The “trends in top incomes does not suggest that there has been a sustained long-term increase in income inequality in Indonesia”, Andrew Leigh and Pierre van der Eng conclude in a recent working paper.
In short, as Indonesia’s economy grows, the rich do get richer. But so do the poor.
Income Share of the Top 10% in Indonesia (Figure 2 in the paper)
Hence, in the last two decades, the income share of the 10 percent richest remains pretty much the same, in the 35%-40% range.
That’s the target of Indonesia Forum Foundation’s ‘Indonesia Vision 2030′, which requires Indonesia’s economy to grow by 7.26 percent annually.
Not an impossible goal, to say the least.
Indonesia’s GDP per Capita
More likely though, Indonesia’s economy would grow by about five percent per year so that GDP per capita PPP at constant 2000 international $ in 2030 will be about $12,000 (the red dotted line).
That would be quite excellent in itself, though, of course, the government could “easily” increase economic growth further.
Such as, by shredding some paper forms and closing some offices.
For 2008 next year, Indonesia assumes an economic growth target of 6.8% and a Budget deficit of 1.7% of GDP said Finance Minister, Sri Mulyani…
In 2007, however, the government’s budget deficit is expected to expand from 1.1% of GDP (or Rp. 40.5 trillion) to between 1.2% to 2% (or an estimated Rp. 60 trillion to Rp. 65 trillion), whereas government’s revenue is expected to reach Rp. 723.1 trillion, and government spending Rp. 763.6 trillion.
This increase was caused by added government spending to assist and recover from the many natural disasters, as well as the increased payments on subsidies carried over from last year. Over the past three years, spending by government agencies has continuously increased, and it is hoped that with increased government spending this will accelerate economic growth, reported Bisnis Indonesia.
That looks like a sensible policy. Perhaps, we can say that gone are the days of balanced-budget zealotry.
From Wuryastuti Sunario’s Indonesia Digest.
[Abdurrahman Wahid] also believes that the “only solution” to the challenge of Islamic radicalization in Indonesia is more democracy. But what about the example of Hamas, which came to power through democratic means, and of other groups like Egypt’s Muslim Brotherhood that would probably do the same if given the chance? Mr. Wahid’s answer is to distinguish between what he calls “full democratization” and the “hollow imitation of democracy” that he sees taking place in Indonesia as well as among Arabs in Palestine and Iraq.
“The problem is not personalities, it is institutions,” he says. “For the past 250 years the Americans have had not just Jefferson’s concept of the rights of the individual but also Alexander Hamilton’s belief in a strong state.” In order to function properly, democracy requires competent government that can effectively uphold the rule of law. It also requires a broadly understood concept of self-rule, which is missing in too much of the developing world: “Here, ordinary citizens expect the government to do everything for them.”
From The Wall Street Journal.
And it is a good thing too. He used to be, I think, very conservative. All he always talked about was macroeconomic stability. His mantra was low inflation and balanced budget. Only recently he starts putting more attention to unemployment, Indonesia’s most depressing economic problem.
Jakarta Post reports:
The government sees economic growth of 6.8 percent in 2008, with inflation between 5.6 and 6 percent, the coordinating minister for the economy [Boediono] said Monday…Boediono said the economy has improved since the second and third quarters of last year, and the government had put into place policies to further push the economy.
With more relaxed monetary policies, effective fiscal management and an improved investment climate, he said the growth target could be achieved.
“We have to be optimistic. There’s no reason to be pessimistic,” he said.
