Nur Ismi, 30, cooks using firewood behind her home in Gampong Lamcarak, Seulimum district, Aceh Besar Regency, Aceh Province, Saturday (14/1). Financial difficulties means Nur\'s family is unable to buy fuel or gas. Nur works as a cake maker with a maximum income of about Rp 1 million and Rp 2 million per month, far below the Aceh minimum wage of Rp 2.5 million per month.
JAKARTA, KOMPAS – Economic inequality has been worsening since the regional economic model was implemented in the early 2000s. Regional autonomy has, in fact, become one of the driving factors.
This is one of the tentative conclusions of the Regional Autonomy and Inequality Study conducted by the Institute for the Development of Economics and Finance (Indef). The study was conducted from March to October 2017 in five provinces, namely Jakarta, South Sulawesi, Maluku, South Kalimantan and Bengkulu.
Indef’s executive director, Enny Sri Hartati, said in Jakarta on Wednesday the research was still underway. However, Indef can draw a tentative conclusion from the data that has been collected.
"We conclude that it is indeed true that the implementation of regional autonomy has partly contributed to the worsening of economic inequality…not by chance," said Enny.
Law No. 32/ 2004 regarding Regional Government stipulates that the granting of wider autonomy to the regions is aimed at accelerating the efforts to improve the welfare of the local people through the enhancement of services, empowerment, and community participation.
The autonomy is not limited to public administration but also includes financial management.
However, the gini ratio, as an indicator of inequality, has been worsening since 2005. In 2004, the gini ratio was at 0.32. Beginning in 2005, the gini ratio gradually climbed to its worst point at 0.4 in 2011 to 2015. In 2016, the gini ratio slightly improved to 0.39.
"Regional autonomy is a driving factor. As the regions want instant results, they choose the easy way by developing the businesses of their cronies. While the sector that provides added value and increased regional economic capacity is left untouched," said Enny
The short-term solution to the problem, according to Enny, is the reformulation of the general transfer funds from the central government to the regions. The scheme should be carefully designed so that the fund transfers can be effectively used to reduce the income gap between one region and another.
"Inequality can be effectively reduced if the policy on regional autonomy is improved. In other words, it is difficult to reduce economic imbalances if there is no evaluation of the regional autonomy policy," said Enny.
Purchasing power
The chairman of the Indonesian Chamber of Commerce and Industry (Kadin), Rosan Perkasa Roeslani, said the government and business people had worked closely together to reduce the gini ratio.
"However, if purchasing power also declines, it will affect the gini ratio. Our job is to increase purchasing power and keep it growing,” Rosan said.
According to Rosan, there must be a breakthrough, including by encouraging the informal sector, to create new jobs. Some support is needed, such as offering cheap funds for investment or to start a business.
The vice chairman of House Commission VI, Azam Azman Natawijaya, said accelerating infrastructure development alone was not enough. The government also needed to provide stimulus so that the real sector could grow.
Village
The chairman of the Association of Indonesian Rice Milling and Rice Traders (Perpadi), Sutarto Alimoeso, said inequality in the villages had worsened partly because economic potential in the villages had not been properly developed. If the government wants to develop the villages, their economy should be empowered.
"There are many farmers in the villages. They should be helped first. We must improve their productivity. To this end, farmers should be educated [on farming activities] from upstream to downstream," Sutarto said.
He cited the rice farmers in the lowlands of Java as an example. During harvests in the rainy season, they are forced to sell their unhusked rice to middlemen. This has resulted in falling prices, he said.
