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Quest for A Better Life

Indonesia Country Profile

Posted by pungkasali on September 22, 2011

Pungkas Bahjuri Ali  (this article is published by Media Scene Magazine 2011)

Indonesia recently, as commonly with many other countries, might be viewed from two different perspectives, namely optimistic and pessimistic. These two views, by their own merits, tell us a wide array of contemporary Indonesia profiles.

Optimism has been sparked from the advancement of economic development in the recent years, primarily after the waning economic crisis in late 1990s. As the economy continues to grow substantially in the international standing, GDP and GDP per capita is also rising. The market expectation has been good indicating the economic stability in recent years. Politically, the democratic system still is hailed by many as a benchmark of a successful transition. Other social and human indicators have improved as well, alongside the economic prosperity.

On the other hand, skeptics have been worried on its slow progress in many important areas. The complex and ‘feudalistic’ bureaucracy does not decrease in a substantial manner as many have expected. Corruption is an everyday theme printed in magazines, newspapers and alternative media.  The improvement of national wealth has not been followed by equality of access to better economy to some disadvantages groups.

Thus, the conclusion upon Indonesia most recent progress is not straightforward; and the future Indonesia might not be easy to predict. Many are optimistic over its economy and democracy prospect.  The current economic growth, despite the recession, has sparked hope for better future. Indonesia, now, is one of the 20th biggest economies and the 4th largest population in the world. In term of governmental politics, Indonesia has emerged from authoritarian to democracy regime for almost all level of administrations. Its major reform in bureaucracy and state finance, however, is often shaken by political interests that could jeopardy the development.

Geography

Geographically, Indonesia is located in Southeastern Asia between Indian and Pacific Ocean.  It comprises 1.9 million kilometer square of land and water, and is ranked the 16th largest country in the world.  The archipelago consists of 17,508 islands, one third of which is unnamed. The largest ones are Sumatra, Java, Bali, Kalimantan, Sulawesi, Timor, Maluku, and Papua. Lying along the equator, it has a tropical climate with two distinct monsoonal wet and dry seasons. The temperature is warm throughout the year and humidity is generally high, averaging at 80 percent.

For most parts of Indonesia, abundant rainfall, temperate climate and fertile soil enable vegetation to flourish. A great variety of crops – palm tree, rice, and corn to name a few – grow throughout the year. The land is so fertile that even ‘stick and stone grow into plants’, a famous song lyric.  Its rain forest is considered as the largest in the world after Brazil and its biodiversity has been recognized as one of the richest.

Indonesia, however, faces major challenges. The environment quality many parts of the region are degrading due to deforestation, air and water pollution, and forest fires. In addition, Indonesia’s location on the edge of tectonic plates makes it vulnerable to volcano eruptions, earthquakes and tsunami.  Global warming, by far, will potentially affect Indonesia more than any country in South East Asia. According to one report, Jakarta will suffer the most from climate change impacts and is threatened be underwater permanently when the sea level should rise.

History

Little is known about Indonesian in the pre-historic time. One significant finding was the discovery of Homo erectus who inhabited Indonesia archipelago some 2 million to 500,000 years ago; and, recently, the finding of Homo floresiansis. The modern human of Austronesia who lives in Indonesia recently are thought to be coming from Asia mainland some 3,000 years ago.

During the first millennium, the archipelago is marked with the emergence of the first known sophisticated social organization, i.e. the establishment of Tarumanegara kingdom, and subsequently Hindu and Buddha kingdoms dominated the land. In the second millennium, Islam kingdoms, established in Aceh and Maluku and later in Java, were replacing the Hindus. Many of these kingdoms are strong in maritime power and became the center of trade in the east. The seamen from Makassar, for example, have been known to sail to eastern Africa for trade.

In exploration era, Diogo Lopes de Sequeira of Portuguese reached Indonesia, marked the first European fleet to reach archipelago.  Afterward, fleet after fleet arrived, and soon disputes with local rulers were inevitable. In 1595, the first Dutch fleet led by Cornelis de Houtman arrived in Banten, and then sailed further east to Madura. This profitable trade voyage spurred larger fleet and soon ignited a handful of Dutch merchants to commission the Dutch East India Company (VOC) in 1602. VOC exploitation ended 2 centuries later. Dutch crown took over the archipelago afterward, and run it as a colony until 1945.

