Indonesia’s next president might face
difficulties in efforts to liberate more people from poverty, with the
country’s economic slowdown possibly further widening the gap between the poor
and the rich, the World Bank says.
“The
people of Indonesia, the world’s third-most populous democracy, have voted for
a new president who will take office facing hard choices necessary to address
rising fiscal pressures and to implement much-needed reforms to deliver on the
economy’s enormous potential,” the World Bank wrote in its quarterly report
released on Monday.
The
US-based organisation has made another slash to its economic growth forecast
for Indonesia to only 5.2 per cent this year, from its earlier estimate of 5.3
per cent.
The
World Bank had previously predicted Indonesia would grow at 6.5 per cent
throughout this year, but then consistently shaved its forecast due to
significant contraction in the country’s growth drivers, notably imports and
investments.
Ndiame
Diop, World Bank lead economist for Indonesia, warned that the latest
deceleration in the economy might not be cyclical in nature, but rather a
representation of a “more structural downshift” in the economy.
Such a
structural slowdown might pose a challenge for Joko “Jokowi” Widodo — who thus
far leads the tally in the vote count by the General Elections Commission (KPU)
— in his bid to fulfill his campaign promises, which focused on promoting
inclusive growth aimed at lifting more people out of poverty and narrowing the
income gap between the rich and the poor.
The
World Bank noted that income inequality in Indonesia had been steadily
increasing since 2000, and it had been the second-fastest in the Asian region
after China.
The
rise of income inequality in Indonesia, measured in a Gini coefficient ratio,
contrasts with the situation seen in Japan, South Korea and Taiwan, which all
posted a high level of growth with a low ratio of income inequality.
In the
Southeast Asia region, countries such as Thailand, Vietnam and the Philippines
have also enjoyed periods of strong growth with stable or declining income
inequality, according to the World Bank.
Indonesia’s
income inequality is widening because its economic expansion has not been
followed with development in necessary infrastructure, such as health care and
education, it says.
As a
consequence, poor households are denied access to economic resources enjoyed
mostly by the rich.
“Indonesia
is not giving everybody a level playing field to compete,” said Rodrigo A. Chaves,
World Bank country director for Indonesia.
“In
fact, there is substantial inequality of opportunities: some people play
uphill, others are playing downhill,” he added.
Commenting
on the report, National Development Planning (Bappenas) Minister Armida
Alisjahbana agreed that inequality issues “would be homework for the incoming
government”.
Nevertheless,
she argued that the existing government had laid out several programs that
could serve as the groundwork needed for the new president to accelerate poverty
alleviation.
“We
have completed our jobs related to social assistance and protection agenda,
such as those related to the programs’ database and targeting-mechanisms, many
of which have become our milestones,” Armida told The Jakarta Post on Monday.
“The
incoming government will just have to continue [the existing framework],” she
added.
Satria
Sambijantoro
Business & Investment Opportunities
Saigon Business Corporation Pte Ltd (SBC) is incorporated
in Singapore since 1994.
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