Visitors flock to Matahari department store’s Manggarai outlet in Jakarta on Friday (15/9) in search of goods sold at a discount of up to 75 percent.
Editor’s notes:The editorial board of the Kompas daily held a panel discussion on the economy with the theme "Coping With a Changing Economy" on 12 Sept. 2017 at the editorial office of Kompas. The panelists included Prof. Dr. Ari Kuncoro from the University of Indonesia (UI), Prof. Dr. Dwi Andreas Santoso from the Bogor Institute of Agriculture, Faisal Basri from UI, Prof. Dr. Kuntoro Mangkusubroto from the School of Business and Management at the Bandung Institute of Technology, Mohammad Reza Hafiz from Indef, and the chairman of the Association of the Management of Human Resources of Indonesia, Pambudi Sunarsihanto. The discussion was chaired by Prof. Dr. A Prasetyantoko from Atma Jaya Catholic University of Jakarta. The results of the discussion were reported below and on Page 25 and 26 by Ninuk M Pambudy, Dewi Indriastuti, Nur Hidayati, Mukhamad Kurniawan, and staff of Kompas’ Research and Development Division, Gianie.
Throughout the year 2017, the economic situation appeared to shift from the usual patterns, requiring deeper explanations. A number of economic indicators during the first semester, for example, grew relatively well, but the contribution of the consumption sector fell during the period.
The economy grew 5.01 percent with inflation from January to August 2017 relatively low at 2.53 percent and at 3.82 percent year-on-year in August 2017. Household consumption contributed 55.61 percent to Gross Domestic Product (GDP). It grew 4.95 percent in the second quarter of 2017, up 1.32 percent from the first quarter of 2017. Consumption grew higher at 5.07 percent in the second quarter of 2016.
On the other hand, the Central Statistics Agency (BPS) noted that third party funds in banks increased by 20.77 percent in the second quarter of 2017 from 18.06 percent in the second quarter of 2016. People’s actual consumption grew 5 percent and nominally rose 8 percent, showing no decline in purchasing power. The growth in consumption occurred amid complaints from the industrial sector about weak demand for motorcycles and daily necessities.
The 2017 global economy is improving as seen in the increase in the economic growth forecasts for the United States, Europe, Japan, India and ASEAN-5. Growth of the manufacturing sector and trade as reflected in container traffic also grew well. The impact of the growth of the global economy on the domestic economy was below expectations. However, the country’s economy was still able to grow positively.
Foreign exchange reserves continued to grow, while the stock price index hit a high of 5,915 on Aug. 25, although compared to other developing countries, Indonesia\'s achievement was among the lowest.
Changing
In the midst of the increase in the economic indicators, a number of things still need to be improved.
The national economic structure is still relatively fragile because tradable sectors such as manufactured products are growing lower than non-tradable goods such as the services sector.
In other words, the manufacturing sector, which grew at a slower pace of 3.9 percent, was lower than the economic growth. This indicates the continuation of the trend of deindustrialization, which has taken place since 1997.
The open unemployment rate fell but the number of workers in the informal sector rose, indicating a shift in investment toward capital-intensive industries and the need for improvement in the skills of human resources to support an increase in economic productivity.
The major changes in the Indonesian economy occurred due to the decline of commodity prices over the last five years. High oil and coal prices in the past resulted in an increase in the middle class, who then spent more money on services, especially those related to recreation. This led to growth in the tourist sector and its associated industries.
Although the commodity boom has long ended, the demand for services in leisure activities remains high. The service sector, which requires more educated workers, is only able to absorb half of the workforce, which mostly consist of junior and high school graduates.
Major changes also occur due to the growing digital economy in the country. The rapid change in the economic activities and an increase in uncertainty require the capability to adapt to the new situation and to innovate. Most of the people are still unfamiliar with the latest information technology. It is therefore difficult for most of people to adapt to the changes, let alone to create innovations.
The government has also made major changes in its development program as indicated by its massive infrastructure development. The construction of toll roads and more power plants has apparently begun to show results.
The infrastructure development mostly involves state-owned enterprises in order to accelerate the construction of the infrastructure. However, the acceleration of the construction work requires strict controls to ensure that infrastructure development can last for a long time. In addition to the need for improvement in infrastructure and equity development, there is also the issue of fiscal balance.
Taxes, as the country\'s main source of state revenue in 2017, are unlikely to meet the government’s target. Based on an optimistic scenario, state revenues from taxes will only reach 97.2 percent of the target.
The ratio of taxes to GDP is expected to reach 11.5 percent in 2017, better than the 10.8 percent recorded last year, but lower than the levels recorded in 2012 and 2013, which averaged 11.9 percent.
The economy of rice
Although Indonesia is on track to become a rich country, one thing that cannot be left behind is the food sector, especially rice production.
To date, rice remains one of the major determinants of social, political and economic stability. However, the government does not use a proportional protection approach, resulting in price distortions due to gaps in the regulations implemented downstream in the upstream sector.
In the midst of such changes, and taking into account the style of President Joko Widodo\'s administration, which wants everything to be done quickly with concrete and populist results, there are not many choices but to strengthen the government in order to support the development program. Restoring the function of the development planning agency will make development planning clearer and help the government’s top officials know all the problems in the field more clearly.
