Harnessing Demographic Dividend: The Future We Want

Republik Indonesia

Ministry of National Development Planning/ Bappenas – National Population and Family Planning Board/BKKBN

Presented at 50th Commission on Population and Development

April 5th, 2017

OUTLINE

1. Current situation

2. Population structural change in Indonesia

3. Harnessing Demographic Dividend

4. Implementation of program

2

Indonesia is facing population structural changes, over the

last 40 years we gained 20 years in life expectancy

3

Indonesia is currently reaping the benefits of the demographic dividend

15,000 10,000 5,000 0 5,000 10,000 15,000

0-4

10-14

20-24

30-34

40-44

50-54

60-64

70-74

80-84

In thousand people

Male Female Working School Lainnya Indonesia had one of the strongest and

most successful national planning initiatives in the world.

Early 70s program on family planning resulted more than half a reduction of number of children per woman.

Big variations still occur among provinces.

Dependency ratio 49,2% - means Indonesia has the largest working population in the region

Total labor force participation is 61%. Women’s participation is stagnant at less than 50%

Number of elderly (65+) is 13,7 Milliion; 24% of them still working (65+) and 16% of 75+

0

1

2

3

4

5

6

7

8

1971 1980 1990 1991 1994 1997 2000 2002 2007 2010 2012 2015

Total Fertility Rates at National and Selected Provinces, 1971-2015

Papua 2,59 (2015)

Jogjakarta 2,1 (2015)

Number of population 255,1 Million

Life expectancy increased to 70,8 years

Most of population lives in city (53,1% ) Early 1970s: The

start of village based contraceptie

delivery

2015

0

20

40

60

80

65-69 70-74 75-79 80-84 85+

Elderly Labor Force Participation (%), 2015

Male

Female

Total

4 Sources: Central Statistical Bureau, Supas and SDKI various years

149 MIO 1,103 PEOPLE/KM2

15,3 MIO 28,2 PEOPLE/KM2

55,2 MIO 114,8 PEOPLE/KM2

18,7 MIO 99,2 PEOPLE/KM2

6,9 MIO 13,8 PEOPLE/KM2 9,9 MIO

147 PEOPLE/KM2

Uneven Population Density, Distribution, and Demographic Transition: Some regions are already experiencing an aging population – targeted specific interventions are required for each province

Late transition Below replacement rate TFR,

large share of older population, window of opportunity has

passed

Early transition

Increasing share of children and working population, older

people start to increase

Pre-transition

stagnant declining fertility, later period of window opportunity

Uncertainty to reach the window of opportunity

High fertility, high mortality, low access to education and health,

Sources: 1. Adioetomo, Forthcoming IRSA Book Series on Regional Development No. 15, 2017; 2. Central Statistical Bureau, Supas 2015 5

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

Per capita Consumption of Education, by single age, 2012

private public

Rel

ativ

e to

lab

or

inco

me

30

-49

-

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

0 1 2 3 4 5 6 7 8 9 101112131415161718192021222324252627282930

Percapita Consumption on Education, by single age, 1993

private public

42%

58%

46%

54%

Human Capital Investment is the key to capitalize on the demographic dividend

Improvement on quality, access, and participation for better productivity

Education and training are vital to achieveing greater productivity with stronger links to industry

Public education expenditures has been increasing significanly following to the Law on Public Education

12 years compulsory education

Rel

ativ

e to

lab

or

inco

me

30

-49

Age Age

Sources: BPS, Bappenas, authors calculation using National Transfers Account

6

0.00

0.01

0.02

0.03

0.04

0.05

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

Per capita Consumption of health by single age, 2012

public health private health

-

0.01

0.02

0.03

0.04

0.05

1 2 3 4 5 6 7 8 9 10111213141516171819202122232425262728293031

Per capita Consumption of health by single age, 1993

private health public health

Mortality declining, life expectancy growing: health expenses start to increase. In 2014 Indonesia introduced a National Health Insurance scheme

Indonesia’s health pattern has gradually shifted from communicable to non-communicable diseases

Although it is not as significant as education expenditures, budget allocations for health have increased

