without serious opposition from thecentral government and the nationalist factionsof the polity.


EVENTS SURROUNDING THE FALL OF SUHARTOSHOWED THAT THE MILITARY WAS SUPPORTIVEOF POLITICAL CHANGE.

IN DEMOCRATIC INDONESIA, THE INDONESIANMILITARY IS STILL A FORCE OF STABILITY ANDPEACE COMMITING ITSELF TO UPHOLDING THECONSTITUTION AND STAYING AWAY FROMPOLITICS.

THE MILITARY IS NOT A THREAT BUT AN ASSETTO INDONESIA’S DEMOCRACY.

THE MILITARY ANDDEMOCRACY


BUT ITS OFFICERS ARE STILL AMONG THEBEST SONS OF THE NATIONS. SO THEMILITARY CONTINUES TO PROVIDE THENATION WITH A POOL OF READY-TO-BE-USED HUMAN RESOURCES FOR VARIOUSPURPOSES, AS SEEN IN THE NUMBER OFCANDIDATES IN PRESIDENTIAL ELECTIONS.


INDONESIAN MILITARY HAS HAD A LONGHISTORY IN THE UN PEACE KEEPINGMISSIONS. IN ALMOST EVERYINTERNATIONAL CONFLICT WHERE THE UNIS INVOLVED INDONESIAN MILITARY ISPRESENT OR REPRESENTED.


THE POLICE THE POLICE HAS BEEN SEPARATED FROM

THE MILITARY SINCE 1999 IT IS NOW THE STANDARD BEARER OF

INDONESIA'S RULE OF LAW, IMPROVING INCOMPETENCY AND PROFESSIONALISMESPECIALLY IN THE FIGHT AGAINSTTERRORISM, BUT STILL NEEDS TO IMPROVEIMAGE AMONG THE GENERAL PUBLIC.


CHALLENGES


DEMOCRATIC INDONESIA IS FACING SERIOUSINSTITUTIONAL CHALLENGES, SUCH AS: IMPROVING DEMOCRATIC PROCESSES/QUALITY OF

DEMOCRACYMoney politics

Mediocre politicians

STRENGTHENING RULE OF LAW

REFORMING THE BUREAUCRACY

ELIMINATING CORRUPTION

MAKING DECENTRALIZATION WORK MOREEFFECTIVELY


INDONESIA’S GROWTH RATE IS STILL BETTERCOMPARED TO PEER COUNTRIES, BUT IT HASBEEN SLOWING DOWN TO UNDER THEAVERAGE OF THE EARLIER YEARS OFAROUND 6%. IN 2014 THE GROWTH RATEWAS “ONLY” 5.02%.

THE NEW GOVERNMENT IS TARGETING A 7%GROWTH RATE TO AVOID THE MIDDLEINCOME TRAP AND OVERCOME THEINFRASTRUCTURE BOTTLENECK.


WITHOUT EFFECTIVE POLICY MEASURES TOSUPPORT INVESTMENT AND PRODUCTIVITYGROWTH THE RISKS OF A MORESTRUCTURAL DETERIORATION WILL MOUNTAND WILL ONLY RESULT IN PERPETUATINGTHE MEDIUM LEVEL OF GROWTH.


INDONESIA HAS MADE SIGNIFICANTPROGRESS IN REDUCING POVERTY OVER THEPAST DECADE.

HOWEVER, THERE IS A SLOW-DOWN IN THEPACE OF POVERTY REDUCTION WHILE AT THESAME TIME THERE IS A RAPID RISE IN WEALTHENJOYED MOSTLY BY THE UPPER INCOMEEARNERS, RESULTING IN THE WIDENING OFTHE GAP BETWEEN THE RICH AND THE POOR.


GRIPS_2017 75

Rat

ioGINI RATIO

2002-2016


THE GAP AS MEASURED IN GINI RATIOIN 2013 (0.413) AND IT WAS 0.43 IN2014 HIGHEST IN INDONESIA’SHISTORY.

IT WENT DOWN TO 0.40 IN 2016.


ECONOMIC CHALLENGES:Growth & Equity


AFTER RECOVERING FROM THE ASIAN FINANCIALCRISIS, INDONESIA'S REAL GDP PER CAPITA GREW ATAN ANNUAL AVERAGE RATE OF 5.4 PERCENT BETWEEN2000 AND 2014.

GROWTH IN 2016 (Q4) WAS 5.04 PERCENT.

THIS GROWTH HELPED TO PULL MANY OUT OFPOVERTY; THE POVERTY RATE MORE THAN HALVEDFROM 24 PERCENT DURING THE CRISIS TO 11 PERCENTBY 2014.

