Fostering Sustainable And Inclusive Development : Opportunities And Challenges In Indonesia

Indonesia, with its 252 million people, has shown significant progress over the past 15 years (BPS (2014) Labour force situation: August 2014, Badan Pusat Statistik, Jakarta). Indonesia has made impressive economic strides, with robust economic growth since the Asian economic crisis in the late 1990’s. In the last medium term development plan, economic growth averaged 5.96 per cent per annum, thanks in a large part to rising global prices for many of the commodities Indonesia exports. Indonesia achieved middle income country (MIC) status in the early 1990s (World Bank, World Development Indicators) and is a member of the G20 group. As one of the co-chairs of the High Level Panel of Eminent Persons on the Post 2015 Development Agenda, Indonesia has played a pivotal role in the Post-2015 process and has incorporated a large number of the draft Sustainable Development Goal (SDG) targets into the National Medium Term Development Plan (RPJMN) 2015 – 2019.

Economic growth has brought about substantial improvements in the standard of living of an increasing number of the country’s population. Indeed, wage employment is rapidly growing in Indonesia, with approximately 42.3 million people (37.0 per cent of employed people) now considered to be ‘regular employees’ (ILO, 2014; Labour and social trends in Indonesia 2014, ILO Country Office for Indonesia and Timor-Leste, Jakarta). As more and more people depend on wages for their livelihoods, wages and their purchasing power assume greater significance – for workers as a source of income, and in turn for economies across the region as a source of demand. In this context, industrial relations and social security assume a great deal of importance.

Indonesia remains a young country with adolescents and young people making up over 25 per cent of the population. At the same time, Indonesia has reached nearly 100 per cent primary school enrolment; however more than 5.3 million children – mostly children of secondary school age (13 – 18 years) from poor families, living in rural-remote areas, children with disability and married adolescent girls – are still out of school (SUSENAS, 2013). In terms of health, more people have access to basic services and fertility rates have fallen. These factors, coupled with Indonesia’s current low dependency ratio, highlight an opportunity for accelerating human capital development through investments in skills development, education and training for a competitive workforce.

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Despite these very tangible developments, challenges remain. Although poverty has been reduced from 24 per cent in 1999 to 11.3 per cent in 2014, 28 million people still live below the national poverty line (In March 2014 the national poverty line was set at IDR 302,735 per month. See BPS, 2014; BPS Strategic data, Badan Pusat Statistik, Jakarta). Some 43.5 per cent of the population lives on under USD 2 per day (103 million people). The decrease in poverty in Indonesia is largely attributed to the expansion of government programmes that have targeted poor people, as well as to gains in wages for unskilled and lowskilled labourers and reductions in the volatility of food prices. However, the rate of poverty reduction has recently slowed and there are still big differences in poverty levels between urban and rural settings, and across regions in Indonesia. Using the national poverty line, rural poor account for more than 60 per cent of the total poor.

According to Statistics Indonesia (BPS), the national statistics office, in 2014, poverty rates were 8.3 per cent in urban centres and 14.3 per cent in rural areas (SUSENAS, 2013). However, using the higher USD 2 per day poverty line there is hardly any difference in poverty rates between urban and rural areas. Income poverty also varies across regions with Papua, West Papua and East Nusa Tenggara provinces remaining the poorest. Unemployment particularly of young people is high with a youth unemployment rate of 22 per cent. Poverty is also contributing to child exploitation. Approximately 3.2 million children between the ages of 10-17 are engaged in employment. In 2010, two million children were working in rural areas with 386,000 in urban and peri-urban areas. Indonesia is considered as a tier two (US Department of State, 2014) country for child trafficking and is considered a major source for women, children and men who are subject to sex trafficking and forced labour. The most significant sources are the provinces of West Java, Central Java, East Java, West Nusa Tenggara, East Nusa Tenggara and Banten.

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Other social indicators are also worrisome. Indonesia is ranked 72nd of 109 countries (2014 Global Food Security Index – an index developed by the Economist Intelligence Unit to serve as a measure for food scarcity, including the quality of nutrition and food security of a country) with regard to food scarcity and food security, with a score of 46.5/100. In 2013, Indonesia had a Human Development Index (HDI) value of 0.684, which positions Indonesia in the medium human development category on rank 108 out of 187 countries; see :

Nutrition indicators have shown little improvement since 2007, with stunting rates remaining high at 37 per cent nationally, and 15 of 34 provinces exhibiting very high prevalence of over 40 per cent (RISKESDAS, 2013). Average levels of calorie and protein consumption are yet to surpass these national standards, indicating that the average condition is inadequate (Indonesia has defined the standard for calorie and protein consumption per capita per day at 2,150 calories and 57 grams of protein). Progress in reducing child mortality has slowed to the point of stagnation over the past decade and maternal mortality estimates suggest an increase during the period 2007 – 2012. Indonesia is one of three countries in Asia where the number of new HIV infections continues to grow, increasing by more than 25 per cent between 2001 and 2011. The Ministry of Health estimates that more than 658,000 people were living with HIV in 2014 and that there were 70,000 new HIV infections in the same year (Interim Report of Estimates and Projections of HIV and AIDS in Indonesia, 2014 – 2019, Draft of the Ministry of Health, Jakarta, April 2015). Approximately 22 per cent of the population still practise open defecation and therefore water, sanitation and hygiene remain a priority.

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Indonesia’s natural resources are under threat. Of particular concern is the depletion of forest resources through deforestation and forest fires and the corresponding increase of greenhouse gas emissions. Indonesia’s geographic location in the ‘Ring of Fire’ puts Indonesia at heightened risk of disasters from earthquakes, volcanic eruptions, and tsunamis in addition to other hazards such as floods, droughts and sea-level rise.


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