A child walks in front of a shanty in a densely populated residential area in Muara Angke, Penjaringan, North Jakarta, Monday (17/7). According to Central Statistics Agency data, the number of urban poor increased by 188,190 from 10.49 million people from September 2016 to 10.67 million in March 2017.
JAKARTA, KOMPAS — The great gap in wealth among citizens cannot be taken trivially. The issue could easily trigger a more serious problem like the political and financial crises of 1998.
The government needs to accelerate the implementation of programs and policies by strengthening inter-ministry coordination to narrow the gap between the wealthy and the poor. Interwoven with this issue is the fate of micro and small business development that needs more serious attention from the government, and conglomerates to create jobs to improve the welfare of poor residents.
Central Statistics Bureau (BPS) data shows that the population of poor residents reached 27.77 million (10.64 percent of the total population) in March 2017. Although this was a year-on-year improvement from28.01 million people (10.86 percent), the rate of decline has not met with expectations.
During a meeting with President Joko “Jokowi” Widodo at Merdeka Palace in Jakarta on Monday (17/7), an advisory council member of the Presidential Working Unit for the Implementation of Pancasila (UKP-PIP), Ahmad Syafii Maarif, said that the issue needed the government’s serious attention.
“The government has worked on it. But the implementation should be accelerated. If not, it might give rise to social riots like the one in May 1998,” Syafii said.
Aside from speaking with the President, Syafii also communicated with several large conglomerates to persuade them on the issue. The big businesspeople, Syafii said, must play a role in empowering low-income residents to help narrow the wealth gap.
The wealth gap, according to Syafii, was a legacy of past problems. The issue was not addressed seriously enough, so that it could easily be used for political interests.
“The gap is like ‘dry grass’ that can easily be used to enflame various problems in the name of religion or other pretexts,” said the former Muhammadiyah chairman.
According to data from the National Team for the Acceleration of Poverty Mitigation (TNP2K), Indonesia is ranked 4thamong countries with the greatest inequality in the distribution of wealth (Kompas, 5/1). One indicator of the high wealth gap is that the wealthiest 1 percent of the population controls 49.3 percent of the nation’s assets.
Earlier, in Padang, West Sumatra, Vice President Jusuf Kalla said the government was paying serious attention to the wealth gap issue and had developed a priority program to facilitate business access for low-income people. Efforts included providing microcredit (KUK) with an annual interest rate of 9 percent for small and medium enterprises (SME).
The government had also allocated 12.7 million hectares of production forests for a period of 95 years to local residents through the community forestry scheme.
Separately, Business Competition Supervision Commission (KPPU) chairman Syarkawi Rauf said that since the reform movement and in the global competition era, the level of conglomerates with integrated downstream and upstream businesses was rising. In developing economies, market domination by some business groups also contributes to widen the economic gap.
“Equal partnership of small and big business players is key to overcoming the gap,” Syarkawi said. Small business players must be given the opportunity to develop through technology and skills transfers from partnerships with big businesses.
Job market
The economic gap is not merely affected by economic conglomerates. Limited formal employment also hampers the effort to raise the poor.
Indonesia Employers Association (Apindo) chairman Hariyadi Sukamdani said the wealth gap issue was closely related to manpower absorption. “Currently, the absorption of manpower in the formal sector is declining,” Hariyadi said.
To illustrate, the value of investment in 2010 was Rp 208.5 trillion and every Rp 1 trillion could absorb 5,000 workers. By 2016, with an investment value of Rp 612.8 trillion, the employment absorption rate had declined drastically to 2,200 workers per Rp 1 trillion of investment.
Hariyadi said the idea of asset redistribution, such as land, from big businesses to small businesses was seen as positive. For example, the excessive land control in the property sector needed reforming.
BPS data shows that the Gini ratio, which serves as a measurement of inequality, declined from 0.397 in March 2016 to 0.393 in March 2017. Although this shows improvement from 0.408 in March 2015, the rate of decline from 2016 to 2017 did not meet expectations.
Coordinating Economic Minister Darmin Nasution said the indicator of equity was not easy to change. “If that happens, the change will be small. We must be grateful of the fact that it did not get worse. It is also true that it did not improve,” Darmin said.
One point that must become the focus of the government’s attention in narrowing the wealth gap is to reduce poverty in rural areas. BPS head Suhariyanto said this must be carried out through keeping a check on urban poverty.
In March 2017, the population of poor residents in rural areas was 17.10 million people (13.93 percent), while in urban areas the poor numbered 10.67 million (7.72 percent). “So, if we want to raise the poor people from poverty, the key is the rural area. The characteristics of poverty in rural and urban areas are different, and they require a different touch,” Suhariyanto said.
