INCLUSIVE ECONOMIC DEVELOPMENT FOR INDONESIA€¦ · INCLUSIVE ECONOMIC DEVELOPMENT FOR INDONESIA...
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INCLUSIVE ECONOMIC DEVELOPMENT FOR INDONESIA
Minister of National Development Planning/Head of National Development Planning Agency
Presented in Paralel Event of Annual IMF-WB Meetings on ‘Inclusive Economic Growth: Reducing Poverty and Inequality’
Bali, 10 October 2018
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Outline
Background: Growth, Poverty and Inequality
Inclusive Growth
Strategies and Policies
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I. SOME BACKGROUND: GROWTH, POVERTY AND INEQUALITY
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Indonesia is a huge potential market in Asia
Largest economy in the world15th
5th Largest emerging market with the best middle class potental
4th Most Populous country in the world
± 5% Private consumpton grows steadily
Indonesia is projected to be the largest economy in the world by 2050
4th
High & stable economic growth Progressive infrastructure development
Source: World in 2050, PWC
Source: BPS, Team Analysis
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Indonesia Maintains High and Stable Economic Growth
2014 2015 2016 2017
5,0
4,9
5,05,1
Economic Growth of Indonesia
Source: BPS
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Source : Indonesia’s Central Statistics Agency (BPS)
The Poverty rate has reached single digit in 2018
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Although the rate of poverty rate has been declining, the absolute number of the vulnerable is significant. They are prone to back again to be poor in a chance of any risk such as sick, loss job, food price inflation, natural disaster, and economic crisis.
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March 2014
Sept 2
014
March 2015
Sept 2
015
March 2016
Sept 2016
Marc
h 2017
Sept 2017
March 2018
23
24
25
26
27
28
29
30
9
9,5
10
10,5
11
11,5
28,2827,73
28,59 28,5128,01 27,76 27,77
26,5825,95
11,25
10,96
11,2211,13
10,8610,7 10,64
10,12
9,82
Number of poor people (million) Percentage of poor people (%)
Per
cen
t (%
)
Mil
lion
pe o
ple
72 million people are vulnerable
(1-1.5 National Poverty Line)
25,95 million people under poverty line
* Natonal pooerty line 20l18 = Rp400l14220l per capita per month (≈ USD245 PPP)
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Poverty is higher in rural areas and Eastern Indonesia
Sumber: BPS, Maret 2018
Sumatera 10,39%
(5,98 million people)
8,65%(2,1 million
people)
11,66%(3,9 million
people)
Jawa 8%
(13,3 million people)
6,82%(6,6 million
people)
12,81%(6,8 million
people)
Bali-Nusra 14,02%
(2,05 million people)
9,18%(0,59 million
people)
17,77%(1,5 million
people)
7,02%(10,14 million people)
URBAN
13,2%(15,8
million people)
RURAL
Maluku-Papua 21,2%
(1,5 million people)
5,03%(0,12 million
people)
29,15%(1,4 million
people)
Sulawesi 10,64%
(2,06 million people
5,83%(0.44 million
people)
13,68%(1,62 million
people)
Kalimantan 6,09%
(0,98 million people)4,3%
(0,32 million people)
7,6%(0,66 million
people)
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Several causes of the slow decline in poverty and inequality
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
28,57 45,3520,71 20,79
19,2824,81
29,7726,06
38,9845,66
22,9525,17
18,5920,65
28,4230,72
BMT
Bank Pemerin-tah/ Swasta
Koperasi
KUD
LKD
BPR
BRI
Need to Improve telecommunications networks
The majority of land is controlled by residents with the highest level of welfare of 20%
Distribution of land holding96% of households in rural areas have experienced more than one type of natural disaster
Number of rural villages by type of natural disaster, 2014
The 10% majority of the lowest welfare level only reaches informal financial services
% People in the village who can access financial sevices
Source : Podes and Susenas
0 5 10 15 20 25 30 35 400
0,2
0,4
0,6
0,8
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Rural poverty rate by province (Susenas 2018)
Prop
ortio
n of
vill
ages
hav
ing
good
sig
nal (
Pod e
s 20
14)
13 of 34 provinces have bad telecommunications signals in rural areas (below average)
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Gini Ratio of National, Urban, and Rural
0,3
0,32
0,34
0,36
0,38
0,4
0,42
0,44
0,3
6 0,3
7
0,3
1
0,3
3
0,3
2
0,3
2
0,3
6 0,3
8
0,3
7
0,3
7 0,3
8
0,4
1
0,3
9
0,4
1
0,4
1
0,4
1
0,4
1
0,4
1 0,4
1
0,4
1
0,4
0,4
0,3
9
0,3
9
0,3
9
0,3
9
0,42
0,4
0,43 0,43 0,430,42
0,430,43
0,430,42
0,41 0,41 0,41 0,4 0,4
0,34
0,33 0,33 0,330,32
0,320,32
0,34 0,330,33 0,33
0,320,32 0,32
0,32
Inde
x
The Gini ratio has slowly decreased.
