Zakir Hussain – Congested streets and growing consumer demand suggest that Indonesia's robust economic growth continues to benefit many.

But officials and observers are concerned that, rosy indicators aside, the country is losing ground in tackling the problems of poverty and a widening income gap.

"Inequality continues to be more acutely felt. This is politically corrosive and socially divisive, and needs to be a top priority for all local leaders," H.S. Dillon, the presidential special envoy for poverty alleviation, said in an interview.

If the gap between the rich and poor grows even wider, he fears "this will engender social unrest."

Poverty and widening inequality have surfaced as issues at local elections amid labour unions' clamor for higher minimum wages.

Government statistics show that the decrease in the official poverty rate is slowing – from 12.3 percent of all Indonesians in September 2011 to 11.7 percent a year later.

The government missed its initial target of bringing this figure to between 10 percent and 11.5 percent last year, and has to catch up, National Development Planning (Bappenas) Minister Armida Alisjahbana said last week.

This means 28.6 million people still live on less than 260,000 rupiah ($27) a month. Many more are vulnerable to slipping into poverty.

There are also concerns that efforts to improve the lot of the poor – a mainstay of President Susilo Bambang Yudhoyono's reform agenda – seem increasingly elusive.

Media Indonesia daily said in a recent editorial that poverty fell only 0.6 percentage point a year from 2002 to last year. But Vivi Alatas, senior economist at the World Bank, said it is tougher getting the chronically poor out of poverty.

"When poverty was 20 or 30 percent of the population, there were many people living just under the poverty line, so moderate increases in income brought a large number out of poverty," she said.

In a speech to district leaders last week, Yudhoyono said job creation was the most effective way to reduce poverty, but admitted this was difficult for the extremely poor, especially those without skills.

"If we just say they have to get back on their feet, we won't see results," he said. Hence, the state was committed to helping them through free schooling and health care, subsidized rice and handouts, he added.

But observers note that a significant number of the poor fail to get the help they need. As for jobs, Vivi said, "The pace of job creation has not kept up with the growing workforce looking for better jobs in the formal and non-agricultural sectors."

More than half of the workforce are informally employed – one in three is in agriculture, and one in four is in services and industries. She said labor laws must be less rigid and workers need to be better protected should they fall ill or out of work.

Dillon said bosses who gain from the economy should give workers a fairer deal. "The tools are there. We can achieve all-encompassing equity and sustainability if we would just stop our profit-seeking mentality and combat our insecurities," he said.

"What we really need is the political will and commitment to really put our money where our mouths are."