Tito Summa Siahaan – Unless the government manages to improve governance and infrastructure development, Indonesia will fall into the "middle-income trap," according to the Asian Development Bank.
"Though the Indonesian economy has been one of the best performers in the region in recent years, it faces a number of challenges – poor infrastructure, good governance and access to basic education – to progress to a high-middle income economy," ADB chief economist Changyong Rhee said on Monday.
Failure to address the challenges would put Indonesia in "a middle-income trap," Rhee said. This occurs when economies at the middle-income level can no longer compete with low-wage nations but do not have the human capital, technology and infrastructure to ascend to high-income status.
"So far, I have witnessed only Japan and the four Asian dragons [Taiwan, South Korea, Hong Kong and Singapore] be successful in lifting themselves into a high-income status," he said.
It was harder, he said, for a country to move into high-income status from the middle-income status than from low-income status. "The issue is key and urgent, because in the next 30 years Asia, including Indonesia, is expected to lead global growth," the economist said.
The government plans to spend Rp 4,000 trillion ($436 billion) in the next few years to boost the country's infrastructure, such as airports, seaports and toll roads, to create jobs and help reduce poverty. Lawmakers approved a land acquisition reform bill last year that was expected to help pave the way for land clearance for those kind of infrastructure projects.
Rhee said that because Indonesia was rich in biodiversity as well as vulnerable to environmental changes, it should incorporate a green growth agenda by promoting the development of new technology.
Armida Alisjahbana, the state minister of national planning and development, acknowledged that the government's environmental policies had always been "defensive."
"We focus on protecting the environment rather than exploring the opportunities and potentials. The government has yet to formulate a comprehensive strategy to exploit our environmental potential," she said.
The government has forecast economic growth at 6.5 percent this year, approximately the same rate as last year. Poor infrastructure and rampant corruption have been blamed for stunted economic growth in Indonesia.