Mother's wish for Indonesia in 2020

Mari Pangestu

JAKARTA (JP): Raymond and Arya are my sons. They are four and two respectively, which means they will be 29 and 27 respectively by 2020. What kind of socio-economic conditions will they face in year 2020?

Economic growth for the next 25 years is projected to be above seven percent per year and perhaps reach nine percent by the year 2020. If one does a linear extrapolation, my sons will be living in the fifth largest economy in the world, measured in terms of size of Gross Domestic Product.

Their friends in the developed countries will see them in an ambivalent light -- both as potential buyers of their products as well as tough competitors. The predicted response will be that while the push to open markets will continue, it will be tempered by continued pressure from domestic political forces to revive protectionism.

The process of integration in the world economy will accelerate with continued improvements in technology as well as liberalization that will take place under different auspices -- multilateral, regional and unilateral.

Capital will flow to "credit worthy" countries and trade in services will rise more rapidly than trade in goods so that its share out of world trade will go up from its present 22 percent share.

The structure of production would have experienced transformation from the agriculture (eight percent) to the industrial (32 percent) and services sector (50 percent). Even though the agriculture sector will contribute a small share, the sector will also undergo technological transformation.

This is similar to the structure of production in Korea at present. Growth will also be generated from private consumption and investment, as well as exports.

I hope my sons will have jobs. By 2020 they will be two out of the 148 million people looking for jobs. Up to year 2000, the number of new entrants into the labor force will still be high at above two million a year and after that, especially after 2005, the numbers will decline as the effects of slower population growth begin to be felt.

As the growth of labor supply declines, growth of labor demand will continue to sustain the seven to nine percent per year economic growth leading to the possibility of a tight labor market or even a labor deficit.

This implies the need to increase the supply of labor through greater participation of women in the workforce, as well as affecting labor demand through increased labor productivity and restructuring to higher value added activities.

Given their expected more urban and middle class lifestyles and changing attitudes, this will mean that their girlfriends or wives will in all likelihood be working.

Female participation in the labor force currently is 42 percent and it is projected to go up to 54 percent. This is still low compared with close to 50 percent in Thailand at present.

The implications for increased participation in the work force, the conditions facing women workers and the necessary changes in attitude to support a greater degree of participation by women in the workforce are clear.

My sons will have to be equally comfortable helping in the home as well as being professionals. I wonder if companies will adopt a supportive and long-term approach in investing in people, by having paternity leave (not just maternity leave), child care centers in the workplace, have flextime, and work done through telecommuting?

For the sake of my grandchildren's mother, I hope so, especially in view of the tight labor situation, better education and economic growth, because domestic help will disappear.

While their labor services may be in great demand, my sons will have to work harder and face a very competitive environment. They will have to join a long queue of people to get to the top due to the maturing of the labor force.

The age group of 34 to 65 will increase from 25 percent to 39 percent of the population. If there is to be continued incentives to work and perform well, then proper and anticipatory actions such as continuous retraining and upgrading are needed so that the aging of the labor force does not create problems and even entry barriers for the new entrants.

This is especially important in light of new entrants, like my sons, will be better educated since by then the percentage in the relevant age group attaining qualification for all education levels should have increased, for instance from 33 percent to 80 percent for senior high school and from 11 percent to 25 percent for university.

I wonder whether they will have a better quality of life? They will live longer with life expectancy expected to go up from 63 to 71. They will hopefully be healthier with better health services, sanitation, clean water. air and a noise-free environment.

If they are single and professional, they will perhaps live in an apartment in the city center and if they are married, they and their families will live in and their children go to school in the various satellite cities in the suburbs -- away from the center of the city.

There will be less poor people, at least in terms of the percentage of the population below the poverty line, but then there will be the massive problem of the near poor needing to be tackled.

I don't expect them to look after me or my husband, even though we would have just entered the growing numbers in the 65 plus age bracket -- two out of the 18 million (seven percent of population). This is because they will have smaller houses, working wives and no domestic help. I hope that anticipation of this problem of the aging of the population in terms of health and other support services will be forthcoming.

What will it take so that by 2020 the vision is a reality for Raymond and Arya and not an empty dream?

In short, it will mean appropriate anticipation, planning, and action by all actors in the economy -- policy makers, civil servants, business sector and individuals -- to face the increasingly competitive world and domestic economy, and anticipate the problems outlined.

In order to sustain growth and realize the transformation process, savings and therefore investment will have to increase.

However, there is an even more dire need to ensure that, firstly, the allocation of resources are efficient to ensure the highest return on investment and most effective use of human resources. Secondly that growth is not just investment driven, but productivity and innovation driven. We have come full circle. In 1911, Schumpeter concluded that profit driven entrepreneurship and innovation are the driving force behind economic development.

To ensure such an outcome, there has to be economic and political stability, conducive investment and business climate, fair competition, widening of a competitive entrepreneurial class, increased technological capability (investment, production, process, modification and design, and marketing capabilities), improvement in human resources, accounting for environmental costs of growth, and strategic linkages.

The role of the government will have to change from direct intervention and participation in the economy, to a more indirect one of investing in human and physical capital, ensuring macro stability and ensuring that social welfare and distribution objectives are met.

The policy implications for the government are continued deregulation (including in education) and restructuring, increased transparency, prioritizing investment in human capital, reducing economic concentration and high cost economy factors that lead to distortions, a sound and transparent legal system, and above all "good and clean" governance.

It is only in this way that individuals and businesses can be expected to be good tax payers, efficient, professional, productive and innovative.

This is a mother's wish list. I hope someone is listening.

The writer is head of the economics department at the Center for Strategic and International Studies and a lecturer at the University of Indonesia.