In this hybrid seminar, Dr Amalia Adininggar Widyasanti shared details about Indonesia’s new long-term development plan and elaborated on the country’s goals by 2045. Dr Agustinus Prasetyantoko evaluated the strategies put in place in the long-term development plan and discussed the potential challenges faced in the current policy planning for the new government.
INDONESIA STUDIES PROGRAMME SEMINAR
Friday, 9 June 2023 – ISEAS – Yusof Ishak Institute (ISEAS), in collaboration with Atma Jaya University of Indonesia (UAJ), invited Dr Amalia Adininggar Widyasanti, Deputy Minister of Economic Affairs in Indonesia’s Ministry of National Development Planning (Bappenas) to present in a hybrid seminar on the progress of Indonesia’s national long-term development plan (RPJPN) for 2025-2045. Dr Agustinus Prasetyantoko, Rector of UAJ, was the discussant for the session., where he shared his views on Indonesia’s long-term development plan and elaborated on the potentiality of reaching the targeted goals by 2024. Dr Siwage Dharma Negara, Senior Fellow, and Co-Coordinator of the Indonesia Studies Programme at ISEAS, moderated this session.
Dr Widyasanti began her presentation by briefly explaining Indonesia’s current economic status. Indonesia’s economy had returned to 5% annual growth, similar to pre-COVID standard, with the trade balance improving due to the commodity boom. The budget deficit had also declined from above 6% during the pandemic to below 3% in 2022, showing good progress in Indonesia’s post-COVID recovery. Apart from that, the country’s gross national income (GNI) per capita has improved, with the aim of “graduating” from a middle-income to an upper-middle-income economy by 2024. Seeing such development, the Indonesian government is developing a national long-term development plan (RPJPN) for 2025-2045. The work-in-progress document provides a roadmap for the country to escape from the middle-income trap and achieve high-income status by 2045. Setting 2045 as the year for achieving this target was also symbolic, as it would be Indonesia’s 100 years of independence. By 2045, Indonesia envisioned itself to be a high-income economy, with zero poverty and reduced level of inequality. It also aims to be placed at the top five position in the global power index, as well as achieving emission reduction targets based on the Paris Agreement. These ambitious targets, therefore, serve as a form of motivation for the government to continuously improve their strategies to meet the targets set.
Dr Widyasanti highlighted some challenges Indonesia had to overcome to reach its targeted goals by 2045. One such challenge is the middle-income trap. Indonesia has been in the middle-income status for the past 30 years. Even though Indonesia has shown a faster recovery rate during the 2020 COVID-19 pandemic as compared to the 1998 financial crisis, the country has yet to advance into a higher income status. Dr Widyasanti, therefore, believed that as much as Indonesia’s economy had become resilient, there was a need to improve its economic structure. Moreover, Indonesia is currently facing premature deindustrialisation, where GDP from manufacturing has declined. Therefore, the need to re-industrialise and produce value-added export products is crucial as it will ensure better economic returns for the country. Dr Widyasanti believed that the next course of action was to transform Indonesia. Indonesia must focus on escaping the middle-income trap in the new long-term development plan. This includes implementing strategies to increase Indonesia’s economic growth to more than 5% and generating economic corridors for specific industries in outer islands, such as Papua and Nusa Tenggara. Indonesia would also need to build up its human capital, mainly through a higher-quality workforce, to boost overall productivity and facilitate greater growth.
Dr Prasetyantoko shared his opinions on Indonesia’s long-term development plan. He echoed similar observations with Dr Widyasanti on Indonesia’s industries, citing declining productivity, low investment, and shrinking manufacturing sectors as the causes for slow growth. In fact, the tradeable sectors, which employed most of Indonesia’s workforce, had shown a low growth rate, signifying a potential stalling of industrialisation. Dr Prasetyantoko, therefore, believed that the next president must devise new strategies to revive the manufacturing industry. This includes adopting new industrial policies and developing a new framework for down-streaming the industries. Investing in new complex export products such as electric vehicles (EV) and nickel products would also enable Indonesia to move away from simply exporting mineral ores to more value-added products. In that sense, this new long-term development plan will aid in setting the foundation for the new administration to implement necessary policy changes. Despite having a narrow corridor for opportunities, Indonesia needs this document as a guide to further advance the country’s development and increase its potential to become a high-income country by 2045.
The hybrid seminar drew an in-person audience of 22 participants and 68 online participants from Singapore and abroad. Some issues raised from the Question and Answer session were the role of foreign direct investments, the potentiality of the EV industry, the challenges of diversifying Indonesia’s economy, the effects of the local content requirement, or Tingkat Komponen Dalam Negeri (TKDN) policy on productivity, the impact of wage setting in reducing disparity, the new measurement of poverty, the possibility of exporting renewable energy as well as the strategies to develop human capital. Dr Widyasanti and Dr Prasetyantoko shared some final concluding remarks, highlighting that this long-term development plan is set to be ambitious so that future leaders of Indonesia can use this document as the benchmark for future policy planning. Doing so will ensure consistency in every administration, and each president will need to work towards the targeted goals to ensure the country’s continuous progression.
