SDGs and Economic Transformation
The implementation of SDGs constitutes orchestration of a joint movement between the government and nongovernmental stakeholders. The major transformation of development will only succeed if undertaken by all of us.
Indonesia is entering one of the most historic and challenging periods. It is projected that in 2036 the country will break away from the middle-income trap and become an advanced nation.
The vision of Indonesia 2045 is that of an advanced country with the fifth-biggest economic power in the world. The scenario prior to the Covid-19 pandemic required an annual economic growth rate of 5.7 percent in order to get out of the middle-income trap in 2036.
However, the post-pandemic period requires a 6 percent growth rate to enable Indonesia to graduate from the middle-income trap. Even then the year will shift from 2036 to 2043. The impact of the pandemic is indeed devastating, upsetting the world including Indonesia, as if negating the exhausting toil underlying development achievements.
History records that in fact it has not been easy to escape the middle-income trap. A study has shown that of the 101 middle-income countries in 1960, only 13 were capable of rising to the rank of high-income countries in 2008. The remaining 78 countries had for 48 years still been trapped as middle-income nations.
For Indonesia, getting out of the trap of middle-income countries is not negotiable. Like the drama of Shakespeare, it’s a choice of “to be or not to be”. It’s because if within three decades the country fails to enter the category of high-income nations, with an aging population, the movement of growth will slow down. This threat will also be faced by other countries in the Asian region, which will be getting old before getting rich.
The demographic bonus window will be left to gradually close down, just passing as a statistical record.
Two reefs
Today, Indonesia is like sailing between two coral reefs, as once illustrated by Bung Hatta. Brushing against sharp corals, the boat can be threatened with sinking, while it has got to keep sailing. The two reefs are the similes of what we are facing, which are the Covid-19 pandemic and climate change.
The pandemic poses a great impact. The hard wrought poverty relief retrogresses to the past three years and unemployment increases as a result of economic slowdown.
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Meanwhile, economic recovery requires the flattening the Covid-19 curve and mitigation of its social impact. Regulatory changes through deficit relaxation and various fiscal stimulus packages have been launched. Economic growth was actually still minus 2.07 percent in 2020. A study has indicated that without stimulus, the economy may contract to minus 6.3 percent.
On the other hand, the Covid-19 curve flattening also depends on public adherence to health protocols, avoidance of crowding and restriction of unnecessary mobility. Encouraging people to change their habits is surely not simple.
Climate change is also a major challenge. The report of “Global Warming of 1.5 C” from the Intergovernmental Panel on Climate Change (IPCC) shows that global warming due to a temperature rise of 1.5 degrees Celsius resulting from carbon dioxide emissions creates an enormous impact.
If the earth temperature increases by 2 degrees Celsius, coral reefs will 99 percent vanish and fish stocks significantly decrease. On land, dryness will spread, harvest failures will be more often so that food prices will soar and clean water become scare. In view of such a tremendous impact, unsurprisingly the European Union is committed to achieve carbon neutrality in 2050.
Toward reaching carbon neutrality in 2050, a carbon barrier will be imposed. It means that goods entering the European Union with carbon footprints will be subjected to an extra tariff before being totally banned in the end.
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In Indonesia, based on a study of the National Development Planning Agency (Bappenas), the economic loss to the gross domestic product due to climate change is cumulatively estimated to reach as high as Rp544 trillion in 2024.
The data evidently indicate that climate change has to be overcome, both by Indonesia and the world.
In the future, if climate change fails to be overcome from the present by the world, its impact will be greater than that of Covid-19. Arctic icebergs will be melting, the sea water surface rising and submerging small island countries, particularly those in the Pacific. Global aridity will also cause poverty, famine and evacuation of a massive scale as well as utmost difficulty in finding solutions.
Transformation and SDGs
It should be admitted that the current situation is complex as a result of disruptions and major changes in various sectors, while the nation cherishes high aspirations that have to be realized within a limited time. The iron law of evolution has demonstrated that it was not the strongest species that could manage to survive, but rather those making prompt adaptations that could safely evade extinction.
The question is how this nation makes prompt adaptations to changes. In order to become an advanced country before the centenary of Indonesian independence, economic recovery is indeed required. But that alone is not enough. The nation needs to undertake a major economic transformation, not only making adaptations but even also getting ahead of the curve.
Amid the waves of changes of a global scale, riding the waves can just serve as a means of accelerating the achievement of goals.
A major transformation of a global scale toward sustainable economy, according to Paul Polman, is the biggest economic opportunity in our life. It is calculated that at least US$ 12 trillion worth of business opportunity will arise from the changes. This opportunity is certainty not to be wasted.
We should prepare an inclusive and sustainable major economic transformation plan. It is open to various options of strategy to get ahead of changes, among others the accelerated upgrading of competitive human resources, promotion of green and productive economy, digital transformation and domestic economic integration.
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> Resurgence of Covid-19 Pandemic
This development also opens relevant economic prospects, such as electric vehicles, energy and basic material efficiency, circular economic value chains, renewable energy, garbage management, sustainable tourism, low emission cattle breeding, food waste management, blended finance, green buildings, smart farming and other sectors.
In the major economic transformation, Sustainable Development Goals (SDGs) will be the main instrument of guidance. SDGs have covered and brought social, economic and environmental goals into equilibrium at the same time, serving not only as a philosophical discourse but also already entering the operational sphere.
One of the strengths of SDGs is to break the rigidity of ego-sectoralism (silos), promote cooperation, interconnectedness, and conclude through measured indicators.
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Suharso Monoarfa.
What is also very strategic in SDGs is the principle of inclusivity and no one is left behind. It means the implementation of SDGs constitutes orchestration of a joint movement between the government and nongovernmental stakeholders. Obviously, the major transformation of development will only succeed if undertaken by all of us.
The successful achievement of Indonesia to become an advanced country before 2045 requires the efforts of all components of the nation, marching onward simultaneously in concert.
Suharso Monoarfa, Minister of National Development Planning/Head of the National Development Planning Agency.
This article was translated by Aris Prawira
