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World Bank warns of Indonesia's rising inequality
Jakarta Post - December 8, 2015
World Bank Indonesia country director Rodrigo Chaves said Indonesia's poverty reduction had begun to stagnate as it had a near zero poverty decline in 2014. Indonesia's inequality level is high, climbing at a faster rate than most of its East Asian neighbors.
"Income inequality is rapidly rising, up to one third of this is explained by the inequality of opportunities," said Chaves at the launch of the World Bank "Indonesia's Rising Divide" report in Jakarta on Tuesday.
The analyst further said that healthy and well-educated children in Indonesia lived side by side with children who suffered from malnutrition, learned little when they were in school and dropped out too early.
"There are stark inequalities between regions as well. For example, 6 percent of children in Jakarta do not have access to proper sanitation, while at the same time, 98 percent of children in rural Papua have no access," said Chaves, adding that this kind of inequality dims the prospect of important segments of society for generations.
Chaves further explained that results of a national survey showed than when Indonesian people were asked to choose between lower economic growth or less inequality, more than 50 percent of Indonesians chose less inequality. It was clear to them that it was more important to share prosperity with people in countries worldwide, he went on.
According to the Word Bank "Indonesia's Rising Divide" report, Indonesia's economic growth over the past decade has primarily benefited the richest 20 percent and left the remaining 80 percent of the population, about 205 million people, behind.
With rising disparities in living conditions and an increased concentration of wealth in the hands of the few, Indonesia's level of inequality is becoming increasingly high and continues to climb faster than most of its East Asian neighbors, the report says.
A popular measure of inequality is the Gini coefficient, in which 0 represents complete equality and 100 represents a complete inequality. During 1997-1998 Asian financial crisis, during which poverty increased sharply, the Gini coefficient also fell. Since then, the Gini coefficient had increased from 30 points in 2000 and reached its highest level at 41 points in 2014.
Meanwhile, the benefits of economic growth have been enjoyed largely by the growing consumer class. Between 2003 and 2010, consumption per person of the richest 10 percent of Indonesians grew at over 6 percent per year after adjusting for inflation, but it grew less than 2 percent per year for the poorest 40 percent.
This contributed to a slowdown in poverty reduction, with the number of poor falling by only 2 percent per year since 2002.
World Bank Indonesia senior economist Matthew Wai-Pai said that in the long run, it is improved access to quality health and education that would reduce unequal access to good jobs. In the short run, more could be done to improve the skill of today's workers and create more productive jobs.
"To improve education, Indonesia could learn from Vietnam. Why is education in Vietnam achieving better results? This is because it has a competitive curriculum and the teachers are well-paid," he said.
The Team for the Acceleration of Poverty Reduction (TNP2K) head of policy working group Elan Satriawan said that in order to eliminate poverty and improve education, the government had reformed several aid programs for poor students.
"In 2013 we changed the aid mechanisms, which were previously determined by the school, to be based on unified data via Indonesia Smart Card (KIP). The impact was quite large," he said.
Coordinating Economic Minister secretary Lukita Dinarsyah Tuwo said the government would continue to reform its policy to improve skills of Indonesian workers.
"There will be an economic stimulus package that will address directly workers' improvement skills, including their competency standard, accreditation, training and certification," Lukita said.
The government has also planned to give incentive to companies who give training to its workers. "Currently only 5 percent of total companies have been providing training to their workers," he said. (ebf)
Source: http://www.thejakartapost.com/news/2015/12/08/world-bank-warns-indonesia-s-rising-inequality.html.
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