Indonesia : Income inequality, Dwell time in selected countries
Economic growth averaging about 6% over the past 6 years has helped to
lift 8.6 million people out of poverty. Yet 29 million Indonesians continue
to live below the government’s poverty line, and an...
other 30 million
would join them in the event of even a small reduction in their incomes.
Of those employed, 60% work in the informal sector, where incomes are
low. Further, income inequality as measured by the Gini coefficient has
worsened from 0.35 in 2008 to 0.41 in 2011 (Figure 3.24.15).
Improved public infrastructure would make a significant contribution
to reducing poverty and closing gaps in income inequality.
Toward reducing poverty, better infrastructure, particularly for
transportation and generating electricity, would support growth
in manufacturing, which generates jobs in the formal sector. The
performance of manufacturing has been lackluster since the late 1990s
and started to improve only in the past 2 years.
Congested ports and rising logistic costs are major constraints on the
expansion of manufacturing. The average time ships spend at Tanjung
Priok, the country’s main port, stretched to 6.7 days in January 2012 from
4.9 days in 2010. This compares with 1–2 days at Asia’s most efficient ports
(Figure 3.24.16). It costs $750 to transport a container 56 kilometers from
the Cikarang industrial zone to Tanjung Priok port, almost 70% more
than moving a container a similar distance in Malaysia. The difference is
primarily caused by road congestion in Indonesia.
Toward closing income gaps, investment in infrastructure is
needed to address high poverty rates in rural areas, which average
14.7% compared with 8.6% in urban areas. Surveys suggest that 41% of
district roads and 24% of provincial roads throughout Indonesia are
in bad condition. Development prospects are poor for rural areas that
lack good connections with towns and markets. Finally, poverty in
some eastern provinces is even higher—at 24.1% in Maluku and Papua.
Weak infrastructure there hinders economic activity, the growth of
employment, and access to services such as education and health care.
The government’s master plan to accelerate economic development,
known by its Indonesia acronym MP3EI, has three main pillars:
developing six economic corridors, improving connectivity both within
the country and internationally, and strengthening human resource
capacity and technology. Acting to support these goals, the government
has increased its budget for infrastructure, with a large share allocated
to eastern provinces. Substantial additional funding could become available if the government redirected huge budget allocations for fuel
subsidies, equivalent to 2.6% of GDP in 2012, toward infrastructure and
social development. The fuel subsidies benefit mainly higher-income
Progress on infrastructure is being achieved. Work started last year
on 182 infrastructure projects valued at $65 billion under the MP3EI
program. Funding came from private companies (44%), state-owned
enterprises (20%), governments (19%), and public–private partnerships
(17%). Nearly 40% of this amount was allocated to eastern provinces.
More projects are scheduled for this year.
Source:Statistics Indonesia. http://www.bps.go.id/ (accessed 2 March 2013)., Note: Dwell time is the number of days a cargo container averagely stays in a port.
Indonesia Infrastructure Initiative. 2012.
Journal of the Indonesia Infrastructure Initiative PRAKARSA. Issue 10. April