Ali Said, Jakarta – Indonesia has experienced relatively high economic growth for almost a decade, but the question remains why has this high growth not been followed by a rapid improvement in social welfare?

Many scholars have argued that high economic growth in this period has lacked quality. Several indicators pointing to the low quality of growth have been shown. These include a slowing down of poverty reduction, an increase in income inequality, and a stagnant real labor wage level.

Economic growth is necessary for poverty reduction, but the recent experience of Indonesian economic growth only resulted in the slowing down of poverty reduction.

The current government has adopted the policy jargon of a triple track strategy covering "pro-growth, pro-poor and pro job", which has been revised to a four track strategy by including "pro-environment" as a part of the policy.

Despite such a strategy being formulated, at the implementation level achieving high economic growth still seems to be the main focus of the government agenda, while almost neglecting areas closely related to poverty.

This can easily be seen in sectors driving economic growth, which are largely supported by sectors that are not labor intensive. The agricultural sector, where a large number of poor people are engaged, grew at a relatively low level.

Increasing income inequality, although still considered to be at a moderate level, could be a warning to policy makers because it indicates that the rich have been disproportionately enjoying more benefits of economic growth than the poor.

In 2004, income inequality measured by the Gini Index based on expenditure data as a proxy of income data stood at 0.32, but the figure rose to 0.41 in 2012.

In addition to this, the share of income enjoyed by the poorest 40 percent of income group also declined as the result of a more rapid growth in income among the richest group over that of the poorest.

It is believed that if the Gini Index of inequality is measured based on income data, it will result in a higher level of inequality.

Davies et al (2008) estimated the Gini Index of Indonesia in 1996 based on income data to be nearly 0.40, while based on wealth data the Gini Index in the same year was estimated to be about 0.76.

Given the fact that the Gini Index measured based on expenditure data is increasing, the income and wealth Gini indices are also believed to be increasing, standing at a much higher level.

The lack of growth's benefits to social welfare can be further observed in the share of growth components, especially when economic growth is measured based on expenditure instead of production.

The high economic growth of Indonesia during the last few years was attributed by a relatively high share of gross fixed capital formation (PMTB).

The share of PMTB to total gross domestic product (GDP) was the second highest after household consumption expenditure. Even during the period 2010-2012, economic growth was dominated by the growth of PMTB. In 2010, PMTB grew by 8.5 percent, while in 2012 it grew by 11.2 percent.

If we look deeper into the components of PMTB, we will find that construction as one of the main PMTB components has the biggest share of PMTB. The construction sector also contributed to the high growth rate of PMTB during the last few years.

In the construction sector, there are three types of construction including building construction (residential sites, office, industrial building education infrastructure, etc.), civil construction (roads, bridges, railways, tunnels, etc.) and special construction (drilling ground water well, Steiger fitting, roof covering, etc.).

The value of civil construction accounted for more than 50 percent of total construction value during the last few fiscal years. This condition is also applied to all regions. This implies that the role of expenditure for road infrastructure is significant in driving economic growth.

Following the theory of development, road infrastructure development plays a key role in the development progress. Road infrastructure development in the long run will stimulate economic activities and have a positive impact on social welfare.

This is because more people will have better access to education facilities, health facilities and income opportunities. In the case of new road infrastructure development in rural areas, this will help farmers transport their products faster and easier to the market, while at the same time off-farm employment activities will also grow.

But what happened with Indonesian road infrastructure development? Despite huge spending on the construction sector, especially road infrastructure development, the data indicates there was no significant change in the total length of roads.

During the period 2010-2011, the total length of roads in Indonesia grew by just under 2 percent as the figure rose from 487.3 thousand kilometers to 496.6 thousand kilometers during the period. Such an increase was attributable only to a significant change in the length of roads in a few provinces, while the length of roads in most provinces remained stable.

There are at least two elements of speculation that can be drawn from the above evidence. First, it is very likely that people's access in rural or remote areas in most of the country has been neglected.

It is important to note that poverty in Indonesia is predominantly a rural problem. With no such significant improvement or no new road infrastructure development, poverty will remain at a higher level because rural residents will remain isolated and cannot have better access to any facilities.

Second, big spending on road infrastructure development was arguably directed toward upgrading roads and not building new ones.

It has been very common for road improvement development to be conducted a few months before the end of fiscal year, but unfortunately just a few months after the improvements, roads become damaged.

This condition is repeated every year. A clear example is the Pantura road development, where the government should improve roads almost every year to face the annual event of flocks of people returning home for lebaran. This suggests that there has been a huge economic inefficiency in road infrastructure development in Indonesia.

All of the above evidence provides clear arguments for the lack of quality of Indonesian economic growth. Given the fact that the growth of PMTB contributed significantly to Indonesia's economic growth and the fact that PMTB components were dominated by the construction sector where there was a huge economic inefficiency in road development, high economic growth created during the last decade has had little effect on the improvement of social welfare.

Despite huge spending on the construction sector, there was no significant change in the total length of roads.

[The writer is a socio-economist working in BPS-Statistics Indonesia.]