I

nequality poses a threat to Indonesia, as the widening gap could potentially hamper economic growth, a new report by the World Bank has found.

World Bank Indonesia country director Rodrigo A. Chaves said on Tuesday that too much would be at stake for Indonesia if high inequality persisted. '€œIt can gradually lead to social tensions that constrain growth,'€ he said during the report'€™s launch.

Chaves said that as the high-income bracket grew more rapidly than others, many Indonesians would be left behind.

According to the report, four major factors play a key role in rising inequality, namely unequal opportunity from birth, widening gap between skilled and unskilled workers, high wealth concentration and shocks that can erode household resources and incomes.

As a result, the country'€™s Gini coefficient has risen sharply since the economic recovery that it underwent following the Asian financial crisis in 1997-1998. '€œAfter recovering from the Asian financial crisis, Indonesia'€™s real GDP [gross domestic product] per capita grew at an annual average rate of 5.4 percent between 2000 and 2014,'€ it read.

'€œThis growth helped pull many out of poverty; the poverty rate more than halved from 24 percent during the crisis to 11 percent by 2014.'€

A stronger middle-income bracket has emerged out of the growing GDP as well, leading to 45 million people '€” claimed as the richest 18 percent of all Indonesians '€” who are economically secure and enjoy a higher quality of life.

The latest data from the Finance Ministry suggests that the GDP now sits at around Rp 11.71 quadrillion (US$836 billion).

However, the report argues that these individuals are now starting to leave the other 205 million Indonesians behind. The number of poor people has only fallen by 2 percent since 2002 and the number of those vulnerable to poverty has barely fallen at all.

National data indicates that the richest fifth enjoy 49 percent of all household consumption, it said.

'€œSince then, the Gini has increased from 30 points in 2000 to 41 points in 2014, its highest recorded level.'€

The government itself has set 0.4 as this year'€™s Gini coefficient target and expects to see it fall to 0.39 in 2016. According to the World Bank, Indonesia'€™s Gini coefficient this year is 0.46. A coefficient of zero expresses perfect equality, while one (100 percent) implies maximal inequality.

World Bank lead economist Vivi Alatas said that in the labor segment, more than half of the workforce was working in the informal sector and only 30 percent of formal workers had written working contracts.

The number of working people stood at 114.8 million as of August, as revealed by data from the Central Statistics Agency. At the same time, only 4.7 percent of all Indonesian companies provided training for their workers and only 5 percent of all workers received training.

To address the rising inequality, the World Bank proposes that the government set the right fiscal policy to increase spending to create more equal opportunities and promote skills training opportunities, among other things.

Secretary for the Office of the Coordinating Economic Minister, Lukita Tuwo, said that it planned to include the problem in the government economic policy package. '€œTo address the labor issue, we will ask the private sector to partner with us to develop training centers nationwide, so that they can obtain relevant skills that will be of use to companies,'€ he said at the launch.

Meanwhile, Vice Presidential chief economic advisor Sofjan Wanandi said that the economic policy packages were part of the government'€™s attempt to lower costs and improve competitiveness, which are expected to reduce the inequality gap.

'€œTraditionally we have a problem in implementation. That'€™s why we have to move fast because we are running out of time,'€ he said.