The poor are benefiting relatively little from Indonesia’s growth

“JALANAN”, a documentary by a Canadian director, Daniel Ziv, tells the stories of three buskers who play music for small change on clapped-out buses in Jakarta, Indonesia’s sprawling capital. One of them, Boni, lives in a sewer that runs beneath one of the city’s swankiest shopping malls. The film, which recently opened in Jakarta, is a poignant reminder of the glaring gap between rich and poor in South-East Asia’s largest economy.

Indonesia has grown rapidly in recent years and living standards have improved. On the basis of purchasing-power parity (PPP), albeit not the updated figures discussedhere, gross national income per head doubled during the decade to 2012, to $4,730. The proportion of the population living in poverty fell by half, from 24% in 1999 to 12% in 2012. McKinsey, a consulting firm, has predicted that the country’s “consuming class” of people earning more than $3,600 annually will treble to 135m by 2030 (again, on a PPP basis and adjusted for inflation). The growing ranks of consumers, in turn, have prompted a spurt of foreign investment.

Yet Indonesia’s growth has been uneven. According to a forthcoming report by the World Bank, real consumption grew by about 4% a year on average in 2003-10. But for the poorest 40% of households it grew by only 1.3%. In contrast, consumption by the richest 20% grew by 5.9%. In other words, the rich are getting richer much more rapidly than the poor are. At 0.38 in 2011, Indonesia’s Gini coefficient, a measure of income inequality, is in line with that of other developing countries. But it has jumped from 0.29 in 2000.

Over 3m migrants from the countryside arrive each year in Jakarta and other cities. Many of them end up with jobs in low-end services, hawking food by the roadside or selling things from handcarts. They are part of a vast informal economy, which accounts for some 70% of GDP. They rarely earn the official minimum wage and receive few government benefits.

The World Bank estimates that labour productivity in Indonesia’s low-end service sector is about double that in agriculture. But it is still only one-fifth of that in manufacturing. In other words, poverty falls as people leave rice fields to work in low-end services, but it would fall much faster if they were to find jobs in factories instead.

Manufacturing in Indonesia is hamstrung by decrepit infrastructure, rigid labour laws and protectionist policies that make it difficult for its factories to be competitive. Even though the share of Indonesia’s labour force employed in agriculture has been in decline for decades, manufacturing’s share has not changed much at all, hovering at about 13%. And local manufacturing remains dominated by the processing of palm oil and other primary commodities. In contrast, services now employ about 44% of the labour force, up from 37% a decade ago.

Widening access to things like well-built houses, clean water and sanitation, along with education and health care, might slowly start to share the rewards of Indonesia’s rapid economic growth more evenly. Indonesia has increased its social spending. It has bold plans to introduce universal health care by 2019, for example.

But government spending is still skewed towards the rich. About 20% of the central government’s budget, or 282 trillion rupiah ($24.5 billion) this year, goes on energy subsidies. Cheap petrol benefits the rich, who are the biggest consumers, more than the poor. It squeezes spending on public services, too. According to the World Bank, getting rid of fuel subsidies, while reforming taxes and cutting spending on civil servants, would allow the government to double spending on infrastructure, health and social welfare. That would be better for the environment, the economy and especially the poor.

Sumber: http://www.economist.com/news/finance-and-economics/21601550-poor-are-benefiting-relatively-little-indonesias-growth-muted-music?zid=306&ah=1b164dbd43b0cb27ba0d4c3b12a5e227

1.   What is discussed in the article above?

Poverty in Indonesia

2.   Where the prominently gap between the rich and the poor occurs?

In South-East Asia

3.   When the proportition of poverty dropped half a percent?

In 1999 to 2012

4.    Why growth in Indonesia is not evenly distributed?

According to a forthcoming report by the World Bank, real consumption grew by about 4% a year on average in 2003-10. But for the poorest 40% of households it grew by only 1.3%. In contrast, consumption by the richest 20% grew by 5.9%. In other words, the rich are getting richer much more rapidly than the poor are.

5.    Who rarely get the official minimum wage in Jakarta?

Them who work in low-end services, hawking food by the roadside or selling things from handcarts

6.    How the way the government to redouble expenditures for infrastructure, health and social welfare?

According to the World Bank, getting rid of fuel subsidies, while reforming taxes and cutting spending on civil servants

Comment:

I think there will always be poverty level in Indonesia. Which  factor is the level of awareness to not idleness to study. The gap between the poor and the rich will always be there because some rich people do not have the awareness to feel quite, it means they continue to make massive corruption.