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Indonesia with a population of over 237 million has 13.3% of its population living under the poverty threshold of US$1.25 per day (2010) but has a projected poverty rate of only 8.0% in 2014. The poverty rate is expected to decline mainly due to Indonesia's nominal GDP having the fastest growth in the world through 2015 at 12.8%, beating out Russia by 0.3%.
Projected nominal GDP growth through 2015
This trend is expected to continue and take Indonesia which has the 17th largest economy by nominal GDP all the way into the top 5 economies worldwide. The nations enormous potential makes it very attractive to investors, these investments could have a snowball effect on the entire nation, all the while speeding up development.

Indonesia's strengths as an economy are it's natural resources and people power. The 237 million people are able to create a strong labor force with high production possibilites. The infrastructure continues to develop nurturing the current and future growth of the nation. Indonesia is an export based economy, and a few of it's dominant trading partners consist of nations such as the US, China, and Singapore. These countries are economic world leaders, since they are Indonesia's main partners, this bodes well for Indonesia's future growth. Another developing and future stronghold the country has is natural resources. The world needs energy, but the supply is limited. Indonesia controls energy based assets, making the nation very attractive for countries in need of high energy (developed nations).

To emphasize inequality, Jakarta the capital, is very developed and looks like a western city. On the contrary, areas in West Papua depict the opposite of the western development picture, they are the focus of anthropological studies. [1] Indonesia is currently ranked 124th on the Human Development Index (HDI) but has put in place policy goals to rank in the top 30 by 2030. [2]


Rural Poverty In Indonesia

In 2007, 23.6 million rural Indonesians were living below the national poverty line, 1 million less than in 1996. Poor people represent 20 % of the rural population and 11 % of the total population. The overall national poverty rate masks the large number of ‘near-poor’ people who live just above the poverty line and are at risk of sliding below that line into poverty. In 2004, about 30 per cent of the population were living above the national poverty line, but they were subsisting on less than two dollars a day. For this reason poverty reduction strategies need to focus on increasing the incomes of both poor and near-poor people. [3]

Constant economic expansion has caused a general decline of poverty. Indonesian poverty rates fell from 17% in 2004, to 13% in the early months of 2010. Although, nearly half of the population barley lives above the poverty line. nearly 70% of Indonesians living in poverty live in rural areas. Regardless of the advancements made during this time, individuals who are poor are now even worse off than they were prior to the 1997 disaster, and the gap between rich and poor is increasing. [4]

Moving on from Poverty

Government officials admit their target, a poverty level of 8.2% by 2009, is anyway unattainable. The current economic growth rate of around 5% is insufficient to provide all new job-seekers with employment, let alone dent Indonesia's huge unemployment tally. Ministers did announce earlier this month an extra $1.4 billion for poverty alleviation in 2007, 18% up on 2006. This will be distributed through a community-empowerment programme, under which each village will be given up to $110,000 more than this year to create jobs in the way it deems best. The goal is 15m additional jobs within three years, with 12.5m of them coming through the village schemes and the rest from the development of the plantation industry.[5]

That the poverty level has stopped falling is no surprise. A 126% increase in fuel prices last October catapulted inflation to 18%, while wages increased only marginally. The number of poor Indonesians would have soared even more, to 51m according to the statistics office, if the government had not given cash handouts to some 76m people to cushion the effects of the fuel-price increase (which eliminated a costly subsidy). But activists are questioning the data. They argue that the figures fail to give the full alarming picture.

reference "Always with Them." The Economist. The Economist Newspaper, 14 Sept. 2006. Web. 26 Apr. 2012. <>.

Infrastructure Reform

Although Indonesia has experienced large recent growths and is expected to continue to grow over the next two decades, on area where Indonesia can improve is its infrastructure, where Indonesia ranks outside most developed/developing countries[6]. President Yudhoyono, the president of Indonesia, has planned to increase spending on infrastructure through the rest of his term ending in 2014. Yudhoyono plans to spend close to $250 billion on infrastructure, with $140 billion being spent on roads, ports, and airports[7].

Development Obstacles

Although Indonesia projected development is promising, the geographical layout and demographics of the country, create obstacles for policy implementation and growth. Consistent with many other developing nations, the rural and urban sectors are changing at different rates. Growth in Indonesia is consistent with the majority of the world, the urban sector is growing at the highest rate. This is not a negative, but it is important to note that Indonesia's most prominent sector has been agriculture associated with rural communities, not urban. A possible complication with this pattern is an increase in inequality within the nation, particularly between rural and urban areas. Once again, some economists are not alarmed by these patterns, they argue that uniform growth is not natural and that growth inequalities are beneficial for the nation. However, it is important to evaluate nations individual, and to separate regions within nations in the same manner. Indonesia consists of a chain of islands, differentiating geographically and culturally, therefore each particular region must be addressed accordingly. The government cannot apply universal techniques to the nation, islands and regions must be addressed individual in order for the policies to be effective.


  1. "". Indonesia Economic Outlook Key Drivers of Economic Growth
  2. "". Yayasan Indonesia Forum
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