Strong
economic growth not accompanied by rising living standards
Jakarta– In the midst of a
global crisis, Indonesia's economic growth recorded a positive result.
Economic growth for the second quarter of this year reached 6.4 percent
compared with the same period last year.
Economic growth continued
to be centred in Java Island contributing 57.5 percent. In cumulative terms,
economic growth for the first semester of 2012 was an improvement on first
semester economic growth for 2011, which was 6.3 percent.
"Although still centred in
Java, regions outside Java also began to record significant economic growth,
particularly in Sulawesi. Economic growth in Sulawesi for the second quarter
reached 4.6 present compared with the previous quarter of only 4.5 percent.
This improvement was cause by a growth in mining industry and agricultural
products", said Central Statistics Agency (BPS) chairperson Suryamin during
a press conference in Jakarta on Monday August 6.
Suryamin said that gross
domestic product (GDP) at current market prices for the second quarter
of 2012 reached 2,050.10 trillion rupiah [US$ 215.25 billion]. The three
sectors that recorded the highest growth (quarterly) were trade, hotels
and restaurants, accounting for 5.2 percent, electricity, gas and drinking
water, 4.6 percent, and construction 4.4 percent.
Meanwhile for annual growth,
the transportation and communication sector grew by 10.1 percent, trade,
hotel and restaurants 8.9 percent, and construction 7.3 percent.
GDP for the second quarter
of 2012 was dominated by manufacturing, plantations, trade, hotels and
restaurant sectors, each contributing 23.5 percent, 14.8 percent and 13.8
percent respectively. The structure of GDP according to spending for the
second quarter of 2012 was dominated by household spending amounting to
53.5 percent.
In addition to this, GDP
was also supported by gross fixed capital formation (GFCF) and government
expenditure, which provided a contribution of 32.9 percent and 9 percent
respectively, along with exports at 24.3 percent and imports at 26.6 percent.
President Susilo Bambang
Yudhoyono welcomed the positive economic growth for the second quarter
noting that this growth has occurred in the midst of a global economic
crisis.
Anomaly
According to economic observer
Salamuddin Daeng from the Institute for Global Justice (IGJ), Indonesia's
economic growth can be categorised as an anomaly because it is not accompanied
by improvements in living standards.
There are four reasons for
this anomaly said Daeng. First, Indonesia's economy is driven by foreign
debt, which continues to grow. "Indonesia's [foreign] debt has accumulated
to 2.870 trillion rupiah [US$ 301.35 billion]. Debt has become the government's
principle source of income and is the driving force of economic growth",
he explained.
Second, economic growth is
driven by increased consumer spending based on the rising cost of basic
goods and food, which is sustained by a growth in credit, particularly
consumer credit.
The third factor is economic
growth is driven by raw material exports such as minerals, oil and gas
and plantation and forestry products, so there is little creation of added
value and employment opportunities. Finally, economic growth is driven
by foreign investment resulting in the country's natural resources increasingly
being controlled by foreigners.
Economic observer A. Tony
Prasetiantono from Gadja Mada University (UGM) in Yogyakarta said that
the domestic sector is sustaining national economic growth. "The transmission
of the global crisis through a decline in exports and a trade account deficit
will only be felt in the third and fourth quarters of this year. Moreover
the contribution of exports to GDP is not significant", said Prasetiantono.
A similar view was conveyed
by economist Mirza Adityaswara. A number of domestic sectors are growing
because they are driven by low interest rates, which are apparent from
a growth in credit of 26-28 percent (annually), which is simultaneously
driven by low fuel prices (BBM), which are still subsidised by the government.
"So from this, high [economic]
growth is being experienced by sectors orientated towards domestic [markets],
such as trade, manufacturing, the automotive industry, transportation,
communication and construction", said Adityaswara, adding that the consequence
of high growth in sectors orientated towards the domestic market is a tendency
for the trade account deficit to steadily rise.
According to Prasetiantono,
faster and more government spending has also been enough to assist economic
growth. In concert with this, keeping inflation below 5 percent has helped
slightly although this will have an effect, namely energy subsidies will
continue to increase, which is not in fact a healthy trend. (ENY/BEN/ATO/MAS)
[Ekonomi
Tumbuh Signifikan, Kesejahteraan Masih Rendah - Kompas. Rabu, 07 Agustus
2012. Slightly abridged translation by James Balowski.]
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Only
the richest 20 percent benefiting from economic growth
Jakarta – Economic growth, which
reached 6.4 percent in the second quarter of 2012, is largely being enjoyed
by the middle- and upper-class, because it is not quality growth.
