I NDONESIAN POLITICAL ECONOMY:
W ILL N EOLIBERALISM PERSIST OR COME TO AN END ?
by Hendri Saparini, Ph.D
INDONESIA 2004-2014: DEMOCRACY DEVELOPMENT
 The rise of political democratization
 Fair and secure the National Elections 2004, 2009, 2014
 Fair and secure local elections in 542 districts
but, the downside:
 Conflicts and insatisfaction
 Slow progress in economic democratization
GDP GROWTH
ONE OF THE HIGHEST ECONOMIC GROWTH
Thousand Billion Rupiah
3
2
Household Consumption
Government Spending
Gross Domestic Fixed Capital Formation
1
Export
Import
0
GDP
Source: Central Board of Statistics
MIDTERM PERFORMANCE 2005-2009
TARGETED UNEMPLOYMENT AND POVERTY RATE: FAILED
Target & Realisation of Unemployment Rate
%
11
10
10,3
10,4
9,9
9,9
Realisation
RPJM Projection vs. Realization of Poverty Rate
15
14,15
%
14,15
9,75
9,9
9
13,33
11,96
12
9,4
8,46
11,2
11,5
8,14
10,5
9
RPJM Projection
7
11,47
12
8,5
8
Realisation
12,49
RPJM Projection
7,3
9,5
8
6
5,7
5
2004
(*) 2014 up to QI
2005
2006
2007
2008
6
2009
2010
2009
(*) 2014 up to QI
2011
2012
2013
2014 (*)
INEQUALITY
INCOME DISPARITY
Lowest 40%
Middle 40%
Top 20%
Gini Ratio (Right Axis)
60
0,45
50
Percent
40
0,4
30
20
0,35
10
0
0,3
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Source: Central Board of Statistics
POVERTY REDUCTION IS SLOWING DOWN
NUMBER OF NEAR POOR 68 MILLION PEOPLES WB,2014)
80
53
70
Poor
50
48
Near poor
48
60
44
43
43
Near Poor
(1.6 below national
poverty line)
Poor
(Below national
poverty line)
Percent
50
40
30
20
18
17
15
14
13
12
11
2007
2008
2009
2010
2011
2013
10
0
2006
Source: Central Board of Statistics
PUBLIC WELFARE :
REAL LABOUR WAGES AND FARMERS’ EXCHANGE VALUE
Real and Nominal Labour Wages
Index of farmers exchange value
Indeks, 2007=
108 100
Ribu Rupiah
2 000
1 800
106
1 600
Nominal Wage
1 400
104
1 200
102
1 000
100
800
600
98
400
Real Wage
96
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94
апр.09
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июн.10
июн.09
июн.08
июн.07
июн.06
июн.05
июн.04
июн.03
июн.02
июн.01
июн.00
июн.99
июн.98
июн.97
июн.96
-
янв.09
200
SECTORAL DISPARITY
Tradable & Non-tradable Sectors
Tradeable Sectors
Non-tradeable Sectors
GDP
Transport and Communication
12
12
Electricity, gas and water supply
10
9
Construction
8
7
Trade, hotel, and restaurant
6
Percent
Average Growth (2006-2013)
7
Finance, real estate and business services
4
7
Sevices
6
2
Gross Domestic Product
6
0
Manufacturing industry
-2
Agriculture, livestock, Forestry and Fishery
-4
Mining and quarrying
5
3
2
0
-6
1970-84
1985-97
1997-98
1999-06
2006-2013
2
4
6
8
Percent
10
12
14
Source: Central Board of Statistics
FDI DOMINANCE, STATE-OWNED ENTERPRISES ABANDONMENT
FDI; 70% OF TOTAL INVESTMENT. ACCELERATION AND EXPANSION ON PRIVATIZATION. SOE NOT
INCLUDED IN INDUSTRIALIZATION PLANNING
INVESTMENT
10
8
6
Number of
Projects
(Thousand)
Profit Transfers From SOE's
40
Foreign Direct Investment