Focus on infant mortality rate, improving nutrition, and reproductive health

Inclusion of health indicators into SDGs to promote healthy lifestyles

Promoting healthy and happy elderly populations

Sources: BPS, Bappenas, authors calculation using National Transfers Account 7

y = 5.1845x + 1.3646 R² = 0.0177

-3

-2

-1

0

1

2

3

4

5

6

-15% -10% -5% 0% 5% 10% 15%Nu

mb

er

of

Job

s C

rea

ted

(M

illi

on

)

Economic Growth (%)

Economic Growth vs Number of Jobs Created, 1989-2016

R² = 0.0261

0%

2%

4%

6%

8%

10%

12%

-15% -10% -5% 0% 5% 10% 15%

Un

em

plo

ym

en

t R

ate

(%

)

Economic Growth (%)

Economic Growth and Unemployment Rate, 1989-2016

With an increasing working age population, we need more quality jobs: the challenge is encouraging collaboration amongst government, private sector , and communities

Indonesia starts to experience growing number in working age population.

In the last five years, there has been an unstable jobs creation, compare to levels of high economic growth

Unemployment rates and number of unemployed declines.

However, there are still more than 32 million workers working less than 35 hours per week

More than half of informal workers 0

10

20

30

40

0

10

20

30

40

200220032004200520062007200820092010201120122013201420152016

Mil

lio

n P

eo

ple

Part-timer/Voluntararyunemployed

Half-unemployed/Forcedunemployed

% out of totalworkers

Sources: National Statistics Bureau, Bappenas, various years 8

Indonesia’s economic growth has played an important role in reducing poverty and increasing the populations’ standard of living

Along with high economic growth, especially during 1990’s and early 2000s, there were trends of increasing inequality. The commodity boom in the early 2000 was one of the main causes of the increasing inequality

Jobs created still in favor those in the highest quintile contributing to high income disparity between the richest and the poorest

0.3

5

0.3

5

0.3

4

0.3

3

0.3

3

0.3

3

0.3

2

0.3

2 0.3

4

0.3

4

0.3

5

0.3

6

0.3

7

0.3

08

0.3

29

0.3

2

0.3

2

0.3

63

0.3

64

0.3

68

0.3

68

0.3

78

0.4

10

0.4

10

0.4

13

0.4

05

0.4

02

0.3

94

0.3

0.32

0.34

0.36

0.38

0.4

0.42

1965 1970 1976 1978 1980 1981 1984 1986 1987 1990 1993 1996 1997 1999 2002 2003 2004 2005 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

In the last two years, inequality has started to gradually decline

Sources: Central Statistic Office, several years

Asian Financial

Crisis

Start declining

Regional inequality: large varitation in productivity amongst provinces (per capita production relative to 30-49 production, 2012, selected provinces)

-

0.5

1.0

1.5

2.0

2.5

3.0

0 5

10

15

20

25

30

35

40

45

50

55

60

65

70

75

80

85

90

+

DKI Jakarta

earning Self

-

0.5

1.0

1.5

2.0

2.5

3.0

0 5

10

15

20

25

30

35

40

45

50

55

60

65

70

75

80

85

90

+

East Kalimantan

Earning Self

-

0.5

1.0

1.5

2.0

2.5

3.0

0 5

10

15

20

25

30

35

40

45

50

55

60

65

70

75

80

85

90

+

Bali

Earning Self

-

0.5

1.0

1.5

2.0

2.5

3.0

0 5

10

15

20

25

30

35

40

45

50

55

60

65

70

75

80

85

90

+

East Nusa Tenggara

Earning Self

-

0.5

1.0

1.5

2.0

2.5

3.0

0 5

10

15

20

25

30

35

40

45

50

55

60

65

70

75

80

85

90

+

West Papua

Earning Self

DKI Jakarta had the smallest dependent ratio (0,37) the most productive

East Nusa Tenggara had the highest dependent ratio (0,69) the least productive

Provinces had the same pattern on composition of production.

Almost half of the provinces rely on the self-employed income (more than 50%)

Sources: Central Statistic Office, author’s calculation, 2012 10

Future Trends

“Indonesia’s population will continue to increase but with at slowing down rate, along with rapid urbanization.

Demographic dividend will reach the peak by 2030.

