Plac 29 nov 14
-
Upload
budhi-mp -
Category
Economy & Finance
-
view
27 -
download
0
Transcript of Plac 29 nov 14
+
Economic issues facing
Indonesia’s Jokowi-JK
Ari A. Perdana
Pangudi Luhur Alumni Club
29 Nov 2014
+
Part 1 - MacroeconomyIndonesia has been performing well, but challenging task ahead,
especially after the commodity boom ends and the global economy
weakens
1
+Indonesia 20014-2014: not bad!
Q2 2014 Indonesia Brazil India South Africa Turkey
GDP (% yoy) 5.1 1.9 * 4.6 * 1.6 * 4.3 *
Inflation (% yoy) 6.7 6.5 7.3 6.6 9.2
Unemployment Rate (%) 5.7 5.0 8.8 25.5 9.7
Fiscal Balance (% GDP) -2.4 * -3.1 * -4.9 * -4.3 * -1.2
*
*
CA Balance (% GDP) -2.1 * -3.7 * -1.9 * -4.5 * -7.5 *
Exchange Rate (ytd H1 2014) 2.5% 6.7% 2.5% 0.7% 0.5%
International Reserve (US$
bn) 107.7 370.7 315.8 40.6 112.5
Debt (%GDP) 25.9 ** 59.2** ** 51.8 ** 45.4 ** 36.6
*
*
Source: World Bank
2
Economic growth 5-6% p.a. | Per capita GDP growth 4-5% p.a. | Stable
inflation, managed budget deficit | Strong, stable fin. sector |
Foundations for social protection reforms
…mainly due to strong domestic demand and commodity boom
+But…
Growth has been slowing down,
even declining
Budget deficit is increasing
Oil consumption is rising while
production declines
Commodity boom has ended
The era of cheap labor has
ended
US monetary policy may lead to
capital outflow
400
600
800
1,000
1,200
1,400
1,600
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
Global prices of commodities
Oil consumption and production3
+
Part 2 – Socio-economicJob creation and investment in skills, promoting social investments
and reducing inequalities
4
+Employment
The good side: unemployment, informal sector is down
However, Every year 2 million more workers competing for less than 1 million good productive jobs
Growth rate of 7% is required to create new jobs. But how to do it while:
The commodity boom has ended
The low wage era has ended?
The manufacturing sector is less significant
Possible ways:
Find new source of employment driver (local ec)
Find new market, take the benefit of AFTA, take advantage of China’s exit from low-wage products
Source: BPS
5
+Employment skills and skills
mismatch
About 2/3 workforce have SMP
or lower education
Skills mismatch is more than
just educational attainment –
many workers have no or less
skills than what the industry
requires
Soft skills
Skills to operate new
technology
Need a reform in skills and
training
Pendidikan tertinggi yang ditamatkan 2012 2013 2014
2014 kumulat
if
SD ke bawah 49.8 48.5 46.8 46.8
Sekolah Menengah Pertama 17.7 17.5 17.8 64.6
Sekolah Menengah Atas 15.1 15.4 16.0 80.6
Sekolah MenengahKejuruan 8.3 8.9 9.2 89.9
Diploma I/II/III 2.7 2.8 2.6 92.5
Universitas 6.4 6.9 7.5 100.0
Source: BPS
6
+Labor reform – because nobody
dares doing it in the past 10 years
Labor market is rigid because
cost of firing and hiring is high
(minimum wage, severance
payment, contract workers)
Workers’ productivity is low
Cost of doing business is high
already
Labor dispute solved internally
Protecting workers vs
promoting jobs
Labor market protection as
social protection
High wage to ensure high
productivity
Eliminate illegal payments
without harming workers
Bargaining is collective
Reform options: combine labor
market flexibility with
government investment in new
industrial areas, provide cheap
housing, invest in skills
7
+Poverty
Poverty declines, but the decline is slowing down
Most of the poor have been eradicated, we are dealing with the very structural poor