The decline in the national was caused mainly by the decline in the urban area.
Gini ratio in the rural area has increased by 0.004 Gini Points in 2018.
1 2 3
Source: BPS 2014-2018
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Employment Inequality(the less skilled are trapped in jobs with low productoity and wages)
Inequality of access to basic services
(e4g4 educaton, health, house, clean water, sanitaton, and
electricity)
Lack of social safety nets when shocks occur (illness, job loss, price increases, natural
disasters)
Inequality of Income and Assets(high concentraton of wealth in a
small group of people)
1 2 3 4
Main Driving Factors of Inequality in Indonesia
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I. INCLUSIVE GROWTH
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Poverty Reduction, Equity, and Inclusive Growth
Anti poverty programs
Anti poverty programs
Increased Purchasing
Power
Increased Purchasing
Power
multiplier effects
multiplier effects
Good HealthGood Health
Better education
Better education
Better nutrition
Better nutrition
Higher Productivity & competitiveness
Higher Productivity & competitiveness
Reduced PovertyReduced Poverty
Higher & sustained
Growth
Higher & sustained
Growth
Political stabilityPolitical stability
Reduced InequalityReduced
Inequality
Increased Domestik Demand
Increased Domestik Demand
More job opportunity
More job opportunity
Source: Rook, 20l10
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Inclusive Economic Development for Indonesia
PILLAR III: Improving Access and
Opportunity
PILLAR III: Improving Access and
Opportunity
PILLAR I :Economic
Growth
PILLAR I :Economic
Growth
PILLAR II :Income Equality
and Poverty Reduction
PILLAR II :Income Equality
and Poverty Reduction
Sub-Pillar:1. Economic Growth 2. Employment Opportunity 3. Infrastructure in Economy
Sub-Pillar:1. Economic Growth 2. Employment Opportunity 3. Infrastructure in Economy
Sub-Pillar: 1. Inequality2. Poverty
Sub-Pillar: 1. Inequality2. Poverty
Sub-Pillar:1. Human Capability2. Basic Infrastructure 3. Financial Inclusion
Sub-Pillar:1. Human Capability2. Basic Infrastructure 3. Financial Inclusion
Economic development that provides equitable access and opportunities to all segment of
society, improves welfare and reduces disparities between groups and regions.
Each Province in Indonesia from
2015-2017 (34 PROVINCES)
Each Province in Indonesia from
2015-2017 (34 PROVINCES)
DATADATA
2121TOTAL INDICATORTOTAL INDICATOR
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Inclusive Economic Development Index at National Level in 2011-2017
2011 2012 2013 2014 2015 2016
4,83 4,895,08
5,165,29
5,42 5,47
INCLUSIVE ECONOMIC DEVELOPMENT INDEX
• Note: In general, a score of 1–3 is mentioned as unsatisfactory progress, a score of 4–7 as satisfactory progress, and a score of 8–10 as excellent progress.
2011 2012 2013 2014 2015 2016 2017
4,8
2 4,9
0
4,9
7
4,9
9 5,0
8
5,1
4
5,1
7
Pillar 1: Economic Growth
2011 2012 2013 2014 2015 2016 2017
6,24
6,15
6,17 6,26 6,36 6,44
6,64
Pillar 2:Income Equality and Poverty Reduction
2011201220132014201520162017
3,75
3,89
4,35
4,56
4,77
5,05
5,05
Pillar 3:Improving Access and Opportunity
20l17
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High economic growth
Low manufacture sector share
Low poverty rate
High human capabilites and access to opportunites
High gender equality and low economic inequality
Bali is the 4th most inclusive province in Indonesia (2017)
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What makes Bali unique?
