I NDONESIAN POLITICAL ECONOMY : W ILL N EOLIBERALISM PERSIST OR COME TO AN END ? by Hendri Saparini, Ph.D

INDONESIA : DEMOCRACY DEVELOPMENT  The rise of political democratization  Fair and secure the National Elections 2004, 2009, 2014  Fair and secure local elections in 542 districts but, the downside:  Conflicts and insatisfaction  Slow progress in economic democratization

GDP GROWTH ONE OF THE HIGHEST ECONOMIC GROWTH Source: Central Board of Statistics

MIDTERM PERFORMANCE TARGETED UNEMPLOYMENT AND POVERTY RATE: FAILED Target & Realisation of Unemployment Rate RPJM Projection (*) 2014 up to QI Realisation RPJM Projection RPJM Projection vs. Realization of Poverty Rate (*) 2014 up to QI

INEQUALITY INCOME DISPARITY Source: Central Board of Statistics

POVERTY REDUCTION IS SLOWING DOWN NUMBER OF NEAR POOR 68 MILLION PEOPLES WB,2014) Source: Central Board of Statistics Near Poor (1.6 below national poverty line)

PUBLIC WELFARE : REAL LABOUR WAGES AND FARMERS’ EXCHANGE VALUE Real and Nominal Labour WagesIndex of farmers exchange value

SECTORAL DISPARITY Tradable & Non-tradable SectorsAverage Growth ( ) Source: Central Board of Statistics

FDI DOMINANCE, STATE-OWNED ENTERPRISES ABANDONMENT FDI; 70% OF TOTAL INVESTMENT. ACCELERATION AND EXPANSION ON PRIVATIZATION. SOE NOT INCLUDED IN INDUSTRIALIZATION PLANNING INVESTMENTSTATE-OWNED ENTERPRISE Source: Central Bank of IndonesiaSource: Coordinating Board of Investment

GOVERNMENT’S HANDS OFF: LABOUR-INTENSIVE SECTORS Source: Central Bank of Indonesia Sectoral Average Annual Growth ( Q2/2014)

VERY LOW IMPORT TARIFF AGRESSIVE IN TRADE AND ECONOMIC LIBERALISATION India (2013) Brazil (2011) China (2011) Russia (2013) Indonesia (2011) All products Agricultural Industrial

GOVERNMENT’S LIMITED ROLE IN PUBLIC SERVICES Source: Central Bank of Indonesia

GOVERNMENT DEBT: DEBT ACCELERATION AND LIMITED PAYBACK CAPACITY (DSR) Government Debt Value Foreign Government and Private Debts Δ Rp 1,240 (98%)

2015 AND BEYOND: ANY CHANCE TO DETHRONE NEOLIBERALISM?

A NEW HOPE EMERGED  Victory of the opposition: PDI-P (Indonesia Democratic Party – Struggle)  Strong anti-neoliberalism paradigm of the new president

GREAT EXPECTATION FROM THE 2014 ELECTION  The presidential candidates gave strong signals to take neoliberalism away  Track record of the presidential candidates  High participation level in the presidential election

THE HOPE HAS BEGUN TO FADE  Questionable figures in the new cabinet  No clear platform, succumbs to transactional politics:  fuel subsidy  foreign investment, etc

ENERGY SOVEREIGNITY SUBSIDY’S FUEL: 65% USE BY POOR AND NEAR POOR, 72 MILLIONS MOTORCYCLE Source: Susenas Panel 2010, process < 2$ (29%) 2-4$ (36%) 4-10$ (27%) 10-20$ (6%)>20$ (2%)

DOMESTIC OIL PRODUCTION SOE MINOR PLAYER Sorce: Ministry of Energy and Mineral

DOMESTIC REFINARY CAPACITY NO INVESTMENT IN REFINARY Sumber: British Petrolium

Source: Comtrade FOOD SOVEREIGNITY HUGE VALUE AND HIGH GROWTH

MP3EI: SIX ECONOMIC CORRIDORS DIFFERENT COMPETITIVENES, NEEDS DIFFERENT POLICY SUPPORTS Mega economic centers Economic centers Sumatera Corridor: “Center for Production and Processing of Natural Resources and As Nation’s Energy Reserves” Kalimantan Corridor: “Center for Production and Processing of National Mining and Energy Reserves” Sulawesi Corridor: “Center for Production and Processing of National Agricultural, Plantation, Fishery, Oil & Gas, and Mining” Papua – Maluku Islands Corridor: “Center for Development of Food, Fishery, Energy and National Mining” Java Corridor: “Driver for National Industry and Service Provision” Bali – Nusa Tenggara Corridor: “Gateway for Tourism and National Food Support”

REGIONAL DISPARITY REGIONAL ECONOMIC PERFORMANCE INDICATORS Sumatera (%) GDP Share23.8 GDP Growth8.2 Unemployment5.7 Kalimantan (%) GDP Share9.2 GDP Growth4.8 Unemployment5.3 Sulawesi (%) GDP Share4.7 GDP Growth8.7 Unemployment5.2 Maluku (%) GDP Share0.3 GDP Growth7.3 Unemployment6.4 Jawa-Bali (%) GDP Share58.9 GDP Growth6.6 Unemployment6.6 Nusa Tenggara (%) GDP Share1.3 GDP Growth1.5 Unemployment4.1 Papua (%) GDP Share1.8 GDP Growth6.4 Unemployment4.0

HIGH GROWTH LOW INCOME HIGH GROWTH HIGH INCOME LOWH GROWTH LOW INCOME LOW GROWTH HIGH INCOME REGIONAL INCOME DISPARITY, 2012 Source: Central Board of Statistics

HIGH POVERTY LOW UNEMPLOYMENT HIGH POVERTY HIGH UNEMPLOYMENT LOW POVERTY LOW UNEMPLOYMENT LOW POVERTY HIGH UNEMPLOYMENT REGIONAL POVERTY & UNEMPLOYMENT, 2012 Source: Central Board of Statistics

SME PROBLEMS: INTEREST RATES, INSTITUTIONAL, MICRO INFORMAL BUSINESS (98%) PRIVATIZATION ON STATE OWN BANK Source: Central Bank of Indonesia

THANK YOU!