Analysis of Indonesian Economics

Assignment 1:
The Accumulation Process

Group Members:
David Tjie 13301810005
Elishema Katheline 13301810007
Jonathan Andersen 13301810001
Jovin Criswell 13301810008
Viona Putri Wijaya 13301810030

Universitas Prasetiya Mulya

Business Economics 5A
2020
 TABLE OF CONTENTS

I. Introduction 3

II. Analysis of Data 3

a. Physical Investment 3
1. Gross Fixed Capital Formation 3
2. Gross National Savings 4
b. Human Investment 4
1. Education 4
2. Employment 6
3. Public Healthcare 8
4. Public Services 10
5. Information and Communication Technology Development Index (IP-TIK) 10
c. Government Revenue 11
1. Tax Revenue 11

III. Jokowi’s Policies 12

a. Dana Desa 12
b. Education 12
c. Tax Amnesty 12
d. Health 13

IV. Conclusion 13
I. Introduction
The accumulation process measures the use of several resources to indicate countries’
development patterns and structural changes. Those resources include physical investment, human
investment, and government revenue, which are then linked to economic growth. As to analyze
whether Indonesia has been experiencing the accumulation process, statistical data will be used,
specifically from the year of 2009 to 2019. Moreover, Jokowi’s development policies will also be
analyzed later in this paper, in order to see whether the pattern of the accumulation of physical and
human investment was taken into account on the policies.

II. Analysis of Data

a. Physical Investment
1. Gross Fixed Capital Formation

One of the components of physical capital, which contributes to the productivity per unit of
labor, is the gross fixed capital formation. As a percentage of GDP, gross fixed capital formation in
Indonesia1 has been increasing overall, from 31.1% in 2009, up to 32.3% in 2019.

1
​https://data.worldbank.org/indicator/NE.GDI.FTOT.ZS?end=2019&locations=ID&start=2009
 2. Gross National Savings

As a percentage of GDP, Indonesia’s gross domestic savings2 has experienced an overall

increase, starting with 31.7% in 2009 and ending up with 33.3% in 2019. It peaked in 2011 with a
value of 35.5% and proceeded to drop until 2016 where afterwards it gradually rose. In terms of
savings, the more one saves, the more physical capital one accumulates.

b. Human Investment
1. Education

There are three indicators we took for analyzing education as human investment in
Indonesia. The first is school participation rate. This is for ages 16-18 (grade 10-12 / ​Sekolah

2
​https://data.worldbank.org/indicator/NY.GDS.TOTL.ZS?end=2019&locations=ID&start=2009
Menengah Atas​) 3. Overall, all categories have experienced an increase in general from 2009 to 2019.
For both urban and rural areas on both boys and girls, numbers rise every year from 22.05 in 2009 to
71.92 in 2019.

The second indicator to analyze education is gross primary school enrollment ratio (ratio of
total enrollment, regardless of age, to the population of the age group that corresponds to primary
school level of education). Primary education provides children with basic reading, writing, and
mathematics skills along with an elementary understanding of such subjects as history, geography,
natural science, social science, art, and music. Numbers actually decreased since 2009, but this is not
necessarily bad. High ratios (as like in 2009 to 2012) can reflect a substantial number of overage
children enrolled in each grade because of late entry or repetition rather than a successful education
system4.

3
https://www.bps.go.id/statictable/2012/04/25/1613/angka-partisipasi-sekolah-aps-penduduk-usia-7-18-tahu
n-menurut-tipe-daerah-jenis-kelamin-dan-kelompok-umur-2009-2019.html
4
https://data.worldbank.org/indicator/SE.PRM.ENRR?contextual=default&end=2018&locations=ID&start=200
9&view=chart
 The third indicator is total government expenditure on education as a percentage GDP.
Numbers dropped greatly from 2009 to 2010 but then gradually increased until 2012. It then
gradually decreased from until 2014 but then increased again in 2015. Overall though, it has
increased slightly from 2009 to 2015. A high percentage to GDP shows high priority for education
and a capacity of raising revenues for public spending in Indonesia5; thus, Indonesia now prioritizes
education more in 2015 than it did in 2009.