Since its 1945 proclamation of independence, Indonesia has embarked a firm modern democracy pursuit. One noticeable landmark was 2004 general election, when people voted for their leaders both in executive and parliament seats. The consensus of being one nation (NKRI) is stronger ever and adhered by almost every citizen in the archipelago. This is a dramatic departure from such a fragmented region and various monarchy powers few decades earlier.

Population

Population subject is inherently important to economic interest and globalization of culture. Java in particular is important in population figure, since it is accounted for 67% of Indonesia population, even though its land surface is accounted only for 7.6 percent of Indonesia land. According to Stamford Raffles, the population of Java in 1815 was 4.6 million. Jakarta (aka Batavia) had only 332,000 inhabitants; 52,000 of them are Chinese. Today, the population of Java is staggering 134 million; 9 million of them living in Jakarta. Thus, in less than 200 years the population of Java and Jakarta has exploded 3,000 percent and 2,700 percent, respectively.

The most recent decennial census of 2010 has confirmed that number of Indonesia Population is 237 million and the average annual growth rate since 2000 in 1.4%. If the rate in the last decade continues, it is predicted that the number of population will further increase to 273 million in 2025. The growth primarily occurs among productive and elderly population segments.  While the share of the population of less than 15 years of age decreases, the share of population at 15 – 64 years of age and elderly (+65 years) increases. In 2010, for example, out of 100 persons, there will be 67 persons at their productive age and 6 are elderly.

Projected Dependency Ratio, Indonesia Population 2000-2025

As for now, Indonesia is heading to its lowest dependency ratio ever. Experts believe that this phenomenon occurs only once in a country history. Dependency ratio basically tells us how many young (under 15) and older people (65 and older) depend on people of working age (16 to 64 years). In 2010 Indonesia dependency ratio is less than 0.5.  In other words each working person has to feed an extra half person, or to put it in a different perspective, each two working persons has to support one other person (in addition to themselves).  This figure is considered low compared to the rest of the world, and in the same level as Australia, United States, Canada and Brazil.

What does this population structures mean to Indonesia economy? It means that Indonesia is in its strongest position in term of proportion of the workforce. If the workforce is educated, employed, and productive, they become superior economic factors, acting as workers as well as consumers, which increase economic productivity and outputs. However, greater investment in education and training will be essential for this to happen.

With current population of 237 million people, the largest share of which is in productive stage, Indonesia can place herself in a very strategic position of global markets.  Furthermore more and more people are living in urban areas, where traditionally people are more educated, healthy and have a stronger economic power.

The city and its urban vicinity is becoming home to a growing population. Since 2007, more than half of the world’s population is living in urban areas. This figure should grow in coming years. Indonesia’s population is urbanized as well. Consider this figure. In 2000, there were four provinces in which more than half of its population was living in urban areas. Now, the figure has increased to 11 provinces. By the end of 2025, almost two thirds of Indonesia’s population will be living in urban areas.

Macro Economic

In macroeconomic, several indicators show that an Indonesia economy growth is sound. The Gross Domestic Product (GDP) has grown 6.1% in 2011, compared to 4.6 % in 2009 (year on year basis). At this rate, the GDP growth is the highest in the last decade after growth in 2007. GDP per capita also increases to USD 3.005. The growth makes the currency strong against many international currencies.  The GDP growth has enabled Indonesia to be included in list of top 20 of GDP in the world and a member of G-20 countries. In addition, Along with China, India, Brazil and South Africa, Indonesia has been invited into enhanced engagement countries’ of OECD.

Unemployment has been reduced from 10.25 million in 2004 to 8.95 million in 2009 and further 8.3 million in 2010. In term of proportion from the workforce, open unemployment has decreased from 9.9 percent to 7.9 percent in 2009 and 7.1 percent in 2010. In the same time, formal employment increased 3.26 million and 7.65 million for informal sector.

The reduction of unemployment contributed to the further reduction of people living under poverty line. The poverty (headcount ratio) is decreasing to 14.1 percent (32.5 million people) in 2009, compared to 16.7 percent (36.1 million people) in 2004. The figure is further decreasing in 2010 to 13.3 percent (31.0 million). This poverty level is the lowest in the last decade.

Human Development

 Human development is central to the development agenda. One indicator that is used in a worldwide comparison is Human Development index (HDI). Indonesia HDI has steadily increased over the past years, even in the time of economic recession. In 2010, the Indonesia HDI (national data) is 71.17, an increase from 70.59 in previous year, primarily due to improvement of life expectancy, educational achievement, and GDP per capita. The highest HDI is achieved in North Sulawesi Province (75.16), while the lowest HDI is in Papua (64.00) and West Nusa Tenggara (64.12). Although the HDI is the lowest, the rate of HDI growth in these two provinces is among the highest in the nation.

