Remaining Demographic Bonus Time
With 18 years remaining, Indonesia must take advantage of its demographic dividend to escape the middle-income trap and become a developed country. There are four strategies to optimize the remaining demographic bonus time.
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President Joko Widodo has reminded on several occasions of the importance of the remaining 13 years for Indonesia to become a developed country.
What President Jokowi revealed is closely related to the demographic bonus period in Indonesia which has 13 more years remaining.
According to Indonesia's population projection for 2015-2045 based on the 2015 Intercensal Population Survey (Supas), the period of demographic bonus in Indonesia will occur from 2012 to 2036.
Why is the demographic bonus period so important? This is because countries in the demographic bonus period have an abundance of productive-age population, marked by a dependency ratio of less than 50, and the opportunity to achieve high economic growth. Demographic bonus is an important capital for us to become a developed country.
The World Bank divides the world economy into four groups, namely low, lower middle, upper middle and high income countries. Income refers to gross national income/GNI (gross national income/GNI) per capita, using US dollars.
This classification is updated by the World Bank annually, so the per capita income limit continues to rise.
Based on data from the World Bank, Indonesia's per capita income in 2011, when it was entering the demographic bonus period, was recorded at 2,990 US dollars. The latest data in 2021 shows Indonesia's per capita income at 4,180 US dollars. During the nine years in the demographic bonus period, Indonesia's per capita income has increased by 1.4 times.
If using the World Bank's 2021 measurements, in the past ten years Indonesia has successfully risen from a lower middle-income country to an upper middle-income country. However, Indonesia is still at the lower end of the upper-middle income countries. It is still quite far from being able to elevate its status to that of a high-income country.
By comparison, South Korea began entering its demographic bonus period since 1987 with a per capita income of $3,530 US dollars. However, South Korea was able to effectively utilize its demographic bonus period.
In just nine years, in 1996, South Korea elevated its status to a high-income country with a per capita income of US$13,320.
During a period of nine years, per capita income in South Korea increased by 3.8 times, while Indonesia increased by 1.4 times in the first nine years of the demographic bonus period.
China entered the demographic bonus period in 1997 with a per capita income of $750 US dollars, lower than Indonesia's per capita income at that time ($1,090 US dollars). Slowly but surely, China has successfully utilized the demographic bonus period very well and since 1998 has had a per capita income above Indonesia's.
In 2021, after being in the demographic bonus period for 24 years, China's per capita income reached US$11,880, an increase of nearly 16 times since entering the demographic bonus period. In 2021, China is already approaching the status of a high-income country.
Longer demographic bonus
Vice President Ma'ruf Amin, along with the Head of Bappenas, launched a book on Indonesia's population projection for 2020-2050 in mid-May. The population projection calculation is based on the 2020 Population Census data. The results of this projection replace the population projection data for 2015-2045.
Good news, based on the population projection for 2020-2050 (trend scenario), Indonesia's demographic bonus will end in 2041. The demographic bonus period is five years longer than the previous projection (which ended in 2036).
With 18 years remaining, we must use it to get out of the middle income trap and become a developed country. In order to make this happen, there are four alternative strategies to optimize the remaining demographic bonus time.
First, regarding the control of birth rates. The birth rate trend in Indonesia continues to decline. Currently, the average number of children per woman in Indonesia is approaching 2.1 children. After 2035, the number of children per woman will drop below two children, reaching 1.97 children per woman in 2045.
With 18 years remaining, we must use it to get out of the middle income trap and become a developed country.
If left unchecked, the population of Indonesia has the potential to decrease in the future and the demographic bonus period may end sooner. Population development strategies must be able to maintain a balanced population growth.
The total fertility rate of two children per woman needs to be maintained as long as possible, not allowed to fall below two children. If in the past we focused on reducing the birth rate, in the future we must be able to keep the birth rate stable, not going down, not going up.
Secondly, regarding the increase in population productivity. The population of Indonesia is projected to reach 300 million by 2032, an increase of 100 million compared to 1998. By 2045, the population of Indonesia is expected to reach 324 million people, surpassing the populations of Nigeria and Pakistan.
If every individual in the population increases their productivity, with a large population, there will be a significant increase in aggregate productivity. Education and training must be able to enhance workforce productivity by building industrial-oriented skills and knowledge. We can learn from South Korea and China that the key to utilizing demographic bonuses is increasing productivity.
The industrialization process must continue by encouraging the growth of the manufacturing industry. However, the manufacturing industry will not be able to absorb all of the workforce. In the era of disruption, capital-intensive industries will dominate. Therefore, the agriculture sector in a broad sense must also grow, absorbing the workforce with high productivity. Agriculture plays an important role in national food security, poverty reduction, and providing inputs for the manufacturing industry.
The population is aging
The third strategy related to population migration is aimed at distributing the benefits of the demographic bonus among regions. BPS notes that since 1971 to 2022, there has been an increase of more than three times the influx of migration to Kalimantan, Sulawesi, and other islands outside of Java.
There is an improvement in the equalization of national development. Migration can improve the distribution of productive age population between regions. A decade ago, there were seven provinces that had not entered the demographic bonus period.
However, currently East Nusa Tenggara is the only region that has not yet enjoyed the demographic bonus era. The challenge is that policies and population migration data are not as good as the other two demographic components, birth and death. This is due to the lack of government institutions that handle migration, while birth and death have been managed respectively by BKKBN and the Ministry of Health. The government needs to establish an institution that manages policies and population migration data so that the benefits of the demographic bonus can be enjoyed by all regions.
The benefits of the demographic bonus will be greater if we are able to maintain the productivity of the elderly and reduce the burden on the productive age population.
The fourth strategy relates to the elderly population. The global percentage of elderly people (aged 60 and above) will increase from 10 percent (in 2022) to 16 percent (in 2050). Meanwhile, the proportion of elderly people in Indonesia in 2022 has reached 10.7 percent, and will increase to 21.90 percent (72.03 million people) in 2050.
A country is said to have an aging population if the proportion of the population aged 60 years and over exceeds 10 percent. This means that since 2022 Indonesia has been in the aging population category. The benefits of the demographic bonus will be greater if the elderly are able to remain productive and reduce the burden on the population of productive age.
Several developed countries that are experiencing an aging population can achieve a second demographic bonus because they develop a silver economy, with the elderly acting as producers or consumers. The demographic dividend is happening today to 18 years later. To quote a saying, time flies so fast, but we're the pilot. Becoming a developed country is not just a dream.
Sonny Harry B Harmadi, General Chairperson of the Indonesian Population Coalition; Lecturer of Economics and Demographics at ITS