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The growth potential of the Indonesian economy is examined, and a model for the impact of alternative development strategies is presented. Among developing countries there is a growing awareness of the importance of underemployment and unemployment. Indonesia is no exception. Like the rest of the developing world, Indonesia is heading toward a more uneven distribution of income unless the government intervenes with an active distributive policy. Indonesia's growth shows an urban bias, with heavy emphasis on the organized industrial sector. The question of a tradeoff between equity and growth can be explored only in the context of specific policy measures. Within the restricted range of feasible policies in Indonesia a choice between growth and equity seems unavoidable. There is room to select a strategy to optimize growth and income distribution. To eliminiate poverty an employment policy is more effective than a policy directed exclusively toward growth. Finally, the relation between growth and income distribution is significantly affected by the set of policy tools available to the public authorities. For Indonesia particularly, any prospective plan must give high priority to population policy. Tables are appended.
Examines the impact of policies on growth, employment, and poverty reduction in Indonesia, reviewing the periods both before and after the 1997 financial crisis and drawing implications for today's policy-makers. Focusing on the sectors of agriculture, manufacturing, and construction and services, as well as assessing macroeconomic policies, this study addresses current challenges with respect to past and emerging trends, and advocates recognizing the country's strengths and fostering a skilled workforce that can adapt and respond to the imperatives of industrial transformation.
This book studies the challenges for Indonesia, once a miracle economy, as it faces premature deindustrialisation, rising inequality and domestic and external factors impacting its export-oriented industrialization. Since the fall of Soeharto, Indonesia has undergone a far-reaching systemic transition from centralised and autocratic governance to a highly decentralised and democratic system. Complicated by regional variations, the country is now being called upon to respect labour rights and, amidst slow global economic recovery, is facing increased competition from other low-labour-cost countries, especially within the ASEAN Economic Community. Tadjoeddin and Chowdhury posit that Indonesia cannot recreate its past miracle based on cheap labour and suppression of labour rights. It will need to move quickly to high value-added activities driven by productivity growth and to develop its domestic market.
The book focuses on Indonesia's most pressing labor market challenges and associated policy options to achieve higher and more inclusive economic growth. The challenges consist of creating jobs for and the skills in a youthful and increasingly better educated workforce, and raising the productivity of less-educated workers to meet the demands of the digital age. The book deals with a range of interrelated topics---the changing supply and demand for labor in relation to the shift of workers out of agriculture; urbanization and the growth of megacities; raising the quality of schooling for new jobs in the digital economy; and labor market policies to improve both labor standards and productivity.
‘Diagnosing the Indonesian Economy: Toward Inclusive and Green Growth’ discusses the critical constrains to inclusive economic growth in Indonesia. The volume includes a broad overview of Indonesia’s development since the 1960s, and features an analytic framework for the study that aims to identify the most binding constraints. The chapters analyze macroeconomic management since the Asian financial crisis; the status of Indonesia’s industrial transformation; the challenges pertaining to Indonesia’s infrastructure; the situation of human capital and employment; the record on poverty reduction; the impact and status of the decentralization effort; and the challenges attendant to the country’s environment and natural resources.
Indonesia's gross domestic product growth rate declined significantly after the Asian financial crisis (AFC) of 1997–1998. The country's potential and balance-of-payments growth rates are only about 5.5% and 3%, respectively. One important reason is that the country's industrialization pace declined after the AFC. Today, Indonesia is still exporting many unprocessed natural resources and simple manufactures (not complex products) with a low income elasticity of demand. This report analyzes how Indonesia's manufacturing sector could diversify and upgrade during 2020–2024 and beyond. This is essential if Indonesia is to attain upper middle-income status as soon as possible. Policy makers and the private sector need to collaborate to identify the coordination failures that hamper the discovery of those products that Indonesia could successfully produce and export. These must be complex products with a high income elasticity of demand. The report proposes a number of policies to expedite this process.