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Boosting economic growth in Indonesia

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Held in July 2019, the third IDF conference brought together almost 3000 development practitioners working in the from the public, private, and non-profit sectors in Indonesia. Two-day event saw 250 speakers presenting across 10 parallel sessions, exploring the opportunities for driving future work and ensuring inclusive growth.

The event was opened by the Vice President of the Republic of Indonesia, H. E. Jusuf Kalla, who highlighted the importance for the young generation to take active role in developing future innovation and technology. Currently, almost 20% of Indonesia’s population are adolescents, aged  between 10 and 19 years. The country is predicted to experience a ‘demographic bonus’ in the decade between 2030 and 2040, where the number of people in the productive age group between 15 and 64 will be greater than the number of people under or above this group.

Thus, it is crucial for the country to transform its economic structure – from agrarian to industrial-based, and then to service-based economy. Indonesia’s current challenge is that the main workforce is not yet working in the industrial sector. Bambang Brodjonegoro, Head of National Development Planning Agency, which organised the event, highlighted that Indonesia still relies heavily on minerals as its export commodity, making it vulnerable to international market volatility. The most sustainable path going forward is to create good and productive jobs and to ensure that all people gain access to good work and other economic opportunities.

In his presentation, Jonathan Mitchell highlighted structural transformation as key to improve economic resilience of Indonesia, and drive sustainable and inclusive economic growth. Indonesia’s small and medium-sized businesses are important to drive forward economic growth, they need to be encouraged to become producers and helped to start exporting their products to the global market. By establishing collaboration between large companies and the small business ecosystem, inclusive growth will be more easily achieved.

Human capital was one of key themes of the conference, and Dwi Rahardiani focused her presentation on building up citizens’ resilience and skilling adolescents for the future. With the current population trends and Indonesia’s demographic bonus set to happen in the next ten years, the country will experience an increased labour supply. At the same time, this change in population structure signifies a higher savings rate, an increased earning capacity, and the entry of more women into the workforce. All these factors could fuel growth, however, there is also a risk – if most young people within the youth group have low skills levels and are unable to find meaningful employment, they could become a burden on society.

Improving human capital requires further collaboration from policymakers, public and private decision makers, and researchers, as it needs to consider other aspects in addition to skills for adolescents, such as the quality of the education and health. Social security in the form of national health insurance is seen as a way of improving human capital by improving infant survival rate, health quality, and reduce the case of stunting among others. However, considering the characteristics of Indonesia with various different social and geographical landscapes, further action is needed to ensure inclusive growth for all.

Oxford Policy Management was an official partner of the Indonesia Development Forum 2019. Find out more about IDF 2019.