Economic Equitable Distribution Stifled by the Pandemic

Name: Economic Equitable Distribution Stifled by the Pandemic
Uploaded: 2021-02-10T02:50:35Z
Duration: 20 min 32 s
Description: The relocation of the nation\'s capital has been stifled by the pandemic. Meanwhile, the target of getting out of the middle class trap by 2045 is not expected to be achieved.

The relocation of the nation\'s capital has been stifled by the pandemic. Meanwhile, the target of getting out of the middle class trap by 2045 is not expected to be achieved.

KARINA ISNA IRAWAN

· 4 minutes read

JAKARTA, KOMPAS — Economic equitable distribution will hold back the decline in gross domestic product. However, special efforts and strong political economy commitment are needed to shift the economic structure outside Java.

Statistics Indonesia (BPS) recorded that the cumulative economic growth of the Republic of Indonesia from January to December 2020 was minus 2.07 percent. The structure of the economy in 2020 was spatially still dominated by the provinces in Java with a contribution to the gross domestic product (GDP) of 58.75 percent. Meanwhile, Java\'s economic growth was minus 2.51 percent.

The majority of province groups experienced negative economic growth in 2020, except for Sulawesi at 0.23 percent and Maluku and Papua 1.44 percent. However, the contribution of the two groups of provinces to GDP was very small, namely Sulawesi at 6.66 percent and Maluku and Papua 2.35 percent.

According to the Bappenas simulation, East Kalimantan\'s economic growth will increase by 2.1 percent only from the construction of housing and offices in the new capital.

The Deputy for Economic Affairs of the National Development Planning Ministry/National Development Planning Agency (Bappenas), Amalia Adininggar Widyasanti, said Tuesday (9/2/2021) that economic equitable distribution will hold back the decline in GDP as well as accelerate economic recovery. However, special efforts are needed to shift the economic structure to the eastern regions.

One of the breakthroughs to build new sources of economic growth outside Java is by relocating the nation’s capital. However, the relocation plan of the nation\'s capital can be resumed if positive cases of Covid-19 can be curbed and the effective reproductive rate can be lowered to at least the level of 0.9.

Also read: Regional Autonomy Agenda 2021

"According to the Bappenas simulation, East Kalimantan\'s economic growth will increase by 2.1 percent only from the construction of housing and offices in the new capital," said Amalia during a press teleconference in Jakarta.

In addition to infrastructure development in the context of relocating the nation\'s capital, a source of economic growth is also created by developing the downstream mineral sector. Several regions in Sulawesi are currently developing smelters and downstream processing industries for nickel and iron ores.

National Development Planning Minister/Head of Bappenas Suharso Monoarfa said that the contraction in economic growth due to the Covid-19 pandemic in the long term will make it difficult for Indonesia to get out of the middle class trap. The government\'s target for 2045 may not be achieved.

Also read: Rigorous Preparation for the New Capital

"If GDP continues to be eroded only to an average of 5 percent, to escape the middle class trap will be very far. Even, the per capita income target cannot reach US$12,000 by 2045,” he said.

Besides economic equitable distribution, Suharso added, the priority of the government at this time is to reduce or curb the rate of addition of positive cases of Covid-19. Vaccination programs can at least reduce the effective reproductive rate from 1.2 to 0.9, although herd immunity is not necessarily created.

Separately, SMERU Research Institute senior researcher Asep Suryahadi was of the opinion that so far there have been no effective efforts to create economic equitable distribution. At least, there are two main problems in the issue of economic equitable distribution, namely the population and infrastructure which are still concentrated in Java.

"To be able to shift the sources of growth outside Java, breakthroughs and strong political economy commitment are needed," he said, Tuesday.

The goal of shifting the economic structure outside Java requires long-term investment. Therefore, a strong political economy commitment is needed because policymakers may not be able to enjoy the results, but rather their future successors.

To be able to shift the sources of growth outside Java, breakthroughs and strong political economy commitment are needed.

Asep added that technology adoption can indeed help economic equitable distribution outside Java. However, it must be accompanied by qualified knowledge and skills of the population. Technology is like a double-edged knife, if the policy is not right it will even widen the gap between Java and outside Java.