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Rich benefit most from Indonesia's growth, says deputy minister

Publication Date : 07-02-2014


Despite seeing impressive gross domestic product (GDP) growth, the government has acknowledged that economic expansion might not be enjoyed by all Indonesians equally, as the rich benefit the most while the poor enjoy little.

“Our economic-growth benefits were enjoyed by the rich more than the poor,” Deputy Finance Minister Bambang Brodjonegoro said on Thursday at a seminar held in his Jakarta office.

“If we record 5.78 per cent economic growth, all people might receive positive spillovers. However, the problem here is the rich gain the most, while the poor gain only a little,” he added.

Indonesia surprisingly saw a pick-up in GDP growth in the fourth quarter, as the economy expanded by 5.72 per cent, taking full-year economic growth last year at 5.78 per cent - the second highest among G20 economies after China.

The economic expansion, however, might be marred by increasing inequality among Indonesians, as evinced by the upward trend of the Gini coefficient ratio, which measures income distribution among citizens. The figure is used to measure inequality in the economy.

Indonesia’s GDP growth has been maintained above 5 per cent since 2009 until the present, but within that four-year time frame the country’s Gini ratio increased from 0.37 to 0.41.

The province with the highest inequality was Jakarta with a Gini coefficient ratio of 0.43, while Bangka Belitung has the most distributed income among its citizens with a ratio standing of 0.31.

“Although Indonesia’s Gini coefficient ratio is not yet at a worrying level, without affirmative action, there’s a risk of widening inequality in the economy,” National Development Planning Minister Armida Alisjahbana said on Thursday.

Paradoxically, impressive economic growth was also followed by a slower rate of poverty reduction. In its report released last month, the World Bank noted that Indonesia’s national poverty rate declined by only 0.6 per cent annually as of March last year, while in the past the country trimmed its poverty levels by 1 per cent. Meanwhile, Indonesia’s economic expansion is also increasingly concentrated in rich, densely-populated Java. The contribution of Java to Indonesia’s GDP growth last year stood at 57.8 per cent, rising compared to 57.6 per cent a year earlier.

Some provinces posted economic growth far lower than the national average, such as East Kalimantan (1.6 per cent), Riau (2.6 per cent) and Aceh (4.2 per cent).

Nevertheless, positives could still be taken, with some provinces benefiting from Indonesia’s economic boom, according to Armida.

She highlighted six provinces in Sulawesi that had all posted economic growth of more than 7 per cent in the last few years, which she said was an accomplishment in Indonesia’s regional development.


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