OR: resources are not well-spent due to bureaucracy and ‘sharing the pie’
The good side: poverty and social programs have been quite developed
The role of local governments will be important in making services work for the poor
60.0
11.3
24.2
17.8
11.4 11.3
0
10
20
30
40
50
60
1970
1976
1978
1980
1981
1984
1987
1990
1993
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
*
2012
*
2013
*
2014
**
Source: BPS, Susenas
Reform agenda: increase spending for social protection; currently at 0.5% of GDP (from 1.5% average in middle income countries)
8
+Income inequality
Growing inequality amidst
strong economic growth
An unprecedented Gini
coefficient >0.40
Higher inequality of land
holding
0.35 0.35
0.38
0.34
0.33
0.32 0.32
0.34
0.355
0.308
0.30
0.329
0.32
0.32
0.363
0.35
0.363
0.35
0.37
0.38
0.41
0.41
0.413
0.28
0.30
0.32
0.34
0.36
0.38
0.40
0.42
1964
1969
1976
1978
1980
1984
1987
1990
1993
1996
1999
2000
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
giniindex
35
40
45
50
1963
1964
1967
1970
1976
1978
1980
1981
1984
1987
1999
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Incomeshareofthetop20%
4.87
0.0
2.0
4.0
6.0
8.0
10.0
1 15 29 43 57 71 85 99
An
nu
al g
row
th r
ate
%
Percentiles
2008-2012 growth Growth in mean
Source: BPS, Susenas
Consumption growth by income decile
9
+Inequality in income means
inequality in services and
access
Poor (%) Non-poor (%)
Babies delivered without professional medical
workers’ assistance
40,2 22,8
Children aged 7-12 who are not enrolled in
elementary school
6,0 2,5
Children aged 12-15 who are not enrolled in
junior secondary school
22,5 10,9
Household without access to proper sanitation 52,4 32,5
Household without access to safe water 51,8 42,2
Poor Non-poor
Average family size 4.7 3.8
Source: Susenas 2006 (1-5), Dartanto and Nurkholish 2013 (6)
10
+Poor kis like Lima has greater
probability of dropping out
Kuantil Pengeluaran 1 (terendah)
Kuantil Pengeluaran 2
Kuantil Pengeluaran 3
Kuantil Pengeluaran 4
Kuantil Pengeluaran 5 (tertinggi)
Sumber: Susenas (2009)
11
+Then there is also regional
inequalities…
12
DKI Papua
Fertility rate (2012) 2.30 3.60
Electricification rate (%) 99.9 61.44
Household with private toilet (%) 76.6 58.21
Birth attended by doctors/nurse (%) 98.12 48.46
Under 5-yo who had measles vaccine (%) 87.03 67.23
Consuming modern medicine 94.05 66.04
Infant mortality rate (per 1000 birth) 22 74
Under-5 yo mortality rate (per 1000 children) 31 109
Source: BPS, Susenas
+
Summary
13
+Challenges ahead
Growth post-commodity boom
and low-wage era
Industrial competitiveness and
business climate
Managing risk from global
economy (incl. AFTA)
Creating jobs
Building a strong social
protection
Manage and reduce inequality
Navigating in the demographic
window
14
Macroeconomy Socio-economic
+Reform agenda for Jokowi-JK
Fiscal reform
Reducing fuel subsidy to create fiscal space, but need to combine with a comprehensive energy reform
Optimize revenue without hurting economic activities
Managing the implementation of BPJS and UU Desa to avoid fiscal burden
Invest in infrastructure
Spending for infrastructure is about 2% of GDP (in 1995, it was 9.5%; India and China spends 10%)
The government is only able to spend about 1/5 of required infrastructure spending
Increase competitiveness of the real sector, reduce cost of doing business
Special attention to SMEs
Socio-economic reform: labor market (job creation + protection), invest more in social protection, fix the skills and education system, reduce income and regional disparity
15