Indonesia Inches Closer to Middle Income Trap: Experts

Anton Hermansyah

The Jakarta Post, Posted: Monday, April 18 2016 | 04:43 pm

Current economic policies have yet to show adequate support for the development of the manufacturing industry, which may lead the country further into the middle income trap, experts have said.

Institute for Development of Economics and Finance ( INDEF ) director Enny Sri Hartati said the fair economic growth in the country was supported by low value-added commodity, while the highly value-added manufacturing sectors were down.

“We were focused on natural resources, that’s where the economy is concentrated. Small and micro industries never ascend to medium and large industries, and 99 percent of the economic structure is the same,” she said on Monday in Jakarta.

Economist Faisal Basri underlined that the key to avoid the middle-income trap was to maintain the performance of manufacturing sectors, like South Korea did in the 1970’s when its economic and political conditions were similar to that of Indonesia today.

“Since 2001, Indonesia has prioritized mining and agricultural commodities export and has been less-supportive of manufacturing,” Faisal said, further explaining that, to avoid the middle income trap, the government needed to focus on industrialization and support it with a strong political will.

Emphasizing that the current tools for economic empowerment were different to those of the past, Emil Salim, an economist during the New Order era, suggested that the solution to avoid the middle income trap was to be found among Indonesian youth.

“The ones who will bring us out from the middle income trap are the youngsters with their updated technology,” he said. (ags)


About faisal basri

Faisal Basri is currently senior lecturer at the Faculty of Economics, University of Indonesia and Chief of Advisory Board of Indonesia Research & Strategic Analysis (IRSA). His area of expertise and discipline covers Economics, Political Economy, and Economic Development. His prior engagement includes Economic Adviser to the President of Republic of Indonesia on economic affairs (2000); Head of the Department of Economics and Development Studies, Faculty of Economics at the University of Indonesia (1995-98); and Director of Institute for Economic and Social Research at the Faculty of Economics at the University of Indonesia (1993-1995), the Commissioner of the Supervisory Commission for Business Competition (2000-2006); Rector, Perbanas Business School (1999-2003). He was the founder of the National Mandate Party where he was served in the Party as the first Secretary General and then the Deputy Chairman responsible for research and development. He quit the Party in January 2001. He has actively been involved in several NGOs, among others is The Indonesian Movement. Faisal Basri was educated at the Faculty of Economics of the University of Indonesia where he received his BA in 1985 and graduated with an MA in economics from Vanderbilt University, USA, in 1988.
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