Infrastructure to combat income inequality Prihananto Sulistyowarno  ;   An official at the Finance Ministry

JAKARTA POST,  09 Desember 2014

                                                                                                                       

Indonesia is one of the few developing countries with economic growth rates that are relatively stable. After being hit by the monetary crisis in 1997, Indonesia’s economy continued to grow. The poverty rate also tends to decline from year to year. However, data from the Central Statistics Agency (BPS) showed an increase in income inequality from 2000 to 2013. Despite fluctuations each year, the Gini coefficient ratio has increased significantly from 0.31 in 2000 to more than 0.41 in 2013. This condition is actually not a new or strange phenomenon. Some countries in Latin America have experienced the same thing. The economy grows steadily, the poverty rate continues to decline, but at the same time, the level of income inequality becomes higher. Referring to the opinion of Gary Fields in his book Poverty, Inequality, and Development (1980), referenced by Todaro and Smith in their book Economic Development, 10th edition (2009), Indonesia seems to experience the type of economic growth called “modern-sector growth enrichment typology”. This type of growth is likely to provide greater benefits to regions that are more advanced or in other words, more prosperous. So how does this happen? In fact, there are a few examples of previous or current government policies that tend to reduce income inequality, such as community-based poverty alleviation programs in sub-districts. We can also take a look at one of the factors that trigger high rates of income inequality in Indonesia, namely uneven public infrastructure in different parts of the archipelago, in terms of both quantity and quality. Undeniably, there are some areas in Indonesia rich in modern infrastructure, such as Java, while other areas have poor infrastructure, such as some parts of Kalimantan, Papua and other places in eastern Indonesia. Data from the BPS supports this view. Good infrastructure is like a magnet for investors, both foreign and domestic. No doubt, as a result of the lack of infrastructure in disadvantaged areas, investors tend to prefer to invest in urban areas that already have adequate infrastructure. Furthermore, people in rural areas with poor infrastructure often move to more modern areas, usually to cities, as more jobs are available there. Based on data from the BPS, Java, with an area of only 7 percent of the total area of Indonesia, is home to more than 50 percent of Indonesia’s population. The higher the population in a region, the wider the income gap. Finally, despite positive economic growth as a result of high investment in urban areas, income inequality in such areas is also greater. Could it be the result of the indifference of the government, especially the central government, to the condition of poor infrastructure in rural areas, as is often suggested? It should be noted that the country’s vast area and incredible number — more than 17,500 — of islands is one of the challenges faced by the governments in developing regions that are still experiencing a shortage of infrastructure. Unfortunately, there also exist poor quality schools, roads and bridges in areas close to the capital, which raises questions about the seriousness of the government in providing adequate infrastructure in this country. The nation recently saw a change in leadership. Indonesia is now led by Joko “Jokowi” Widodo and Jusuf Kalla. Several concepts have been conveyed through the media and have given hope to millions of a more equitable income distribution. The aspiration of President Jokowi to make Indonesia the world’s maritime axis will require several additional world-class sea ports in all regions of the country, not just on the island of Java. The concept of the ocean highway is also a good plan to reduce the inequality of income distribution in all parts of the archipelago. In addition, an increase in the quality and quantity of roads, bridges, railways, irrigation channels, schools and health facilities is highly anticipated. Many people in rural areas are unable to enjoy the country’s economic growth because of the scarcity of adequate infrastructure. Investors are reluctant to invest their money, so the economy in such areas grows slowly. Accelerating the development of infrastructure in such rural areas is a priority in the near future. Increased investment in these areas is expected to follow the increase in the quality and quantity of infrastructure, and thus employment there will grow exponentially. Finally, we can say that the improvement of infrastructure in disadvantaged areas, both in terms of quality and quantity, is indispensable in the effort to reduce income inequality. Good infrastructure is one of the drivers for the entry of investors to lagging areas, which in turn will increase the income of the people in the region. In the future, we can expect that the incomes of the people of Indonesia will be more evenly distributed. ●