2. Employment

5
​https://data.worldbank.org/indicator/SE.XPD.TOTL.GD.ZS?end=2015&locations=ID&start=2009
 In this section, we will be comparing the employment rate in services and industry with the
employment rate in agriculture. This graph shows the proportion of the employment rate in services
compared to the total employment rate. In here, it is very clearly seen that the employment rate in
services6 has improved considerably over the years, climbing from a value of 41.3% in 2009 to 48.9%
in 2019. This likely indicates that people are acquiring better skills which allow them to work in the
service sector.

This graph shows the employment rate in the industry sector as a percentage of total
employment. Similarly to the employment rate in services, employment in industry7 has experienced
an overall rise in value. It has only fallen slightly in some years. In 2009, the rate was only at 18.3%
and it made its gradual rise to its peak value of 22.5% in 2019. This likely implies the same reasoning
with employment in services where people are growing more qualified over the years to work in the
industry instead.

6
​https://data.worldbank.org/indicator/SL.SRV.EMPL.ZS?end=2019&locations=ID&start=2009
7
​https://data.worldbank.org/indicator/SL.IND.EMPL.ZS?end=2019&locations=ID&start=2009
 This graph shows the employment rate in agriculture as a percentage of total employment
rate. Unlike the other graphs, employment in agriculture8 has taken a constant fall in value
throughout the years. Though it began with a value of 40.5%, it dropped all the way down to 28.6%
in 2019. Overall, this graph represents proof of the Indonesian labour force gaining better
qualifications and being more skilled in terms of their capabilities. Many have likely abandoned the
agriculture sector due to its inefficiencies in terms of profits and work required. With the help of
education and infrastructure provided, a larger proportion of the workforce has easier access to
better employment opportunities in more profitable sectors such as services and the industry.

3. Public Healthcare

The changes of human investment would also be analyzed using the data of public
healthcare, which involves several indicators such as the number of public health centres, human
resources for healthcare, and the health spending in percentage of GDP. Those indicators will be
explained more on the graphs below.

8
​https://data.worldbank.org/indicator/SL.AGR.EMPL.ZS?end=2019&locations=ID&start=2009
 9

The number of public health centres (Puskesmas) in Indonesia increased from 2014 to 2018,
and most significant changes happened in 2018, which went up by 0.17 thousands from 2017.

10

While the number of public health centres was on the uptrend curve from 2014-2018,
however, the human resources for healthcare was going down drastically in 2016, but it then went
up quite high in 2017 reaching 665.83 thousands of human resources in health.

9
https://databoks.katadata.co.id/series?id_kategori=267#
10
​https://databoks.katadata.co.id/series
 Even though the number of public health centres and human resources slightly increased
from 2016 to 2017, but the current health expenditure (% of GDP) in Indonesia decreased instead, as
shown on the graph above.11 The comparison of those three graphs was on 2016-2017 because
there is limitation for data of current health expenditure.

4. Public Services

Public services as one of the factors influencing human investment will also be analyzed
here. As a percentage of government spending, expenditure on public services has been decreasing
overall from 2009 to 2019, from about 70% down to only around 30%12.

11
​https://data.worldbank.org/indicator/SH.XPD.CHEX.GD.ZS?end=2017&locations=ID&start=2009
12
​https://www.bps.go.id/statictable/2009/02/24/1287/realisasi-pengeluaran-negara-milyar-rupiah-2010-2020.html
 5. Information and Communication Technology Development Index (IP-TIK)

Furthermore, Information and communication technology development index also gives an

influence on human investment, in which it measures the level of technological development in both
information and communication of a region, its potential improvement, and a digital divide. Related
to the human capital, the highlight of the table above is the expertise subindex. It shows an increase
from 2015 to 2017, which means that the higher the index the faster the development of
information and communication technology in a region.13

14

However, in the year of 2016, compared to other countries, Indonesia has the lowest
spending in information and communications technology (% of GDP) which was only 1.3%.

