Economic growth and poverty<\/p>\n
By T. Sima Gunawan<\/p>\n
JAKARTA (JP): The development of Indonesia in the past three
\ndecades has been amazing. No one can deny that, under the
\nleadership of President Soeharto, Indonesia has achieved
\nsignificant progress in many fields.<\/p>\n
The government has successfully changed Indonesia from one of
\nthe least developing countries in the world, to a fast-growing
\ncountry with an 8.3 percent economic growth per annum in the
\nFifth Five Year Development Program (1989-1994). President
\nSoeharto said last week, in his state of the nation address,
\nthat the country was expected to see an annual 7.1 percent real
\neconomic growth in the Sixth Five Year Development Plan (1994-
\n1999).<\/p>\n
It is projected that Indonesia will become one of the newly-
\nindustrializing countries by the end of that period, in 1999,
\nwith an income per capita of $1,280.<\/p>\n
In 1969, when the government kicked off the First Long Term
\nNational Development Plan, the income per capita was US$70. It
\njumped to nearly $920 by the end of the program, in 1994.<\/p>\n
Despite the fact that, in a way, technology in Indonesia is
\nbehind some other Asian countries, it has successfully launched
\nthe first-ever locally made double engine aircraft, the N250. It
\nis true that some government officials are corrupted and that the
\nmanagerial skills of Indonesian executives needs improvement, but
\nIndonesia is enjoying a success in its economic development.<\/p>\n
Indonesia has every reason to keep growing. It still has
\nabundant natural resources -- even though they will not last
\nforever -- and the political situation is relatively stable. As
\nthe fourth most populous country in the world, Indonesia does not
\nneed to worry about manpower resources. Both local and foreign
\ninvestors must be happy with the fact that Indonesia has the
\ncheapest labor force in the world, with basic minimum wages
\nranging from Rp 2,800 (US$1.22) to Rp 4,750 ($2.07) per day. If a
\nlaborer works for at least six hours a day, this means that the
\nemployer will have to pay no more than between Rp 466 ($0.20) and
\nRp 791 ($0.35) per hour.<\/p>\n
Last month more than 5,000 workers of PT Great River
\nIndustries in Cibinong, Bogor, West Java, staged a strike,
\ndemanding a minimum wage of Rp 4,600 a day, plus transportation
\nand allowances, which would bring their total take home pay to Rp
\n7,000 ($3.06) a day. But the company, a large garment factory
\nwhich makes noted brand names such as Arrow, Triumph and
\nBenetton, turned down the demand, saying that it paid the workers
\nRp 4,675 -- Rp 75 more than the minimum wage in West Java.<\/p>\n
Can one live decently with Rp 4,675 ($2.05) a day? It seems
\nimpossible to make both ends meet on such a small amount of
\nmoney. But people survive.<\/p>\n
As a matter of fact, poverty has become a lifestyle for some
\npeople in this country.<\/p>\n
President Soeharto said that the number of poor people
\ndeclined from 60 percent of the total population in 1970 to 14
\npercent today, which means 26 million.<\/p>\n
The Central Bureau of Statistics, which conducts a survey to
\nmonitor the number of poor people once every certain number of
\nyears, found in 1994 that 8.7 million poor people live in urban
\nareas, and 17.2 million poor people in rural areas.<\/p>\n
A person is considered poor if he or she consumes less than
\n2,100 calories per day. The poverty line is set at Rp 27,905
\n(US$12.2) per capita per month for people living in urban areas,
\nand Rp 18,244 ($8) for rural dwellers.<\/p>\n
In an effort to combat poverty, President Soeharto launched a
\nprogram called Inpres IDT, or Presidential Instruction for
\nVillages Left Behind. Under this scheme, each of the 22,000
\nunder-developed villages in the country receives Rp 20 million
\n($8,752).<\/p>\n
But clearly, such a program alone is not enough.<\/p>\n
The government needs to take more substantial steps to combat
\npoverty.<\/p>\n
"Last year, from January to April, banking loans for the
\ndevelopment of luxury houses was Rp 2.7 trillion, compared to Rp