Compared to some other countries, however, the progress is considered moderate. Indonesia HDI rank is relatively stagnant (111th in the world) over the years.  Health and education remain a matter of concern. The move to increase public education expenditure to a minimum level of 20 percent of total government spending will probably have some impacts on the education achievement in coming years.  Increasing life expectancy, on the other hand, is more complex and not straightforward.  In addition to better health care, behaviour, environmental health, nutrition, and prevention measures have to be strengthened for a meaningful increase. Looking at a more recent trend in public health expenditure, it is likely that the health care provision will have a positive effect on the health status of the community.

Politics

Indonesia has been praised for successful transition from authoritarian to democratic regime. Since the 1997/1998 political reform, there have been 3 national elections where legislators are elected fairly and openly. The milestone of democracy reached its peaks when the president and vice president were directly elected in 2004.  At local level, in 2007, two third of governors and bupatis/mayors have been appointed by election. It was a major reform considering that in 2003 all of local leaders (governors and bupatis/mayors) were still elected by members of local parliament. Currently, all local executive and parliaments seats are elected directly by the people. The world saw this process and considered Indonesia in one of the biggest democracy in the world (together with US and India).

The democracy, however, to some extent cannot perform well since it is not fully backed up by clean government practices. Corruption is a major and chronic problem in Indonesia bureaucracy, political parties and alike, dragging the advancement of democracy and economy. There has been a slow progress in government efforts in fighting corruption. According to 2008 UNDP Tackling Corruption, Transforming Lives report,  the perception index on corruption in Indonesia increased only  marginally from 2.0 in 2004 to 2.8 in 2009 (scale 1 to 10, with 1 being the most corrupt).

Future Direction

Government through its Medium Term Development Plan 2010-2014 gears toward acceleration of economic and human development. With the expectation of economic recovery from global recession is under way, the annual economic growth of 6.2 – 6.8 percent has been projected, and annual inflation would be between 4 and 6 percent. With this rate, by the end of 2014, it is expected that open unemployment rate would fall to 5-6 percent, poverty rate decreases to 8-10 percent and 10 million new jobs are created during 2010-2014.

In a more optimistic view, in the beginning of 2011 the Government has set up ambitious goals toward economic acceleration and expansion 2011-2025. The vision 2025 aims at national GDP to grow from USD 1.2 trillion and GDP per capita USD 4.800 in 2014 to USD 4.5 trillion of GDP and USD 16.100 of GDP per capita in 2025. This optimism is also supported by IMF prediction that Indonesia economic growth would at 12.8% between 2009 and 2015, the highest among the biggest 18 economies of the world. This rate is higher than that of Brazil, Russia, India and China, as well as the rest of ASEAN countries.

A domestic port in Sumbawa, one of the tourism and food security keys in Bali and Nusa Tenggara economic corridors 2011-2025

For that purpose, the government built three major strategies, i.e. the development of Six Indonesia Economic Corridors, strengthening national connectivity, and strengthening national science and technology. The six economic corridors will have their own niche, including natural and energy resources in Sumatra and Kalimantan, service and industry in Java, tourism and food security in Bali and Nusa Tenggara, natural resources and human development in Maluku and Papua; and fishery and agriculture in Sulawesi.

Human development will further improved. School participation of people 15 years of age and older increases to 8.25 years (current level is 7.50 years) and illiteracy rate is reduced to 4.2 percent (current level is 6 percent). Life expectancy is projected to increase from 70.7 in 2008 to 72.0 years in 2014, infant mortality rate decreases to 24 per 1.000 live births and under nutrition falls below 15 percent. Population will continue to grow, but with slower rate at 1.1 percent annually.

Democracy, indicated by electoral process and pluralism, functioning of government, politic participation, political culture and civil liberties, is expected to improve with the democratic index (UNDP index) increases from current 69 to 73 in 2014. The government also targeted ambitious corruption eradication by improving corruption perception index to increase 3.2 index points in the next 4 years (compared to 0.8 index point achievement in the last 4 years).

Pungkas B. Ali

Sources include World economic Outlook 2010 – IMF, CIA World Book; Bappenas-BPS-UNFPA Population Estimation, Internet World Statistics, Wikipedia, RPJMN 2010-2014, UNDP Report, UN Population Prospect, Dutch Federal Statistical Office, Climatico, Nature Magazine

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