TheJakartaPost
Please Update your browser
Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.
Indonesia needs more than just financial growth
How do we build an Indonesia that is upper-middle income, prosperous, inclusive and sustainable? Financial growth is important but the foundations of well-being stretch far beyond simple economics
Change Size
H
span>How do we build an Indonesia that is upper-middle income, prosperous, inclusive and sustainable? Financial growth is important but the foundations of well-being stretch far beyond simple economics.
Boston Consulting Group’s (BCG) Sustainable Economic Development Assessment (SEDA) analyzes 12 years of publicly available data across 143 countries to understand the foundations of well-being. SEDA analyzes well-being across 10 dimensions, sorted into the three core categories of economics, investment and sustainability.
Indonesia has emerged as Southeast Asia’s first trillion-dollar economy, with projections that it is on track to cross the US$2 trillion barrier by 2025. Gross national income (GNI) per capita is predicted to grow from $1,600 in 2008 to $3,540 by 2019.
The BCG SEDA data also reveal a positive story of growth for Indonesia, driven by improving economic stability, underpinned by the success of its ambitious infrastructure projects.
In 2008, the first year of available SEDA rankings, Indonesia was ranked 94th in the world but by 2019 Indonesia’s had shot up 11 places up in the international rankings, to 83rd.
Just as importantly, Indonesia’s SEDA wealth-to-well-being coefficient also increased from 1.08 in 2008 to 1.16 in 2019, revealing a nation successful in turning wealth into well-being for its citizens.
Infrastructure development was a cornerstone of President Joko “Jokowi” Widodo’s first term, with huge investment commitments culminating in headline success stories such as Jakarta’s state-of-the-art MRT system. That focus saw a pipeline of investment estimated to be worth $327 billion delivered over a five-year term.
This has led to Indonesia’s strong trajectories in the dimensions of economic stability and infrastructure. In the former, Indonesia has seen a change in its current score of 44 points, catapulting the nation a massive 123 positions up the global SEDA rankings for this measure. Employment has also seen a substantial rise, ascending 27 points up the global rankings.
Underpinning these efforts has been a committed drive toward improving Indonesia’s infrastructure. The score for this measure rose by 27 points between 2008 and 2019, with the nation’s global ranking for infrastructure increasing by 33 places, putting it notably above the regional average.
It draws in elements from across Indonesia’s physical infrastructure. Measured on a scale of one to seven, its SEDA score for quality of road network increased from 2.25 in 2008 to 3.89 in 2019.
The railroad network saw similar success over this period, with a score increasing from 2.77 to 4.68. While the value of such numbers without context can sometimes be hard to discern, that represents a significant, substantial and sustained improvement in transportation infrastructure across the nation.
Access to sanitation and utilities, a clear foundation of healthy modern lifestyles, forms another element of this success story. The percentage of the population with access to improved water sources grew from 82.6 to 87.4 percent, and the share with access to improved sanitation increased from 54.1 to 60.8 percent.
The quality of electricity supply also improved, increasing from 90.2 to 93.5 on a 100-point scale. Once again, those figures represent an impressive feat in a country where infrastructure development must overcome the significant hurdle of a nation spread across 17,000 islands.
It is not just traditional physical infrastructure that can boast such success. The share of Indonesia’s population considered as active internet users has grown from 5.79 to 32.29 percent. At the same time, the number of mobile subscriptions per 100 people has more than quadrupled from 40.08 to 173.84. This important expansion of connectivity could provide a further catalyst for equitable economic growth for the nation.
While traditional infrastructure is essential to national success, it is important that we do not overlook the need for “soft infrastructure” in supporting positive well-being for the nation.
Health and education are vitally important in ensuring a sustainable national infrastructure that is socially equal and socially empowering. The 2019 SEDA report clearly highlights the role of social equality in delivering positive well-being outcomes for a nation.
While economic stability and infrastructure have been trailblazing a well-being revolution in Indonesia, the factors of health and education have remained stubbornly stagnant. Only education has seen improvement, a two-point rise across the years measured, yet both factors remain average or below average compared to ASEAN as a whole.
There are green shoots of growth. Education has experienced an increase in school enrolment, rising from 17.77 percent in 2008 to 27.94 percent in 2019. Yet average math and science scores, teacher-pupil ratios and years spent in school still remain broadly stagnant.
In health, the number of hospital beds per 10,000 people has doubled, and the mortality rate under 5 years has reduced by half. While life expectancy has increased, it is not at the expected rate and other health measures see equally positive and yet frustratingly slow progress.
The National Development Planning Agency (Bappenas) estimates that the country needs investment in infrastructure of $429.7 billion, equal to 6.1 percent of GDP, between 2020 and 2024. An equally important focus should be on investing in elements of health and education to underpin that growth story.
This is in line with President Jokowi’s focus on promoting human capital development as a central theme of this year’s state budget to improve essential services, such as education, health care and basic infrastructure.
Indonesia should be proud of its well-being success. It has delivered some of the most remarkable well-being improvements measured in this sixth edition of BCG’s SEDA report.
At the same time, the country has balanced admirable economic growth with consistent improvement in converting wealth into well-being for the nation’s citizens. With a commitment to human capital and infrastructure remaining high on the political agenda, we can hope that well-being will continue to be the true measure of success for Indonesia going forward.
Edwin Utama is a managing director & partner and office head, Boston Consulting Group, Jakarta. Haikal Siregar is a managing director & partner, Boston Consulting Group, Jakarta.