Working population starts to decline.

Indonesia will shift from a situation of population mobility to non-permanent mobility” (Population Dynamic, UNFPA 2015)

11

The Future we will be or The Future we want ? –

sustainable, inclusive, and productivity-led path of development

40

45

50

55

60

65

70

75

80

1971 1980 1990 2000 2010 2015 2020 2025 2030 2035 2040 2045

Life Expectancy at birth by sex (years)

Male

Female

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

Future Total Fertility Rate, 2020-2045

Sources: Central Statistical Bureau, Bappenas, UNFPA (various years)

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

0%

10%

20%

30%

40%

50%

60%

70%

80%

19

71

19

73

19

75

19

77

19

79

19

81

19

83

19

85

19

87

19

89

19

91

19

93

19

95

19

97

19

99

20

01

20

03

20

05

20

07

20

09

20

11

20

13

20

15

20

17

20

19

20

21

20

23

20

25

20

27

20

29

20

31

20

33

20

35

20

37

20

39

20

41

20

43

20

45

Dependency Ratio

% <15

% 15-64

% 65+

DR

Dep

eden

cy R

atio

1. Getting the balance between population growth, fiscal sustainability, and environmental capacity right for Indonesia

2. Inclusive growth that emphasizes equal access to improvement of productivity and human capital

3. Comprehensive and sustainable social security system

255,1 juta Number of Population 1

318,7 juta

2015 2045

12

Towards sustainable consumption and production

Life-cycle financial

sustainability and

intergenerational financing

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

0 2 4 6 8 1012141618202224262830323436384042444648505254565860626466687072747678808284868890

Per capita Consumption and Production by single age, Indonesia (2012) compared to the USA (2010) value is divided by production of 30-40

USA consumption with large health expenses

Indonesia needs to maintain most suitable and sustainable consumption

Improving the elderly productivity, coverage of social security so do not fall to poverty

Improving productivity, maintaining the peak

Improving competitiveness, years of education, and relevance to jobs requirement

Sources: authors calculation based on National Transfers Account (NTA) methodology

Sustainability of environment

Over a decade, productivity has experienced positive change.

However there is room for improvement.

A fully implemented social security system may also shift the shape of old age labor income and consumption.

13

On average, potential gains with the best scenario of productivity and consumption is 0,62% to the economic growth will last only 8 more years...

POTENTIAL ANNUAL GAIN (PERCENTAGE)

PERIOD

1st DIVIDEND 2nd DIVIDEND

BUSINESS AS USUAL

SUSTAINABLE CONSUMPTION

AND PRODUCTION (IMPROVED

PRODUCTIVITY)

BUSINESS AS USUAL

SUSTAINABLE CONSUMPTION

AND PRODUCTION (IMPROVED

PRODUCTIVITY)

2015-2030 0,21 0,31 -0,19 0,31

2030-2040 (0,02) 0,08 -1,52 -2,62

2040-2050 (0,00) (0,01) -1,67 -2,62

PERIOD of positive dividend

58 yrs (end 2035)

81 yrs (end 2059)

32 yrs (end 2021)

23 yrs (end 2024)

Indonesia has a very short time frame to take advantage of the increasing in productive age groups

This is one way to realize high economic growth and escaping from lower-middle income trap

However, this achievement should not be on the expense of sustainable development principle

Investment in economic, social, and environmental aspects are vital

Development of a critical mass of a skill-intensive workforce

Policies to support maintaining fertility rates at replacement rate to maintain the momentum in growth and fiscal sustainability

Total 0,62%

Preparatory arrangment has been established to implement SDGs

14

INCLUSIVE GROWTH

(optimize economic growth potential, created as many as good jobs, pro-poor)

15

Cutting the intergenerational cycle of inequality: strategies for inclusive growth

Increasing job opportunities and

job intensive investment

Special intention to micro and small

enterprises

Nurture the growth of new

entreupreunerships

Strengthen the economy of the

villages

Improved access to basic services for the

poorest 40%

Reduce the burden of the

poor and vulnerable

Medium Term Development

Plan 2015-2019 (RPJMN)

Thank you

Medium Term Development

Plan 2015-2019 (RPJMN)