THE CHALLENGES AND OPPORTUNITIES OF INDONESIA, ,

THE CHALLENGES AND OPPORTUNITIES OF INDONESIA, 2014-2019, 2019-2024 University of Indonesia Department of Economics

Dorodjatun Kuntjoro-Jakti, PhD. Professor Emeritus

(Jakarta, September 2014)

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 FORWARD PROJECTION  BACKWARD PROJECTION

versus

 Sebagian terbesar kajian “future studies” menggunakan metode: “The Future of the Past” Di mana masa mendatang diproyeksikan sebagai kelanjutan/konsekwensi perkembangan-perkembangan masa lalu.  Sejumlah terbatas melakukan “gap analysis” dengan membandingkan “Das Sollen” dengan “Das Sein”  Sebagian lagi melakukan “comparative analysis” pada sekelompok negara yang pernah mengalami proses-proses yang serupa Prof. Dorodjatun Kuntjoro-Jakti, PhD.

2

 RISIKO “LONG-TERM PROJECTION EXERCISES”

Tidak diketahui (NOT KNOWN)

Diketahui (KNOWN)

UNKNOWN-KNOWNS (Tidak diketahui bahwa telah diketahui)

THE PRESENT: KNOWN-KNOWNS (Diketahui telah diketahui)

Telah diketahui (KNOWNS) Prof. Dorodjatun Kuntjoro-Jakti, PhD.

THE FUTURE

KNOWN-UNKNOWNS (Diketahui tidak/belum diketahui)

Tidak diketahui (UNKNOWNS)

3

PENDEKATAN KE PENDEKATAN  DARI PENDEKATAN SATU DISIPLIN  KE INTER-DISIPLIN  MULTI-DISIPLIN

Pendekatan multi-disiplin Pendekatan inter-disiplin

MASA KINI

MASA DEPAN

Pendekatan satu-disiplin Pendekatan inter-disiplin

Prof. Dorodjatun Kuntjoro-Jakti, PhD.

4

 PARAMETER-PARAMETER KEBIJAKAN 2015-2025 - Demography

is destiny

- Geography

is destiny

 VARIABEL-VARIABEL KEBIJAKAN 2015-2025 Tergantung kepada “Gap-Analysis”, yakni hasil membandingkan “Das Sollen” dengan “Das Sein”


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 CLINTON TO GUSDUR (During the third and the last visit of Gus Dur to Washington DC in early 2001)

 Mr. President, I wish Indonesia a great success. A successful Indonesia will help to characterise the 21st Century. Indonesia is now the world’s third largest democracy. Indonesia is the fourth large-population country, with the world’s largest Moslem population. If Indonesia can prove to the world that Islam and democracy are compatible – you show us the way. (I was Indonesia’s Ambassador to Washington DC in the period of March 1998-July 2001, serving Presidents Suharto, Habibie, Gusdur, tasked with shuttle diplomacy between the two capitals.)


 POLITICAL ENVIRONMENT -

After 20 years of rule by the autocratic Sukarno (1945-1965) After 32 years of rule by the dictatorial Suharto (1966-1998)

•

Starting with Habibie (1998) Expanded by Gus Dur (1999-2001) Consolidated by Megawati Sukarnoputri (2001-2004) Indonesia undertook simultaneously - REFORMASI - DEMOKRATISASI - DESENTRALISASI Including the cessation of Military Dual-Function At a time of Multi-dimensional Crisis and Under the complex bailout scheme of IMF which covered more than 20 LOIs (Letter of Intent), consisted of more than 100 items of conditionalities In cooperation with CGI (Consultative Group for Indonesia)

• -


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 RATING

Investme nt grade

Investment rating BBB+ BBB BBBBB+

Non Investment grade

BB B+

Indonesia was “investment grade” before the 1998 crisis

B BCCC+

Asia monetary crisis hit in 1997-1998

Subsidized Oil price doubled

Global economic crisis in 2008

BBB-

Baa1 Baa2

BB+ Baa3

Baa3 Ba1 Ba2 Ba3 B1 B2

CCC

B3

CCC-

Caa1

CC

Caa2 Caa3


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A simplified picture of the rating indicates that Indonesia is expected to reach the S&P investment grade of BBB+ around 2016. At that time Indonesia’s will reach the position it had enjoyed before 1997. Note, however, that since 2009 Indonesia had continuously enjoyed the position of “Stable outlook” with no “Review/Credit Watch” for both foreign currency as well as local currency ratings.