Domestic Direct Investment
4
2
30
Percentage to Non-Taxes Revenues (Right axis)
14%
13%
13%
12%
35
Thousand Billions of Rp
12
STATE-OWNED ENTERPRISE
12%
11% 11%
10%
10%
9%
9%
10%
9%
25
6%
20
8%
7%
6%
15
4%
10
2%
5
0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Q2
2014
Source: Coordinating Board of Investment
12%
0
0%
2001
2003
2005
2007
2009
2011
2013
Source: Central Bank of Indonesia
GOVERNMENT’S HANDS OFF: LABOUR-INTENSIVE SECTORS
Wood and other wood products
Iron and steel basic metal
Forestry
Other manufacturing products
Cement and non metalic quarrying products
Paper and printing products
Textile, leather products and footwear
Livestock and its products
Estate crops
Fishery
Fertilizers, chemical and rubber products
Food crops
Food, beverages and tobacco
Transport equipment, machinery and apparatus
Sectoral Average Annual Growth
(2004 - Q2/2014)
0
1
2
3
4
5
6
Percent
Source: Central Bank of Indonesia
VERY LOW IMPORT TARIFF
AGRESSIVE IN TRADE AND ECONOMIC LIBERALISATION
India
(2013)
Brazil
(2011)
China
(2011)
Russia
(2013)
Indonesia
(2011)
All products
13.9
12.2
12.0
10.1
4.8
Agricultural
43.3
11.2
22.6
23.4
13.6
Industrial
11.8
12.3
11.2
9.2
4.2
GOVERNMENT’S LIMITED ROLE IN PUBLIC SERVICES
35%
30%
Goods and Services
Interest payment
Social Assistance
Development Expenditures
1 400
1 200
1 000
25%
800
20%
600
15%
400
10%
Thousand Billion Rupiah
Personnel
Capital
Subsidies
Others Current Expenditures/Others Expenditures
Central Government Expenditures (right axis)
40%
200
5%
0%
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Source: Central Bank of Indonesia
GOVERNMENT DEBT:
DEBT ACCELERATION AND LIMITED PAYBACK CAPACITY (DSR)
Foreign Government and Private
Debts
Government Debt Value
Triliun Rupiah
3000
Pinjaman
Surat Berharga Negara
Miliar US$
160
Total
Δ Rp1,240 (98%)
2 508
2500
146
131
140
120
2000
100
1500
80
1 268
60
1000
40
20
500
0
2001
2003
2005
2007
2009
2011
2013
1999
2002
2005
2008
2011
апр.14
2015 AND BEYOND:
ANY CHANCE TO DETHRONE NEOLIBERALISM?
A NEW HOPE EMERGED
 Victory of the opposition: PDI-P (Indonesia
Democratic Party – Struggle)
 Strong anti-neoliberalism paradigm
of the new president
GREAT EXPECTATION FROM THE 2014 ELECTION
 The presidential candidates gave strong signals to take
neoliberalism away
 Track record of the presidential candidates
 High participation level in the presidential election
THE HOPE HAS BEGUN TO FADE
 Questionable figures in the new cabinet
 No clear platform, succumbs to transactional politics:
 fuel subsidy
 foreign investment, etc
ENERGY SOVEREIGNITY
SUBSIDY’S FUEL: 65% USE BY POOR AND NEAR POOR, 72 MILLIONS MOTOR CYCLE
>20$ (2%)
10-20$ (6%)
< 2$ (29%)
4-10$ (27%)
2-4$ (36%)
Source: Susenas Panel 2010, process
DOMESTIC OIL PRODUCTION
SOE MINOR PLAYER
PetroChina Bangko Ltd.
2%
Mobil Cepu Ltd.
3%
JOB PSC
2%
Others
10%
PT. Medco E&P Indonesia
3%
CNOOC SES Ltd.
4%
Chevron Indonesia Company
43%
Pertamina Hulu Energy West Java Ltd.
