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Assessing Indonesia's sustainable development: long-run trend, impact of the crisis, and adjustment during the recovery period

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  • Alisjahbana, Armida
  • Yusuf, Arief Anshory

Abstract

We adopt the definition of sustainability as “non-declining welfare per capita”, and measure genuine savings and change in wealth per capita as indicator of weak sustainability. The results suggests that the overall trend in sustainability as measured by changes in wealth per capita had shown that the Indonesian economy during the last twenty years had not been on a sustainable path. Despite this, sustainability had been on an improving long-run trend due to the restructuring of the economy away from oil and gas sector, towards more reliant on secondary and tertiary economic activities. However, the need for more appropriate approach in managing mineral, forest resources depletion, as well as environmental degradation caused by industrial sector’s pollution is called for as they had rapidly becoming a growing problem. Measures of sustainability during the economic crisis and its adjustment period clearly show that the crisis had adversely affected the positive trend in sustainability through a combination of reduction in savings rate and increases in natural resources depletion. This has rephrased the importance of economic growth in the context of sustainable development, and provided empirical evidence that economic crisis had created incentives for more rapid natural resources extraction that could endanger sustainable development. Relevant policies to help address both problems are discussed.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 1736.

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Date of creation: 04 Oct 2003
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Publication status: Published in Asean Economic Bulletin 21.3(2004): pp. 290-307
Handle: RePEc:pra:mprapa:1736

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Keywords: Genuine Savings; Changes in Wealth per Capita; Sustainable Development; Indonesia;

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  1. Dasgupta, Partha & M Ler, Karl-G Ran, 2000. "Net national product, wealth, and social well-being," Environment and Development Economics, Cambridge University Press, vol. 5(01), pages 69-93, February.
  2. Bayoumi, Tamim & Masson, Paul R & Samiei, Hossein, 1996. "International Evidence on the Determinants of Saving," CEPR Discussion Papers 1368, C.E.P.R. Discussion Papers.
  3. Baharumshah, Ahmad Zubaidi & Thanoon, Marwan A. & Rashid, Salim, 2003. "Saving dynamics in the Asian countries," Journal of Asian Economics, Elsevier, vol. 13(6), pages 827-845, January.
  4. Masson, Paul R & Bayoumi, Tamim & Samiei, Hossein, 1998. "International Evidence on the Determinants of Private Saving," World Bank Economic Review, World Bank Group, vol. 12(3), pages 483-501, September.
  5. Hamilton, Kirk, 2000. "Sustaining economic welfare : estimating changes in per capita wealth," Policy Research Working Paper Series 2498, The World Bank.
  6. Pearce, David W. & Atkinson, Giles D., 1993. "Capital theory and the measurement of sustainable development: an indicator of "weak" sustainability," Ecological Economics, Elsevier, vol. 8(2), pages 103-108, October.
  7. Christian Thimann & Anuradha Dayal-Gulati, 1997. "Saving in Southeast Asia and Latin America Compared," IMF Working Papers 97/110, International Monetary Fund.
  8. Vincent, J. & Casteneda, B., 1997. "Economic Depreciation of Natural Resources in Asia and Implications for Net Savings and Long-Run Consumption," Papers 614, Harvard - Institute for International Development.
  9. Hamilton, Kirk & Clemens, Michael, 1999. "Genuine Savings Rates in Developing Countries," World Bank Economic Review, World Bank Group, vol. 13(2), pages 333-56, May.
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Cited by:
  1. McCulloch, Neil & Sjahrir, Bambang Suharnoko, 2008. "Endowments, location or luck ? evaluating the determinants of sub-national growth in decentralized Indonesia," Policy Research Working Paper Series 4769, The World Bank.
  2. Arief Anshory Yusuf & Ahmad Komarulzaman & Muhamad Purnagunawan & Budy P. Resosudarmo, 2013. "Growth, Poverty and Labor Market Rigidity in Indonesia: A General Equilibrium Investigation," Working Papers in Economics and Development Studies (WoPEDS) 201304, Department of Economics, Padjadjaran University, revised Jan 2013.

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