Indonesia's slow road to recovery

Indonesia's slow road to recovery

UNSFIR, Jakarta

Indonesia's 2004 National Human Development Report tracks the
country's recovery following the financial crisis. It points out
that Indonesia certainly made progress, and has now made up most
of the ground lost after 1997. But economic growth is still slow,
so regaining the former human development momentum will demand a
new approach to public spending.

Indonesia's 2004 National Human Development Report, The
economics of democracy, offers a new perspective on the country's
recovery from the 1997 crisis. The report, which is a joint
publication of the national planning agency (BAPPENAS), the
Central Bureau of Statistics (BPS), and the United Nations
Development Programme (UNDP), presents one of the most detailed
statistical pictures yet of this diverse nation.

The report's primary statistic is Indonesia's human
development index (HDI), a composite measure of income, life
expectancy and educational achievement that takes a value between
1 and 100. The global human development report, which is produced
by UNDP in New York, has also calculated this index for Indonesia
annually and has indicated consistent progress from 47 in 1975 to
68 by 2001 -- and suggests little or no effects from the 1997
crisis. However, the global report uses a measure of national
income that is relatively insensitive to changes in the
circumstances of the poorest people -- using national accounts
data to estimate the country's gross domestic product (GDP) which
is divided by the total population to give the per capita income.

The National Human Development Report, on the other hand,
estimates income by using household surveys which tend to be more
responsive to the income of the poorest groups. This is the
approach that BPS has used since 1990, and it shows far greater
fluctuations in the HDI. In 1996 the HDI had reached 69, by 1999
however it had dropped back to 64 -- largely due to the effects
of the crisis but also because from that year BPS changed the way
in which it estimated household income.

Using data for 2002, the 2004 National Human Development
Report shows a rise in the HDI to 66. It may appear from this
that the country's level of human development is still below that
of 1996 but the remaining gap is largely due to the change in the
method of calculation; in fact all the component indicators of
the HDI are now higher than they were in 1996, particularly those
for income and literacy, so the real story is of an improvement
but a very modest one -- and nothing like what might have been
expected without the 1999 crisis.

As the report also points out, however, even the HDI gives
only a very partial view of human development. Like any index
which reduces a complex concept to a single number it misses many
important components of development. It does not, for example,
factor in such issues as social or political freedom.

On this basis, Indonesia has made dramatic gains, moving from
a crony-based dictatorship to a much more open democracy -- which
has not just resulted in two successful national elections but
also encouraged a diverse and flourishing media along with a
multitude of non-governmental organizations. The HDI does not
reflect this -- probably one of its greatest flaws as a measure
of human development.

While in 2002 the average HDI for the whole country was 66 the
values among the provinces ranged from Jakarta (76) and
Yogyakarta (71) to Papua (60) and West Nusatenggara (58). Even
greater, however, were the differences between districts. The
highest value was in East Jakarta (76) and the lowest was in the
Papua district of Jayawijaya (47). Just as striking, however, was
the comparison between districts in the same province. In East
Java, for example, while the city of Surabaya had a HDI of 72 and
the district of Sampang on the island of Madura, only 90
kilometers away, had a HDI of just 50.

Just as there are variations in the HDI across the country,
there are also differences in the rates of improvement. Between
1999 and 2002, most districts made some progress; however 18
districts saw a fall in their HDIs. Most of the weaker, declining
regions are in Papua and the Malukus. In Papua, the main reasons
for this have been deteriorations in education and income. In the
Malukus, they have been the result of declines in life expectancy
and real income that can be related to social conflict.

As well as giving the latest figures on human development, the
report also tracks changes in levels of income poverty. Since the
height of the crisis in 1999 the proportion of people living
below the poverty line had by 2002 fallen back to 18 percent. But
low income is only one part of the poverty picture; people may be
deprived in many other ways, beyond having insufficient income.

They may lack education, for example, or be in poor health, or
live in an unsafe and insecure environment -- and generally lack
opportunities to expand their capabilities. The report tracks
this using the human poverty index (HPI) another composite
measure -- this time of deprivation in health, nutrition,
education and access to safe water and sanitation.

Here too there has been progress: Between 1999 and 2002 the
HPI fell from 25.2 percent to 22.7 percent -- much smaller than
the drop in income poverty because the components of the HPI are
less susceptible to short-term fluctuations than the income
poverty index which is sensitive to both incomes and prices which
tend to be more volatile.

The HDI and the HPI reflect the situation for the population
as a whole. But since the situation of women is frequently worse
than that of men, UNDP has also produced two additional measures.
One is the gender-related development index. If there were no
gender discrimination then the GDI would be the same as the HDI.

In fact in 2002 while the HDI was 66 the GDI was only 59
largely because women had fewer years of schooling and had a
smaller share of earned income. The second index is the gender
empowerment measure (GEM) which measures women's representation
in parliament and in managerial roles. In this case there has
been a slight improvement in recent years -- and Indonesia has a
higher GEM than other countries in the region, including the
Philippines, Malaysia, Japan, Thailand, and the Republic of
Korea. Nevertheless the report points out that Indonesia still
has a long way to go.