Indonesia looks to close income inequality gap

Global Business

Indonesia looks to close income inequality gap

Most countries would be thrilled to see their economies growing close to five percent. But that qualifies as an underachievement for Indonesia. A slump in the price of commodities led to Indonesia’s slowest expansion in six years in 2015 and growth again fell short of expectations in the first quarter of this year.That’s prompted the government to look for new engines to drive the economy.

CCTV’s Rian Maelzer reports. Follow Rian Maelzer on Twitter @rdamael

Indonesia looks to close income inequality gap

Indonesia looks to close income inequality gap

Most countries would be thrilled to see their economies growing close to five percent. But that qualifies as an underachievement for Indonesia. A slump in the price of commodities led to Indonesia’s slowest expansion in six years in 2015 and growth again fell short of expectations in the first quarter of this year.That’s prompted the government to look for new engines to drive the economy. CCTV’s Rian Maelzer reports.

A squatters’ settlement sits right in the heart of Jakarta’s business district. People there, like this man who drives for a motorcycle taxi-hailing service, generally say their lives have been improving in recent years.

“Since I’ve been working for Grab, my income has increased. I’ve been able to pay for my kids to go to school, and now college,” Grab Motorcycle Taxi Driver, Rudhy Riyanto said.

Poverty rates in Indonesia have been steadily declining for many years. But the gap between rich and poor has been widening. And that’s a worry for President Joko Widodo, or Jokowi, whose core support comes from lower income groups.

“So it makes a burden for Jowoki to make sure the government is moving in the right direction to decrease the poverty. The Jokowi government actually has the good political will to alleviate the poverty,” said Mohamad Fahmi, economist from university of Padadjaran.

Jokowi’s 18 months in office have thrown up big economic challenges with slowing demand, and sliding prices of commodities such as hydrocarbons, palm oil and minerals on which the country has been relying. Last year’s growth was less than five percent, with economists believing Indonesia is capable of much better.

To boost foreign investment and get growth back to closer to seven per cent, President Jokowi has introduced measures in recent months to ease restrictions on foreign investment in dozens of sectors.

The government is aiming to swiftly diversify the economy, reducing reliance on commodities and developing sectors such as manufacturing, e-commerce, and tourism to places other than Bali.

“An advantage of these new growth engines is that they will be more employment intensive, they will be more regionally diverse and the will lead to a pattern of growth that is more equitable and sustainable. So really at this point in time, at this juncture we are seeing a shift from one set of growth engines to another,” Asian Development bank country director, Steven Tabor said.

The government knows it will have to continue slashing red tape, building new infrastructure, and improving the quality of education and vocational training if it’s to make that economic shift, and continue improving people’s lives.