(WORLD BANK, 2015, P.11)

GROWTH


GROWTH HAS ALSO HELPED TO CREATE A STRONGERMIDDLE CLASS THAN EVER BEFORE; THERE ARE NOW45 MILLION PEOPLE (THE RICHEST 18 PERCENT OF ALLINDONESIANS) WHO ARE ECONOMICALLY SECURE ANDENJOY A HIGHER QUALITY OF LIFE.

THEY COMPRISE THE FASTEST GROWING SEGMENT OFTHE POPULATION, INCREASING AT 10 PERCENT PERYEAR SINCE 2002.

(Ibid, P.11)


INEQUALITY THE BENEFITS OF ECONOMIC GROWTH HAVE BEEN

ENJOYED LARGELY BY THE GROWING CONSUMERCLASS.

BETWEEN 2003 AND 2010, CONSUMPTION PERPERSON OF THE RICHEST 10 PERCENT OFINDONESIANS GREW AT OVER 6 PERCENT PER YEARAFTER ADJUSTING FOR INFLATION, BUT GREW AT LESSTHAN 2 PERCENT PER YEAR FOR THE POOREST 40PERCENT.

(Ibid, P.11)


RISING INEQUALITY IS CREATING AN INDONESIATHAT IS MORE DIVIDED THAN EVER BEFORE FIFTEEN YEARS OF SUSTAINED ECONOMIC GROWTH IN

INDONESIA HAVE HELPED TO REDUCE POVERTY ANDCREATE A GROWING MIDDLE CLASS.

HOWEVER, GROWTH OVER THE PAST DECADE HASPRIMARILY BENEFITTED THE RICHEST 20 PERCENT ANDLEFT THE REMAINING POPULATION-OF ABOUT 205MILLION PEOPLE- BEHIND.

(Ibid, P.2)


WITH RISING DISPARITIES IN LIVING CONDITIONS ANDAN INCREASED CONCENTRATION OF WEALTH IN THEHANDS OF THE FEW, INDONESIA'S LEVEL OFINEQUALITY IS NOW CONSIDERED TO BE RELATIVELYHIGH AND CLIMBING FASTER THAN MOST OF ITS EASTASIAN NEIGHBORS.

(Ibid, P.2)


INEQUALITY IN INDONESIA IS RISING RAPIDLY BY MOST MEASURES, INEQUALITY IN INDONESIA HAS

REACHED HISTORICALLY HIGH LEVELS.

IN 2002, THE RICHEST 10 PERCENT OF INDONESIANSCONSUMED AS MUCH AS THE POOREST 42 PERCENTCOMBINED; BY 2014, THEY CONSUMED AS MUCH ASTHE POOREST 54 PERCENT.

(Ibid, P.11)


THE RICHEST 10 PERCENT OF INDONESIANS OWN ANESTIMATED 77 PERCENT OF ALL THE COUNTRY'SWEALTH.

IN FACT, THE RICHEST 1 PERCENT OWN HALF OF ALLTHE COUNTRY'S WEALTH, WHICH IS THE SECOND-HIGHEST LEVEL (ALONG WITH THAILAND) AFTERRUSSIA FROM A SET OF 38 COUNTRIES.

(Ibid, P.18)


Indonesia has one of the highest concentrations of wealth out of 38 countries withavailable data

Share of total wealth held by richest 1 percent of households (percent)

Source: Credit Suisse, 2014 in World Bank 2015, P.18GRIPS_2017 85www.slideshare.net/Ginandjar

THE SHARE OF WEALTH OWNED BY THE RICHEST 10PERCENT IN INDONESIA INCREASED BY 7 PERCENTAGEPOINTS BETWEEN 2007 AND 2014, IN THE TOP 10 OF46 COUNTRIES OVER THAT PERIOD.

THESE INCREASED ASSETS TODAY WILL GENERATEEVEN HIGHER INCOMES TOMORROW.

A SMALL NUMBER OF INDONESIANS ARE BENEFITTINGFROM FINANCIAL AND PHYSICAL ASSETS—SOMETIMESACQUIRED THROUGH CORRUPT MEANS—THAT, INTURN, DRIVES HIGHER INEQUALITY IN THE FUTURE.

(Ibid, P.18)


(Ibid, P.8)


MAINTAINING MACRO ECONOMIC STABILITY ENHANCING UNCORRUPT AND RENT FREE

BUSINESS ENVIRONMENT EXPANDING INFRASTRUCTURE

DEVELOPMENTEASTERN REGION AND RURALAREAS

ECONOMIC POLICY IN FAVOUR OF THE POOR:ACCESS TO CAPITAL, TECHNOLOGY AND MARKET

WHAT NEED TO BE DONE


COST OF LOGISTICS (% OF GDP)BETWEEN 2016

INDONESIA 26%SOUTH KOREA 13%JAPAN 9%MALAYSIA 14%SINGAPORE 8%

SOURCE: ROLAND BERGER CONSULTING


AFFIRMATIVE ACTION AND TARGETEDSOCIAL ECONOMIC POLICIES• IMPROVING LOCAL SERVICE DELIVERY TO

PROVIDE EQUAL OPPORTUNITY FOR ALL.A KEY TO A BETTER START FOR FUTUREGENERATIONS IS IMPROVED LOCAL SERVICEDELIVERY, WHICH CAN IMPROVE HEALTH,EDUCATION AND FAMILY PLANNINGOPPORTUNITIES FOR ALL.

