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Jay K. Rosengard
Adjunct Lecturer in Public Policy, Harvard Kennedy School &
Director, Financial Sector Program, Ash Center for Democratic Governance and Innovation
Malcolm F. McPherson Senior Research Associate, Ash Center for Democratic Governance and Innovation, Harvard Kennedy School
The government of Indonesia’s primary development objective is to join the ranks of upper middle-income countries by 2025. If Indonesia could generate an annual real GDP per capita growth rate of 8.5 percent for the next ten years, it would be well on the path to achieving this objective. At current projections, this will not be possible. It will fall short in three fundamental dimensions: growth will be jobless, competitiveness will decline and inequality will rise.
The binding constraint to accelerating sustainable, inclusive growth is that Indonesia exploits neither the benefits of being a large country nor its international dynamic comparative advantage. Indonesia is beset by local economic fragmentation and global economic marginalization. At present, the sum is worth less than the parts.
Based on Indonesia’s history and current situation, the nation has a choice of three future development paths: reactive, proactive and transformative. Reactive best describes the government’s current approach of “muddling through”; proactive refers to policies pursued in response to past major crises such as widespread malnutrition and rural poverty in the 1960s and the collapse of oil prices in the 1980s; and transformative, or fundamental metamorphosis, characterizes the policies that enabled the “Four Asian Tigers” to become high-income nations.
“This is a welcome, topical and timely report. In the long sweep of economic, social and political development, Indonesia has been a great success story over the past 45 years. But graduation to the group of middle-income developing countries and sustaining the development momentum pose immense challenges, the more so in an uncertain global economic environment and against a backdrop of fluid and sometimes unpredictable domestic politics. This report highlights, analytically dissects and constructively investigates many of these challenges. It argues persuasively that ‘cukup baik tidak cukup’: that Indonesia is not growing fast enough to meet its ambitious economic transformation objectives and its pressing social agenda. It will certainly be required reading for policy makers, academics and civil society.”
— Hal Hill, H.W. Arndt Professor of Southeast Asian Economies, Australian National University
“Indonesia half a century ago was one of the poorest countries in the world. Since then it has enjoyed long periods of substantial economic growth and in the late 1990s there was reform of the political system leading to the creating of a thriving democracy. While economic growth has continued over the most recent decade, too much of that growth has depended on the continuance of high natural resource prices that are now falling. This book goes beyond explaining how growth was achieved in the past to laying out the choices facing Indonesia in the immediate future. It is a major study that is accessible to any informed reader concerned about Indonesia’s future..”
— Dwight H. Perkins, Harold Hitchings Burbank Research Professor of Political Economy, Harvard University