Towards the end of Jokowi's administration, promises of equitable development are still superficial

Even though the economy in eastern Indonesia is growing rapidly, unemployment and poverty rates have not decreased significantly.

KOMPAS/P RADITYA MAHENDRA YASA

Residents peep from behind their homes in Siwalima Fishermen Village, Pulau-pulau Aru District, Aru Islands Regency, Maluku, on Thursday (21/9/2023). Poverty is a portrait of the fishing village's life amid the great potential of Eastern Indonesian waters' fisheries.

JAKARTA, KOMPAS — Almost 10 years have passed, President Joko Widodo's promise to encourage "Indonesia-centric" development, aka not centered on Java, is slowly starting to emerge. However, the ideal equitable development is still superficial or just on the surface. The economy outside Java is indeed growing high, but the people are not yet prosperous.

In the last decade, Java's position has still dominated the spatial national economic structure, followed by Sumatra. However, its contribution has slowly begun to decline. At the same time, the economy outside of Java, especially in eastern Indonesia regions such as Sulawesi, Maluku, and Papua, is starting to rise and grow rapidly.

As a comparison, quoting data from the Central Statistics Agency, in the first quarter of 2014 before Jokowi became president, Indonesia's economic structure was heavily dominated by Java with a 58.52 percent contribution to gross domestic product (GDP) and Sumatra with 23.88 percent.

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Other regions, such as Kalimantan, only contribute 8.45 percent, Sulawesi 4.72 percent, Bali and Nusa Tenggara 2.48 percent, while Maluku and Papua only contribute 1.95 percent to the national economy.

Towards the end of the Jokowi regime, based on the latest data economic growth for the first quarter of 2024, although it still dominates, Java's contribution to GDP formation fell to 57.70 percent, followed by Sumatra which fell to 21, 85 percent, and Kalimantan which fell to 8.19 percent.

KOMPAS/ZULKARNAINI (AIN) 31-03-2018

Residents of Simpang Jersih District, East Aceh Regency, Aceh, use boats as a mode of transportation, Saturday (31/3/2018).

At the same time, the contribution of Indonesia's eastern and central regions to the formation of GDP is increasing. Sulawesi has the most significant increase, reaching 6.89 percent, followed by Bali and the Nusa Tenggara region at 2.75 percent, and Maluku-Papua at 2.62 percent.

This shift is supported by investment which in the last decade has been boosted in central and eastern Indonesia. In the first quarter of 2024, the distribution of investment realization was more outside Java with a value of IDR 201 trillion (50.1 percent), while investment entering Java was IDR 200.5 trillion (49.9 percent).

This shows that the equality that occurs is still superficial, just on the surface.

Executive Director of the Center of Reform on Economics (CORE) Indonesia Muhammad Faisal, on Thursday (8/5/2024), assessed that development equalization in the Jokowi era has begun to be seen from the faster economic growth in the eastern and central regions of Indonesia. However, this shift has not been particularly significant in the past decade.

"There is a shift from Java to outside of Java, but it is not yet significant as it is still around 1%. Economic growth in Maluku, Papua, and Sulawesi is indeed high, due to the contribution of downstreaming and the entry of smelter investments in the mining sector. However, if further examined, there are a few notes," said Faisal.

Not prosperous yet

The most striking issue is the minimal multiplier effect of high growth on people's welfare. Even though the economy in Maluku, Papua and Sulawesi reached double digits, unemployment and poverty rates in these areas did not decrease significantly.

Ideally, high economic growth should be followed by an increase in local communities' welfare indicators. "This shows that the equality that occurs is still superficial, only on the surface. What we want is not just high economic growth, but also an increase in welfare," said Faisal.

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On the other hand, infrastructure development is still focused mainly on Java. According to the report data from the Committee for Acceleration of Priority Infrastructure Provision (KPPIP) in 2022, the spread of infrastructure projects is still dominated by Java and Sumatra, with 19 projects for Sumatra worth Rp 400.55 trillion and 18 projects for Java worth Rp 639.18 trillion.

The development of infrastructure in Maluku and Papua only involves two projects, despite their quite high value of Rp 428.66 trillion, while in Sulawesi, there are only three projects worth Rp 51.83 trillion.

KOMPAS/FAI

One of the roads leading to the Limboro community health center in West Seram, Maluku, must cross an unbridged river. Photo taken on Wednesday (21/6/2023).

"For outside Java, the important homework is to increase infrastructure that can reduce logistics costs, because that is the main obstacle why manufacturing investment is difficult to enter, because logistics costs are too expensive to send materials raw materials and sending final products to market. "The economy still has high costs," said Faisal.

Quality of deployment

Researcher Ahmad Heri Firdaus from the Center of Industry, Trade, and Investment at the Institute for Development of Economics and Finance (Indef) highlights the distribution of investments that are increasingly shifting outside of Java, but are only concentrated in certain regions and sectors such as the processing (downstream) of mining products.

Indeed, there has been a lot of investment spread outside Java, but it is still in the same areas.

"There have indeed been many investment spread outside of Java, but it is still in the same regions. The quality of this distribution needs to be improved so that economic growth outside of Java is not only focused on certain areas due to mining and nickel," said Heri.

He gave an example of Papua, which actually has many natural resources besides gold, such as copper. However, copper from Papua is only relied on as a raw material. Its processing center is actually built in East Java by PT Freeport Indonesia. "In the end, those who enjoy its economic added value are still in Java," he said.

According to him, a new economic center is needed in the future that does not simply rely on mining and excavation results, but adds value and has an impact on the welfare of the community. Comprehensive downstreaming or industrialization from upstream to downstream can absorb more labor compared to the current practice of processing semi-finished products.

"For this, there needs to be an improvement in the ecosystem in each region to optimize its natural resources, especially in preparing human resources and infrastructure that can reduce logistics costs," said Heri.