UN report cites gap between urban and rural incomes
JAKARTA (JP): The imbalance between the sectoral share of output and employment is a source of concern in Indonesia as it reflects a rise in the disparity between the income levels of the urban industrial sector and rural agricultural sector, according to a United Nations report.
The Bangkok-based United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) said yesterday Indonesia experienced a decline in the share of agriculture in gross domestic product (GDP) from 31 percent in 1980 to 16 percent in 1995.
ESCAP noted in its latest annual Economic and Social Survey of Asia and the Pacific report the share of the manufacturing industry in the GDP increased to 41.9 percent from 31 percent and the services sector to 42 percent from 38.4 percent in the same period.
Copies of the report were distributed at a news conference here yesterday which was also attended by Anwar Nasution, a noted economist from the University of Indonesia.
"The share of the labor force in agriculture remained high at 55 percent which was disproportionate to its contribution to GDP," the report added.
Nasution agreed with the ESCAP observation, saying that "We are short of skilled labor in industrial and service sectors,"
"Most of the farmers and shoes and textile workers do not have adequate education. The majority of them are drop outs from elementary schools," Nasution added..
According to the report, concentration of relative poverty in rural areas served as an inducement to rural or urban migration in search of employment which were often ill-prepared to receive employment opportunities, housing, sanitation, transportation, education and health.
As of 1995, about 35 percent of the population lived in urban areas, ESCAP concluded..
It said the average economic growth rate exceeded 8 percent per year which was supported by high domestic investment and savings.
According to ESCAP, Indonesia's monetary and fiscal policy was generally prudent, which enabled the stability of price and exchange rate. Monetary policies geared toward promotion certain strategic sectoral objectives.
"The nominal exchange rate has been allowed to depreciate over the years so that the real exchange rate has either depreciated or remained stable to benefit exports," the report added.
Nasution concurred that the policy has kept the inflation low -- currently about 7 percent -- encouraged the flow of investment and created higher productivity.
Asia-Pacific
The report added that Asia-Pacific countries were poised to repeat their phenomenal growth of the past decade well into the 21st century.
The ESCAP survey said strong world and regional trade and an influx of foreign capital would ensure the region's gross domestic product (GDP) growth stayed between 5.1 and 6.7 percent for the next 20 years.
World GDP growth over the period was projected at between 2.5 and 2.7 percent. Growth for the European Union was seen at 1.5 to 1.6 percent and growth for the United States at 2.1 to 2.4 percent, it said.
"Developing countries in the ESCAP region have increased their share of world trade, private financial flows and foreign direct investment," ESCAP, which is UN-affiliated, said.
Their value of trade in goods and services rose to 27 percent of world GDP in 1993 compared to 11 percent in 1971.
But the survey warned that a closer relationship with the global trading community brought with it some problems, such as linking of trade with other issues such as labor welfare, environment and human rights.
"It is important to ensure that such issues are not misused as non-tariff barriers against developing countries," it said. (10)