What makes Bali vulnerable
Internal shocks: • Disasters surrounds island and in the
island (ex: Mt4 Agung erupton)• Security issues (Bali Bombing)
External shocks: • Global economic crisis• Traoel warning as a result of disaster
and security situaton Number and spending of tourists decline Economy is weakening
• Based on this oulnerability assessment, Bali should haoe growth strategy that mitgate risk of tourism sector
• Reoitalize agriculture sector to back up the tourism sector
• Agricultural products must be encouraged to be further processed so that medium and small industries grow and adoance
• Tourism as an engine of growth
• Cultural atracton is the backbone of tourism
• Balinese culture is mainstreamed in all aspect of life
• High concern on afrmatoe policies for the poor
What should be done?
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III. STRATEGIES & POLICIES
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3 MAIN STRATEGIES3 MAIN STRATEGIES
Basic Services DevelopmentBasic Services Development
Comprehensive Social Protection System
Comprehensive Social Protection System
Sustainable LivelihoodsSustainable Livelihoods
Improved Access and Quality of Basic Services for the 40% lowest income households: civil registration, education, health, housing, water, sanitation, and electricity
Improved Access and Quality of Basic Services for the 40% lowest income households: civil registration, education, health, housing, water, sanitation, and electricity
Productive Economic Community Empowerment Access to credits and micro insurance Vocational trainings Facilitation and partnership
Productive Economic Community Empowerment Access to credits and micro insurance Vocational trainings Facilitation and partnership
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Strategies For Reducing Poverty, Vulnerability & InequalityIn National Medium-term Development Plan (RPJMN) 2015-2019
2
3
1
8.5-9.5 %
Gov’t Annual Plan Target
2019
0.380 – 0.385
Goo’t Annual Plan Target
20l19
Social Assistance: Smart Indonesia Card (KIP), Health Indonesia Card (KIS), Family Welfare Card (KKS) for food ooucher and Conditonal Cash Transfer, and Assistance for Children, Elderly, Disability, and indigenous people
Social Assistance: Smart Indonesia Card (KIP), Health Indonesia Card (KIS), Family Welfare Card (KKS) for food ooucher and Conditonal Cash Transfer, and Assistance for Children, Elderly, Disability, and indigenous people
Social Security: Health and employment Insurance Social Security: Health and employment Insurance
WELFARE IMPROVEMENT
WELFARE IMPROVEMENT
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Social Protection Budget, 2010-2018
Significant subsidy reduction (from 3.4% to 0,8% PDB) between 2015 and 2018 has been allocated for SP:
• Premium of National Health Insurance for the poor.• Social Assistance Programs has been scaled up.
In 2018, significant budget goes to infrastructure and economic investment.
Budget Allocation Based on Intervention and share from Central Government Spending (in Rp Trilion)
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Subsidy
Transfer to Region
Village Fund
Total State Expenditures
- 500.000 1.000.000 1.500.000 2.000.000 2.500.000
733.773
573.703
-
1.770.562
286.385
643.835
20.766
1.984.150
174.227
663.578
46.679
1.864.275
168.877
697.667
58.200
2.111.364
156.228
706.163
60.000
2.220.657
2014 2015 2016 2017 2018
Distribution of State Expenditures (Billion Rupiah)
Fuel subsidy allocation decreased significantly in 2015. The subsidy allocation was transferred for the village
fund and regional transfers to reduce inequality. Subsidy Reform has continued to ensure:
• Right targeting• Fiscal sustainability• Energy diversification
Source: Financial Note, various yearsSource: Bappenas
2010 2011 2012 2013 2014 2015 2016 2017 2018 20190
50
100
150
200
250
0,00%
2,00%
4,00%
6,00%
8,00%
10,00%
12,00%
14,00%
16,00%
52,7 61,9 69,2 82 90,1 98,4 99,6 99,6 99,6121,826,1
30,638,7
60,9 57,876,7 78,3 81,49 85,99
88,7
11,30%10,50% 10,10%
12,60% 12,40%13,30% 13,60% 13,50%
12,80%13,70%
Bantuan Sosial Jaminan Sosial% Terhadap Belanja Pemerintah Pusat
Social Assistance Social Insurance % of the total Central Gov’t spending
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Significant in supporting sustainable national development
Enhancing social welfare
Improving social services
Supporting real sector development
Developing funding sources outside the national and regional budget for the
welfare development of people
Encouraging the emergence of a breakthrough model in poverty
alleviation;
Generating the people’s economy
Moderating the social gap
THE ROLE OF ZAKAT & WAQF: Reducing poverty and inequality
ZAKAT WAQF
The potental of
zakat in 20l15:
286 Trillion Rp
Only 66 percent of waqf land In
Indonesia is certfed
Source: Indonesia Zakat Outlook (20l18) Source: Indonesian Waqf Board
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Productive waqf land for VIP rooms. This was a pilot project on productive waqf from grants provided by the Ministry of Religious Affairs. In less than 7 years, the VIP building has reached BEP (break event point).
