Sunday, October 12, 2014

Indonesia’s Future Economic Well-Being Refined

By Alya Nurshabrina

On 15 August 2014, President Susilo Bambang Yudhoyono (SBY) said Indonesia has triumphed by overcoming its economic obstacles and catapulting development to a highly satisfying rate. The first achievement he acknowledged is how Indonesia managed to maintain the stability and condition of macro-economics after the 2008 crisis, when various natural disasters had struck it by surprise. The second is how Indonesia’s growth is comparatively high; in the same period surpassing growth in the USA, Europe and Japan, at an impressive 5.9%. And lastly, SBY proudly announced Indonesia’s debt completion to the IMF, fantastically, four years earlier than planned. According to SBY the economy has never been healthier. Yet the economy is not a person. Behind all the fanfare, is the economy really a true measure of people’s happiness?

Can these achievements guarantee that Indonesia’s economy will always grow stronger? Because in reality so many underprivileged and unemployed citizens still exist in large numbers. Despite his speech on economic improvements, SBY admits that poverty remains the hardest challenge Indonesia has to face in the future. There needs to be a new type of way to effectively reduce the poverty rate, if future governments want to stick to plans of ambitious economic growth.

We should thank Joseph Stiglitz, Amartya Sen, and Jean-Paul Fitoussi for their work (plus former French president Nicolas Sarkozy for setting them up). This trio, in 2010, produced a commission on the Measurement of Economic Performance and Social Progress, where in their report they did numerous recalculations of what indicators should be used to mark a country’s prosperity. Stiglitz argued that the measurements currently used to compare the success of countries - GDP, HDI - are not profound or thorough enough, and are thus the reason countries keep going back and forth with growth rates. In addition, old measurements are not focused on the details that differentiate countries, which may be important missing pieces that can help improve their state. These new, radical suggestions are the kind of answers Indonesia that can change the way Indonesia’s prosperity is viewed.

In the commission report, there are two main suggestions regarding GDP-issues, measurement of ‘quality of life’ and ‘sustainable development and environment’. Firstly, related to GDP, both income and consumption should be taken into account rather than just production. This way each country can adjust its own standards of wealth in its regions. This must be supported by emphasizing per household perspectives, as each household’s needs and sense of fulfilment vary from one to another; having enough to get by doesn’t always have to mean being poor, or that one is living under the poverty line. Next the trio tackle the misinterpretations of ‘quality of life’. Here, one of the points that they stress is the importance of measuring key-information; both objective and subjective measurements of people’s conditions and capabilities.
As it stands, current objectivist parameters are incapable of reflecting experience accurately across varying contexts. The spectrum that should be examined has to comprehensively capture all dimensions, from people’s differentiated priorities to social surroundings, and even to hedonic experiences, in order to be able to classify quality of life, and then be applied by the Indonesian government to create policies. Lastly, they also point out that there has to be a clear indicator of environmental damage, and how it is affecting sustainability.
Indonesia is desperate for something fresh, new and uplifting, something to support ongoing growth and of course, address continuing poverty. In reality, even with a massive GDP and having solved IMF debt, the government’s total debt in the course of the last 10 years has risen to Rp1.240 trillion, from Rp1.268 trillion at 2005 to Rp2.508 trillion at June 2014. And yet, the challenges do not stop there. The Global Risk Report 2014 by the World Economic Forum forecasts that global economic risks are the highest in likelihood and impact. Those risks include fiscal crises in key economies, failure of a major financial mechanism or institution, liquidity crises and high unemployment. Therefore it is crucial to start gathering new ideas for new strategies that could be beneficial both domestically and internationally.

The dream of being in the G-10 as an economy giant is still an achievable goal for Indonesia, yet to get there we need a clear track and proper planning instruments that take account of country specific people-centric indicators. Indonesia should contribute to further research of new GDP/quality of life measurements, particularly as the results would be beneficial to other states who feel their experiences and context are not adequately captured. Relying in the current measurement will not just lead to deadlock, but to many undetected, unforeseen problems. If prioritizing integration with other countries to strengthen economic bonds can be easily achieved, then sure enough it will suffice as preparation for future economic risks. If we do not re-adjust how we measure the country’s success and happiness, Indonesia may be in real jeopardy. 

Many of us are optimistic about Indonesia’s next president, to lead the way in designing more effective pro-job and pro-growth policies, and yielding positive sustainability results, We need a new path and new ways of thinking that will allow us to change the mind-set about we measure our economic state and how that relates to happiness and security. So hello Mr. President Joko Widodo, welcome and have fun… We’re counting on you!

Alya is a student at Universitas Katolik Parahyangan, Bandung Indonesia.

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