(Ibid, P.18)


• PROMOTING BETTER JOBS AND SKILLSTRAINING OPPORTUNITIES FOR THEWORKFORCE.

TODAY'S WORKERS WHO HAD AN UNFAIR STARTCAN STILL IMPROVE THEIR SKILLS.WHEN THEY DO, THE GOVERNMENT CAN HELP TOMAKE SURE THERE ARE BETTER JOBS AVAILABLETHROUGH A MORE CONDUCIVE INVESTMENTCLIMATE AND LESS RIGID BUT MORE EFFECTIVEWORKER PROTECTION REGULATIONS.

(Ibid, P.18)


• ENSURING PROTECTION FROMSHOCKSSOCIAL SAVETY NET

GOVERNMENT POLICIES CAN REDUCE THEFREQUENCY AND SEVERITY OF SHOCKS, AS WELL ASPROVIDE THE COPING MECHANISMS TO ENSURE ALLHOUSEHOLDS HAVE ACCESS TO ADEQUATEPROTECTION TO THE SHOCKS WHEN THEY DOOCCUR.

(Ibid, P.18)


• USING TAXES AND GOVERNMENT SPENDING TOREDUCE INEQUALITY NOW AND IN THE FUTURE

— THIS FINAL PRIORITY IS A PREREQUISITE FOR THEFIRST THREE. THAT IS, THE FIRST THREE PRIORITYACTIONS ORE ONLY POSSIBLE IF SUFFICIENT ANDEFFECTIVE SPENDING DECISIONS ORE MADE.

— AT THE SAME TIME, HOW TAXES ARE RAISED TOFUND THIS SPENDING CAN BE USED TO REDUCEINEQUALITY TODAY, AS WELL AS POTENTIALLYADDRESS SOME OF THE UNFAIR ASPECTS OFWEALTH CONCENTRATION.

(Ibid, P.18)GRIPS_2017 93www.slideshare.net/Ginandjar

TAX PROBLEMS

• 2015: 82% OF TARGETTAX/GDP (%)INDONESIA 10%OTHER ASEANCOUNTRIES

13-15%

WESTERN EUROPE 40%



PROCESS

OUTPUT OUTCOME

OUT OF THE BOX >< ROUTINITYBUSINESS AS USUAL

GLOBAL → KNOW HOW → TECHNOLOGY→ MARKET

LOCAL → WISDOM → CULTURE/VALUES→ CAPABILITY→ PRODUCTIVITY→ COMPETITIVENESS→ ENTREPRENEURSHIP

LEADERSHIP IS THE KEY


IN CONCLUSION


ECONOMICCRISIS

POLITICALREFORM DEMOCRACY

ECONOMICGROWTH

SOCIALWELFARE


ECONOMIC CRISIS HAS CAUSED A LOT OFSUFFERINGS AND SET BACK TO THE ECONOMYAND SOCIAL WELFARE.

POLITICAL REFORM IN INDONESIA HASPRODUCED A STABLE AND VIBRANTDEMOCRACY.


INDONESIA’S DEMOCRACY HAS PERFORMEDRELATIVELY WELL IN MAINTAINING POLITICALSTABILITY, SUSTAINING ECONOMIC GROWTHAND IMPROVING SOCIAL WELFARE OF THEPEOPLE.


HOWEVER AS WITH OTHER EMERGINGECONOMIES, INDONESIA ALSO FACESFORMIDABLE ECONOMIC CHALLENGES, BOTHDUE TO EXTERNAL PRESSURES AND INTERNALSTRUCTURAL PROBLEMS, THAT HAS MADE:HIGHER LEVEL OF GROWTH ELUSIVE,

FISCAL BALANCE PRECARIOUS,

RATE OF POVERTY REDUCTION STAGNATING,AND

GAP BETWEEN RICH AND POOR WIDENING.


STRONG DEMOCRATIC LEADERSHIP ISA CONDITIO SINE QUA NON TO BE ABLETO OVERCOME THOSE CHALLENGES ANDREALIZE THE POTENTIALS OF THECOUNTRY AND ITS PEOPLE.


THANK YOU


Date post:	12-Apr-2017
Category:	Leadership & Management
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IV. Where Indonesia is Now 2017

Leadership & Management