Economics professor Mudrajad
Kuncoro, from the Gadjah Mada University Faculty of Business and Economics,
said that economic growth has risen and per capita income (PCI) has reached
3,540 US dollars annually.
However the indications of
an imbalance are visible from the results of the current national development
process. This can be measured by the imbalance in distribution of income
that is steadily widening as reflected by the gini coefficient (a measure
of inequality), which rose from 0.33 in 2002 to 0.41 in 2011.
"The irony is, there has
been a decline in the [share] of the national cake enjoyed by poorest 40
percent of the population, which has been accompanied by an increase in
the [share] of the national cake enjoyed by the richest 20 percent", said
Kuncoro when contacted in Jakarta on Tuesday August 7.
Indonesian Employers Association
(Apindo) general chairperson Sofjan Wanandi is of the view that economic
growth is only being enjoyed by the middle- and upper-classes, while lower-class
society is being ground down by various obstacles and is simply trying
to survive.
"Even though [they] benefit,
the lower-classes' gains are becoming smaller because they have to deal
with the high price of materials and have to face high bank interest rates",
said Wanandi.
Wanandi confirmed that current
economic growth rates are being sustained by people's consumption during
the fasting month and Idul Fitri holiday celebrations. On the questing
of increased investment, Wanandi said this is not something new.
Wanandi said that current
investment, particularly by foreign investors, appears to be sustained,
and represents a process that has been going on for two years. It is not
the pace of investment that has recently been ventured, such as the investment
by Foxconn from Taiwan, which is still struggling to find industrial land.
Not much change
Fishing communities and trade
unions admit they have felt little impact from the high level of growth
in the second quarter.
Cornelius Mahuze (32), a
traditional fisher from the Marind Kampung Mbuti ethnic group in Merauke
district, Merauke regency, Papua, concedes that his life is not heading
in a better direction. "Yeah, it's just like this, [I] can only net prawns.
[I] don't have a boat, don’t have any capital", he said on Tuesday.
Every day Cornelius works
netting prawns on at the Mbuti beach. If it is the prawn season, he can
catch 10-20 kilograms a day. Prawns sell for 15,000 rupiah a kilo. If it's
not the prawn season, he can only catch 1-2 kilograms a day. "If it’s the
hot season or big wave season, [I] don't have any income", he said.
Laurensius Mahuze (50), another
traditional fisher from the Mbuti village, also relies on netting prawns
from the beach because he does not own a motor-boat to catch fish at sea.
His income depends upon the season. "If it's not prawn season, I just sell
young coconuts for 5,000 rupiah each", he said.
Meanwhile according to Jamaluddin,
a labour activist from the East Java provincial capital of Surabaya, economic
growth has yet to raise workers' living standards and only provides profits
to business and employers. This is reflected in the growth in the number
of outsourced workers so that benefits that company owners are obliged
to provide, such as the right to a pensions, healthcare allowance and children's
schooling costs, are in fact non-existent.
"Workers' wages in Indonesia
are the lowest compared with Thailand, Singapore, the Philippines and Malaysia.
Meaning that economic growth is not directly proportional with workers'
incomes, never mind farmers or fisherpeople", he said.
Meanwhile, an economic observer
from the Airlangga University in Surabaya, Subagyo, said the gains from
all this are actually being enjoyed by foreign investors who already control
shares in almost all business sectors. "Economic growth is not impacting
directly on the little people, but rather the owners of capital", he said.
National Planning and Development
Minister and National Development Planning Board (Bappenas) chief Armida
Alisjahbana said that economic growth in the second quarter of 2012 is
being driven by growth in domestic consumption and investment. The government
is targeting an investment growth of 11 percent, which could realistically
reach 12 percent.
"How to maintain the momentum
and minimalise declining exports. So as to get the best contribution for
the agricultural sector. That will be the driving force. Our hope is, all
of this can be translated into ordinary people's living standards and reducing
unemployment", he said. (RWN/ETA/EVY/ATO/OSA/IDR/BEN)
[Pertumbuhan
Dinikmati Kelas Menengah - Kompas.com. Kamis, 09 Agustus 2012. Translated
by James Balowski.]
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