UN report cites gap between urban and rural incomes

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)