ISLAMIC HOSPITAL OF MALANG
ZAKAT WAQF
TOWER 165
Tower 165 in Jakarta is a
commercial building
built over mortmain
properties under waqf.
1550 Jabon trees was planted on a waqf
land of 2.5 ha in Bogor, Indonesia. The
value of the harvest that flows its benefits
reaches 750 million rupiah per 6 years.
AGRICULTURE
Micro Hydro Power Plant (PLTMH) in Jambi
Zakat has supported the
construction of Micro
Hydro Power Plant
(PLTMH) to provide
electricity for a total of 806
households from 4 villages,
benefiting approximately
8,000 people.
Empowered Villages based on
Zakat Infaq Sadaqah have been
established and located in 1056
Desa Berdaya. The number
beneficiaries in 2017 reached
almost 2 million people.
EMPOWERED VILLAGE
PROGRAM
THE ROLE OF ZAKAT & WAQF: Reducing poverty and inequality
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Less than
2,3 percent of
its potential
National Collection and Distribution of ZIS in 2014 – 2017 (Billion Rp)
Source: Indonesia Zakat Outlook
The zakat distribution needs to be continuously improved…
2014 2015 2016 20170
1.000
2.000
3.000
4.000
5.000
6.000
7.000
Collection Distribution
Source: Indonesia Zakat Outlook (20l18)
National Allocation of ZIS in 2016
2016 2017
5.017,29 6.060,00
2.931,16
4.007,54
Distribution Collection
58,02% 66,13%
The absorption rate is increasing, and it is considered as “quite effective” in terms of the absorption of zakat funds used.
The Development of Zakat In Indonesia
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Source: Indonesia Zakat Outlook (20l18)
National Allocation of ZIS based on Distribution Sector in 2016
16%
18%
27%
31%
Social Humanites
Dakwah
Educaton
Economy
8% Health
By 2016, the largest proportion of zakat disbursements was distributed in the education sector, which amounted to nearly 843 billion rupiahs.
The Development of Zakat and Waqf In Indonesia
By 2016, the number of waqf land in
Indonesia reached 4,4 billion m2, spread
over in 435.768 locations throughout
Indonesia….
Use of Waqf Lands
8,4%
10,6%
28,17%
45,02%
Prayer Room
Others
Mosque
School
4,6%Graveyard
3,23% Islamic Boarding School
Source: Indonesian Waqf Board
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Enhancing Village Fund to the lowest economic group:a. Development of basic infrastructures through cash for works programsb. Improvement of basic services c. Local economic development
Developing growth centers outside Java Island through:a. Strengthening infrastructure to connect between economic centers and supporting
areasb. Strengthening local product development and supply chain products for export
Strengthening aspire middle income group through:a. Easiness to get business licensesb. Strengthening micro and small enterprises as well as empowering cooperativesc. Enhancing labor expertise and skill certification
Further Improvement on Inclusive Development
The utilization of information technology to:a. Extend the outreach and better public basic servicesb. Stimulation of innovation and creative ideas that can be enjoyed by all levels of
society
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THANK YOU