 CHALLENGES Indonesia’s Potential: demographic bonus • Indonesia has the fourth ranking population in the world, with 237.6 million people (2010), and the working age population is close to 70% of the total population. Population growth rose to 1.49% in 2010. • Indonesia’s window of “demographic bonus” (only if it accompanied by better quality education to produce skilled workers and more job creation) will close in the next decade, as the dependecy ratio (i.e. ratio of young and elderly to working age) will start to rise after 2030. INDONESIA: Age Structure of Population and Dependency Ratio (%), 1950-2050

Source: Government of Indonesia (2011), “Master Plan: Acceleration and Expansion of Indonesia Economic Development 2011-2025


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11

TEN LARGEST COUNTRIES AND THEIR POPULATION, SELECTED YEARS (millions)


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VOTERS TURNOUT

95%

95%

93%

84%

75%

71%

High Generasi Millenium participation

1992

1997

1999

2004

2009

2014

Direct & Open General Election Prof. Dorodjatun Kuntjoro-Jakti, PhD.

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Indonesian presidential election, 2014

Nominee Party Running mate Popular vote Percentage Source: KPU


Joko Widodo PDI–P Jusuf Kalla 70,997,833 53.15%

Prabowo Subianto Gerindra Hatta Rajasa 62,576,444 46.85%

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Summary of the 9 April 2014 Indonesian People's Representative Council election results


15

16

Source: Kompas - 25 Agustus 2014


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Source: Kompas - 25 Agustus 2014


INDONESIA ECONOMIC EXCLUSIVE ZONE


18

19

INDONESIA ARCHIPELAGIC SEA LANES SLoC MALACA

ALKI I

ALKI IIIC ALKI IIIB ALKI II

ALKI IIIA

Note: ALKI = SLOC (Alur Laut Kepulauan Indonesia = Sea-Lane of Communication)


QS (Strategic Question) Mengapa terjadi ketegangan yang semakin memanas di wilayah Laut Cina Selatan? ESTIMATED PROVED AND PROBABLE RESERVES IN THE SOUTH CHINA SEA Crude oil and liquids reserves (billion barrels)

Natural gas reserves (trillion cubic feet)

Brunei

1.5

15

China

1.3

15

Indonesia

0.3

55

Malaysia

5.0

80

Philippines

0.2

4

Taiwan

-

-

Thailand

-

1

Vietnam

3.0

20

11.2

190

Country name

Total

Source: EIA


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 OPPORTUNITIES


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World Development Indicators database, World Bank, 1 July 2014 Prof. Dorodjatun Kuntjoro-Jakti, PhD.

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World Development Indicators database, World Bank, 1 July 2014 Prof. Dorodjatun Kuntjoro-Jakti, PhD.

 THREATS

External sector


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 THREATS Fuel prices during Megawati Soekarnoputri’s presidential term


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Impact of higher fuel price on current-account deficit


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POLICY FRAME 2014-2019 What Indonesia must do DAS SEIN

REFORMASI

- Reinvent GOI

DEMOKRATISASI

- Consolidate checks & balance

DESENTRALISASI

- Develop regional capacities Prof. Dorodjatun Kuntjoro-Jakti, PhD.

What Indonesia would like to do DAS SOLLEN (Idealism)

 Out from the 3 decadeslong Middle Income Trap  Out from the Resource Curse

What is beyond Indonesia’s capacities (Realism)

 Structural bottlenecks & mismatches can probably be overcomed only in 20192024

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Correlations:

The Middle-Income Trap By Evan Applegate June 13, 2013

Speaking on June 6 in Chengdu, China, Executive Vice Premier Zhang Gaoli said his country “has to stand up to the test of striding over the ‘middle-income trap.’ ” Zhang was referring to a well-known phenomenon: Many nations can move from low-income to middle-income status, but as labor costs rise only countries that boost productivity, improve education, and master innovation fully develop.

www.businessweek.com Prof. Dorodjatun Kuntjoro-Jakti, PhD.

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The Economist, August 2nd 2014


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Source: FT.com – Global economy battle decline in productivity growth – 16 Januari 2014


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Source: FT.com – Global economy battle decline in productivity growth – 16 Januari 2014


Prof. (Emeritus) Dorodjatun Kuntjoro-Jakti, PhD. Email : [email protected]

THE CHALLENGES AND OPPORTUNITIES OF INDONESIA, ,

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