Economic Inequality in Indonesia • The Apex Chronicles

Indonesia is the sixth country with the largest wealth inequality in the world with a ratio of the wealth of the 4 richest people in Indonesia to the total wealth of the 100 million poorest people in Indonesia. The order of the richest people in Indonesia according to Forbes has also not changed much from year to year and it can be said that there has been no addition to the list of new rich people who hold strategic sectors in Indonesia, which has a total population of 270 million.

Limited access to capital is the main factor that makes rich people in Indonesia only dwell on the same people.

An Observer from the Institute for Development of Economic (Indef) Bima Yudhistira

And the main reason why the number of rich people in Indonesia has not changed much is because these rich people control the main business in the commodity sector. For examples, the cigarette business, palm oil, mining, and banking. It is undeniable that the dependence of the Indonesian economy to date is still very high in the commodity sector. Therefore, the commodity sector is one of the strategic economic sectors that is the main driver of the Indonesian economy.

BPS data shows that total non-oil and gas exports reached US$14.40 billion or 94.36 percent of Indonesia’s total exports in February 2020. Of this, the palm oil group controlled the export share, US$1.71 billion or 11.87 percent of total exports. non-oil. Another thing that causes the lack of presence of the new rich in Indonesia is because the diversification and innovation of economic resources in Indonesia is still limited.

The scope of the business sector is still dominated by giant businessmen in the commodity sector. Meanwhile, other countries have expanded the scope of business in the digital world, such as financial technology (fintech) and e-commerce.

Credit Suisse Group, a world investment and management bank from Switzerland conducted a study on the growth of the rich in Indonesia. As a result, there are 21,430 people in the High Net Worth Individual category or people with a wealth of more than US $ 1 million in 2020. This number is expected to increase to 110% in 2025 to 45,063 people.

In the Ultra High Net Worth category for people with a net worth of more than US$ 30 million or IDR 434.5 billion, there are 673 people and it is estimated that this will increase by 67% to 1,125 people in 2025.

“Currently 1% (one percent) of the rich in Indonesia control 46 percent of the total wealth of the population in Indonesia,” said Bima when contacted by The Apex Chronicles.

According to him, if the concentration of wealth is concentrated on a few people, it will be difficult to find solutions to solve various economic problems that have an impact on the Indonesian economy. For example, the problems of poverty and unemployment.

The Central Statistics Agency (BPS) noted that in September 2019 the poverty line in urban and rural areas increased by 4.18%. From Rp 440,538,-/capita/month to Rp 458,947,-/capita/month in September 2020. The lower class (poor) are those who have an income of Rp. 354,000,- per month while the poor vulnerable class are those who have high consumption rates or income of IDR 354,000 – IDR 532,000 per month.

BPS Director of Social Resilience Statistics, Harmawanti, explained that social inequality between the poor, middle class and upper class occurred among others due to disparities in Rural and Urban development, disparities between eastern and western parts of Indonesia.

“The number of poor people in Indonesia in 2020 has increased,” said Harmawanti when contacted by The Apex Chronicles.

The number of poor people in September 2019 of 24.79 million people began to increase to 26.42 million people in March 2020 or the early days of the pandemic and again increased to 27.55 million people in September 2020.

Social inequality also occurs in the middle class. As the name suggests, this class is in the middle, which is not as rich as the owners of capital but living well. Currently, more than 50 million Indonesians are in the upper middle class and another 120 million people are in the aspiring middle class. This group is a group of citizens who are no longer poor and are moving towards a more established class.

Expanding the middle class population is very important to unlock the development potential in Indonesia. Quoted from the Ministry of Finance website, Indonesia’s middle class has been the main driver of economic growth with a consumption rate growing by 12% annually since 2002 and representing almost half of all household consumption in Indonesia.

Uniquely, most of the middle class in Indonesia is dominated by the millennial generation, which is currently the driving force for Indonesia’s economic revival through the start-up route, which is indeed done by many millennials. This generation has an interest in certain professions, such as graphic design, content writers, online businesses, web developers, and influencers.

The rapid development of technology makes it easier for the younger generation of Indonesia to have a career and choose a profession that has never been done by previous generations. The freedom to find sources of information, hone skills and use technology in various sectors to facilitate business opens opportunities for the younger generation to start a business by utilizing digital technology.

“For my knowledge, I have been helped a lot by training programs from the Government. In addition, I also upgrade my business skills by joining the community to gain new knowledge for product innovation,” he said.

Industry 4.0 spurs the younger generation to become a creative generation that can utilize digital technology for business purposes. Rifai, a start-up entrepreneur from Yogyakarta, chose to develop his business in the culinary and batik convection fields. He said that the Government’s support was very important in his business, including by providing business training to improve entrepreneurial skills. Including providing facilities such as Bandung Techno Park, Jogja Digital Valley, and the like that can be a means for start-ups to advance their business.