4%
Conoco Phillips
6%
Total E&P Indonesie
8%
Pertamina
SOE
15%
Sorce: Ministry of Energy and Mineral
DOMESTIC REFINARY CAPACITY
NO INVESTMENT IN REFINARY
12000
China; 10834
10000
Thousand barrels daily
8000
6000
4000
India; 3804
South Korea; 2783
2000
Singapore; 1395
Indonesia; 1141
0
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
Sumber: British Petrolium
FOOD SOVEREIGNITY
HUGE VALUE AND HIGH GROWTH
US$ Mil.
2003-2007
2008-2012
35%
10 000
Bulk commodities
32%
30%
Produce/horticulture products
9 000
30%
Semiprocessed products
8 000
28%
Processed products
25%
7 000
20%
6 000
20%
20%
20%
18%
5 000
15%
4 000
3 000
10%
10%
2 000
5%
1 000
0
0%
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Bulk commodities
Produce/horticulture
Semiprocessed
Processed
Source: Comtrade
MP3EI: SIX ECONOMIC CORRIDORS
DIFFERENT COMPETITIVENES, NEEDS DIFFERENT POLICY SUPPORTS
Sumatera Corridor:
“Center for Production and
Processing of Natural
Resources and As
Nation’s Energy Reserves”
Kalimantan Corridor:
“Center for Production and
Processing of National Mining and
Energy Reserves”
Sulawesi Corridor:
“Center for Production and
Processing of National
Agricultural, Plantation, Fishery,
Oil & Gas, and Mining”
Mega economic centers
Economic centers
Java Corridor:
“Driver for National
Industry and Service
Provision”
Bali – Nusa Tenggara Corridor:
“Gateway for Tourism and
National Food Support”
Papua – Maluku Islands Corridor:
“Center for Development of Food,
Fishery, Energy and National
Mining”
REGIONAL DISPARITY
REGIONAL ECONOMIC PERFORMANCE INDICATORS
Sumatera (%)
GDP Share
Kalimantan (%)
23.8
Sulawesi (%)
Maluku (%)
GDP Share
9.2
GDP Share
4.7
GDP Share
0.3
GDP Growth
8.2
GDP Growth
4.8
GDP Growth
8.7
GDP Growth
7.3
Unemployment
5.7
Unemployment
5.3
Unemployment
5.2
Unemployment
6.4
Jawa-Bali (%)
GDP Share
Nusa Tenggara (%)
58.9
Papua (%)
GDP Share
1.3
GDP Share
1.8
GDP Growth
6.6
GDP Growth
1.5
GDP Growth
6.4
Unemployment
6.6
Unemployment
4.1
Unemployment
4.0
REGIONAL INCOME DISPARITY, 2012
18
West Papua
16
HIGH GROWTH
HIGH INCOME
HIGH GROWTH
LOW INCOME
14
RGDP Growth (%)
12
Sulawesi Tenggara
10
Riau
Maluku
8
DKI Jakarta
6 Maluku Utara
East Kalimantan
Riau
4
LOWH GROWTH
LOW INCOME
2
0
LOW GROWTH
HIGH INCOME
Papua
West Nusa Tenggara
-2
0
20
40
60
80
Percapita RGDP (Billion)
100
120
140
Source: Central Board of Statistics
REGIONAL POVERTY & UNEMPLOYMENT, 2012
35
HIGH POVERTY
LOW UNEMPLOYMENT
HIGH POVERTY
HIGH UNEMPLOYMENT
Papua Barat
30
Papua
Poverty (%)
25
East Nusa Tenggara
20
Bengkulu
15
Gorontalo
Maluku
Aceh
West Nusa Tenggara
West Sulawesi
10
Central Kalimantan
5
West Java
East Kalimantan Banten
North Sulawesi
Bali
DKI Jakarta
LOW POVERTY
LOW UNEMPLOYMENT
0
0
2
4
6
Open Unemployment Rate (%)
8
LOW POVERTY
HIGH UNEMPLOYMENT
10
12
Source: Central Board of Statistics
SME PROBLEMS: INTEREST RATES, INSTITUTIONAL, MICRO INFORMAL BUSINESS (98%)
PRIVATIZATION ON STATE OWN BANK
Percent
Credit for Corporation
Credit for SME
25
20
15
10
5
0
Source: Central Bank of Indonesia
THANK YOU!