\n360 billion for the Villages Left Behind fund, allocated for the
\n1994-1995 fiscal year," Sritua Arief, a Salatiga-based economic
\nconsultant, said in a recent seminar on people's economy.<\/p>\n
He criticized the government for putting the wrong thing on
\nthe priority scale, over-emphasizing the economic aspects at the
\nexpense of the social elements.<\/p>\n
Like Arief, several other experts accuse the government of
\ndrafting policies on economy, which are disadvantageous to the
\ncommon people, widening the gap between the rich and the poor.<\/p>\n
Loekman Soetrisno, a sociologist and expert on rural economics
\nfrom Gadjah Mada University, said the main obstacle in the
\nefforts to improve people's economy was the fact that the
\ngovernment sided with big shots.<\/p>\n
"We still remember how easy the Federation of Indonesian Batik
\nCooperatives was discharged from the management of Kanindotex by
\na consortium consisting of businessmen who have strong
\nconnections with the government," he said.<\/p>\n
In May, a consortium led by businessman Bambang Trihatmodjo,
\nPresident Soeharto's second son, took over the management of
\ntroubled giant textile company Kanindotex from the federation.<\/p>\n
Loekman also perceived that as long as the "connection law",
\nwhich allows the collusion between conglomerates and the
\nauthorities, still exists, people will continue to lose.<\/p>\n
The businesses of conglomerates grow fast because they enjoy
\nvarious facilities from the government, including soft-loans and
\ntax reimbursement.<\/p>\n
Indonesia's number-one business tycoon Sudono Salim, also
\nknown as Liem Sioe Liong, with an estimated US$3 billion in net
\nassets, is the richest ethnic Chinese in southeast Asia, the
\nHong-Kong based Asiaweek reported in August last year. Liem's
\nbusiness includes cement, finance, automotive and food
\nindustries.<\/p>\n
Swa business monthly reported in its March edition that the
\nsecond richest man in the country, Eka Tjipta Widjaja, boss of
\nthe Sinar Mas Group, has assets of Rp 18 billion, while the
\nassets of Prayogo Pangestu, with its Barito Pacific Group, is Rp
\n16 billion. Mochtar Riyadi of the Lippo Group is in fourth place
\nwith Rp 12 billion in assets.<\/p>\n
The government has recently been under fire for issuing a
\ndecision which allows large business groups to expand their
\nproduction capacities despite their leading position in the local
\nmarket. They are also allowed to deal in industrial activities
\nfrom the upstream to downstream levels.<\/p>\n
Some analysts worry that the policy would be harmful to small
\nbusiness groups. But Coordinating Minister for Industry and Trade
\nHartarto said such a policy is essential to enable Indonesian
\ncompanies to compete in the era of trade globalization.<\/p>\n
Minister of Industry Tunky Ariwibowo said that the government
\nhas no objection to such monopolistic practices because the
\nconsumers get advantages from the efficiency.<\/p>\n
Denying that the policy would be disadvantageous to smaller
\ncompanies, Tunky said that they can work with big industries to
\nincrease the competitiveness of Indonesian products overseas. He
\nsaid the big companies should assist the smaller business in
\nimproving management skills and facilitating access to loans.<\/p>\n
What is happening is different.<\/p>\n
Christianto Wibisono, director of Indonesian Business Data,
\nsaid, "The economic policies are meant to develop large-scale
\nbusiness with a hope that they will be able to compete with big
\nentrepreneurs from other countries.<\/p>\n
"But what is happening is that they (the big companies) 'eat'
\nlocal smaller businesses," he said.<\/p>\n
The government, obviously, does not have any intention to make
\npeople suffer. "If the goal is good, but the mechanism is not
\ngood, the result will not good either" Loekman Soetrisno said.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/economic-growth-and-poverty-1447893297",
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"sponsor": "Okusi Associates",
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