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Policies for inclusive and sustainable growth in Indonesia

Author

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  • Petar Vujanovic

    (OECD)

Abstract

Indonesia has a very good record of poverty reduction, having halved its incidence over the past two decades. Nevertheless, almost 30 million people still live below the national poverty line, mostly in rural areas and in certain provinces. In order to make further progress in lifting these people out of poverty and economic vulnerability, policy needs to focus on generating strong, inclusive and sustainable growth. Pro-poor growth can assist in the process of economic convergence by facilitating the migration of workers out of the low-productivity agricultural sector into the industry and services sectors. By putting in place the right fundamentals, such as a well-designed and inclusive education system, efficient infrastructure and a stable macroeconomic environment, Indonesia will have decades of strong growth ahead by virtue of economic convergence with frontier countries. This has the potential to lift millions more out of poverty without exacerbating income inequality. Moreover, it will set Indonesia up for the next phase of innovation-driven growth that will propel it into the ranks of high income countries. While existing poverty reduction programmes have become increasingly effective, more resources are required, and efficiency could be further enhanced, especially through better targeting. The distribution of income has become markedly more unequal over the past decade and needs to be kept in mind when formulating growth policies. This Working Paper relates to the 2015 OECD Economic Survey of Indonesia (www.oecd.org/eco/surveys/economic-survey-indonesia.htm) Des politiques en faveur d'une croissance inclusive et durable en Indonésie L’Indonésie a obtenu de très bons résultats en matière de réduction de la pauvreté, dont l’incidence a été divisée par deux au cours des vingt dernières années. Néanmoins, presque 30 millions d’Indonésiens vivent toujours en dessous du seuil national de pauvreté, dont la majorité dans des zones rurales et dans certaines provinces. Pour qu’il soit possible de continuer à aider ces populations à sortir de la pauvreté et de la vulnérabilité économique, l’action publique doit viser en priorité à susciter une croissance forte, inclusive et durable. L’instauration d’une croissance favorable aux pauvres peut rendre plus aisé le processus de convergence économique en facilitant le redéploiement des travailleurs du secteur agricole, à faible productivité, vers l’industrie et les services. Pour autant qu’elle mette en place les fondamentaux adéquats, comme un système éducatif bien conçu et inclusif, des infrastructures efficientes et un environnement macroéconomique stable, l’Indonésie aura devant elle des décennies de forte croissance en vertu de la convergence économique avec les pays frontières. Une telle évolution a le potentiel d’aider des millions de personnes à sortir de la pauvreté sans accentuer les inégalités de revenus. De plus, l’Indonésie sera ainsi bien placée pour aborder la phase suivante, celle de la croissance tirée par l’innovation, lui permettant ainsi de se hisser aux rangs des pays à haut revenu. Par ailleurs, les programmes existants de réduction de la pauvreté sont devenus de plus en plus efficaces, mais des ressources supplémentaires sont nécessaires, et l’efficacité pourrait être encore améliorée, notamment grâce à un meilleur ciblage. La distribution des revenus est devenue sensiblement plus inégale au cours de la dernière décennie et il conviendra de ne pas perdre cet élément de vue lors de la formulation des politiques en faveur de la croissance.

Suggested Citation

  • Petar Vujanovic, 2015. "Policies for inclusive and sustainable growth in Indonesia," OECD Economics Department Working Papers 1246, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:1246-en
    DOI: 10.1787/5jrxqbh40r35-en
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    Citations

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    Cited by:

    1. Takahiro Akita & Sachiko Miyata, 2020. "Assessing Pro-poorness of Regional Economic Growth: Evidence from Indonesia, 2004-2014," Working Papers EMS_2020_03, Research Institute, International University of Japan.
    2. Szczepaniak, Małgorzata & Geise, Andrzej & Bariyah, Nurul, 2022. "Impact of institutional determinants on income inequalities in Indonesia during the Era Reformasi," Journal of Asian Economics, Elsevier, vol. 82(C).

    More about this item

    Keywords

    convergence; education; inclusive growth; income distribution; inequality; middle-income trap; productivity; sustainable growth;
    All these keywords.

    JEL classification:

    • A20 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - General
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • I20 - Health, Education, and Welfare - - Education - - - General
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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