A New History for Indonesia’s HDI
The United Nations Development Programme (UNDP), through its Human Development Report (HDR) 2019, announced that Indonesia was upgraded for the first time to the category of countries with high HDI.
The United Nations Development Programme (UNDP), through its Human Development Report (HDR) 2019, announced that Indonesia was upgraded for the first time to the category of countries with high Human Development Index (HDI).
According to the UNDP’s latest HDI data, released just this week, Indonesia has exited the category of countries with medium human development after scoring poorly for 20 years. This is truly a historical milestone for Indonesia.
The HDI is developed by the UNDP to measure the success of development efforts oriented towards public welfare instead of focusing exclusively on gross domestic product (GDP). The HDI is a composite index based on four indicators: (1) healthy life as measured by life expectancy; (2) knowledge, by mean years of schooling; (3) access to learning, by expected years of schooling; and (4) standard of living, by Gross National Income (GNI) per capita.
The UNDP has periodically released its HDI since 1990 through the Human Development Report (HDR), which carries different themes in each edition. This year, the UNDP HDR is themed “Beyond income, beyond averages, beyond today: Inequalities in human development in the 21st century”.
Looking more closely, this change in status is understandable, as it matches Indonesia’s consistently upward HDI trend over the past three decades.
The report cites Indonesia’s 2018 HDI value as 0.707, which ranks it among countries with high human development at 111th out of 189 countries and territories. Looking more closely, this change in status is understandable, as it matches Indonesia’s consistently upward HDI trend over the past three decades.
Between 1990 and 2018, Indonesia’s HDI increased from 0.525 to 0.707, an increase of 34.6 percent. Increases occurred in all HDI indicators. Between 1990 and 2018, life expectancy at birth increased by 9.2 years to 71.5 years, mean years of schooling increased by 4.7 years to 12.9 years and expected years of schooling increased by 2.8 years to 8 years. Meanwhile, Indonesia’s GNI per capita skyrocketed almost 156 percent between 1990 and 2018.
Indonesia’s HDI achievement in 2018 must surely be recognized, as this is the fruit of the Indonesian government’s hard work in improving its investments in education, health and social security. Progress has been supported by economic development policies oriented towards human development. This
“class advancement” is in line with the dynamics that have developed to make Indonesia a middle-income country that has successfully slashed its poverty rate by more than half in the past 20 years.
Inequality as obstacle
Such progress is not without footnotes, as Indonesia is yet to fully exploit its potentials towards advancing human development. The main factor that has held back Indonesia’s HDI potential is the rather deeply set inequalities in the country. If inequality was included in the HDI measurement, Indonesia’s HDI would plummet 17.4 percent, more than the average decrease in HDI due to inequalities in East Asian and Pacific countries, which is 16.6 percent.
To compare, Indonesia’s 2018 HDI (0.707) is still below the average HDI of countries with high human development (0.750) and the average HDI of East Asian and Pacific countries (0.741). In East Asia and the Pacific, the countries that have an HDI and population size similar to Indonesia are China and the Philippines, which are ranked respectively 85th and 106th. Indonesia scores lower than the Philippines in only one HDI indicator, mean years of schooling. Meanwhile, compared to China, Indonesia scores lower in almost all four HDI indicators, except in mean years of schooling. Indonesia also ranks below China and the Philippines in the Gender Inequality Index (GII).
This rate is lower for university participation. Furthermore, despite the increase in expected life expectancy at birth, life expectancy beyond 70 years remains low.
Indonesia’s HDI may rise even higher and beyond the average of countries with high HDI if the government sharpens its focus on tackling the country’s inequalities. Despite Indonesians having surpassed the average of basic human development indicators, persisting inequalities prevent more progressive achievements in the indicators. For instance, the participation rate in elementary school is pristine at almost 100 percent, but only 60 percent of high school-aged children have the opportunity for school participation. This rate is lower for university participation. Furthermore, despite the increase in expected life expectancy at birth, life expectancy beyond 70 years remains low.
Inequalities in human development will not improve without better policies and better provision of basic services to ensure more progressive equality across the indicators. This is important, as inequalities in the 21st century will be more difficult to overcome in relation to the climate crisis and the digital revolution.
Policy recommendations
How, then, can Indonesia respond to challenges of inequalities in the 21st century and continue to progress in human development? The HDR includes several policy recommendations that are in line with the conditions in Indonesia. First, the idea that Industry 4.0 will lead to lower labor demands is incorrect. This is because automation will increase productivity and create new jobs, such as influencers, YouTubers and, most especially, digital economy entrepreneurs.
It is undeniable that certain jobs may be replaced by technology. However, with the right policies, technology can accelerate human development. Policies are required on training that encourage the youth and workers to become lifelong learners that are always ready to meet the dynamic changes in the working world of the future.
This inclusivity principle is in line with the mandates of the Sustainable Development Goals (SDGs), to which the Indonesian government is already committed.
Second, infrastructure investment must be increased for uninterrupted, inclusive connectivity. Inclusive means developing connectivity must include physical and non-physical aspects like the internet to ensure that all people, including those on remote islands, have access, can benefit from and are included in Industry 4.0. This inclusivity principle is in line with the mandates of the Sustainable Development Goals (SDGs), to which the Indonesian government is already committed.
Next are improving policies related to distributing capacity in human development and income. Indonesia has several social protection programs, including the Family Hope Program (PKH), that aim to resolve today’s income problems and tomorrow’s health and education investments. Social protection programs like the PKH will be more effective in reducing inequalities if they are followed by improvements in the quality of basic services across Indonesia.
Improvements to post-job market policies must focus on improving the tax system to ensure that enough funding is available to support pre-job and job market interventions.
Among the relevant HDR recommendations for Indonesia on reducing inequalities is to develop a series of comprehensive human development policies that address capturing the pre-job market, the job market and post-job market. Pre-job market policies can focus on reducing skills inequality to ensure that everyone can enter the job market with better skills. For the job market, there must be policies that ensure the absence of discrimination in job opportunities and incomes, and which push for better job flexibility to encourage more women to enter the job market. Improvements to post-job market policies must focus on improving the tax system to ensure that enough funding is available to support pre-job and job market interventions.
The UNDP’s report cautions all countries to reduce inequalities and prevent new ones from arising as a result of technological advancements and climate change, in order to overcome development challenges in the 21st century. The report also says that, with strong political will and the right policies, this dual goal is achievable.
Christophe Bahuet, Country Director, UNDP Indonesia