13

https://www.bps.go.id/pressrelease/2018/12/17/1532/indeks-pembangunan-teknologi-informasi-dan-komuni
kasi--ip-tik--indonesia-tahun-2017-sebesar-4-99-pada-skala-0---10.html
14
http://www.oecd.org/economy/surveys/Indonesia-2018-OECD-economic-survey-overview.pdf
 c. Government Revenue
1. Tax Revenue

Not only the human and physical investment explained above contributes to the
accumulation process, but government revenue is also involved in the contribution. As a percentage
of GDP, Indonesia’s tax revenue15 dropped as a whole, as shown on the graph. Starting with a value
of 11.1% in 2009, it ended with a value of 10.2% in 2019. It fell slightly in 2010 but rose to a peak of
11.4% in 2012 and then slowly decreased to its lowest point of 9.9% in 2018.

III. Jokowi’s Policies

When he began his presidency in 2014, Joko Widodo had set out nine programs (or known
as “Nawa Cita”) which would become the main goals of his government for the next five years.16 In
this section, we will analyse whether Jokowi’s programs and policies have had any contributions to
the accumulation process in Indonesia.

a. Dana Desa
One out of nine of Jokowi’s priority programs set on his governance in 2014 was to develop
Indonesia from the periphery by strengthening regions and villages within the framework of a
unitary state. The realisation of this goal was through issuance of Undang-undang Nomor 6 Tahun
2014 Tentang Desa.17 The amount of ​dana desa ​allocation increased every year.18 In 2015, it reached
Rp20,7 triliun, 2016 Rp46,98 triliun, 2017 Rp60 triliun, 2018 Rp61 triliun, and in 2019 Rp73 triliun. An
increase of about Rp52.3 trilliun from 2015 to 2019 is stated by Mukhamad Misbakhun (​Komisi XI

15
​https://data.worldbank.org/indicator/GC.TAX.TOTL.GD.ZS?end=2019&locations=ID&start=2009
16
https://nasional.kompas.com/read/2014/05/21/0754454/.Nawa.Cita.9.Agenda.Prioritas.Jokowi-JK
17
​http://www.dpr.go.id/dokjdih/document/uu/UU_2014_6.pdf
18
​https://news.detik.com/berita/d-4265140/4-tahun-jokowi-jk-dan-realisasi-nawacita
DPR member) as proof of how President Jokowi currently sets village development as a priority to
improve welfare of people in rural areas.19

b. Education
One of Jokowi’s main goals in his 2014-2019 presidency is to raise people’s living standards,
one of which is by improving the quality of education. Through his “Indonesia Pintar” program for
primary and secondary students, the government has spent Rp6.2 trillion, and 12 million students
have benefitted from it in 2014.20 By 2019, the program has nearly doubled in budget (Rp 11.2
trillion), with a total of 20.1 million students as beneficiaries.

c. Tax Amnesty
During the presidential debate in 2019, Joko Widodo proudly shared his achievement on the
tax amnesty program.21 Through this program, they were able to locate Rp4,800 trillion and gain
Rp114 trillion for tax income. The main objective of this program is to strengthen Indonesia’s tax
base in order to increase income. However, shifting the tax base upwards instantly, would result in
economic shock.

d. Health
The most successful program initiated by Joko Widodo as the seventh government in
Indonesia is ​Kartu Indonesia Sehat​. This program was first presented in 201422, and is aimed to give
health protection to people and also to reduce health expenses. ​Kartu Indonesia Sehat is used as
health insurance for people to get free treatment. Most people feel the benefit of this program as
according to BPJS data, 216.152.549 people in Indonesia have registered to this program, in which
the total number is 82% of all Indonesia citizens. This number of people was obtained on 10th
January 2019.
This program not only gives effect on the people, but it also gives positive effects towards
economic growth, both short term and long term. The contribution of the program in economic
growth reached about Rp152.2 trillions in 2016, surveyed by Business and Economics Faculty of
Universitas Indonesia. It was also projected to increase to Rp289 trillions in 2021.23

19
https://www.liputan6.com/bisnis/read/3614556/kenaikan-dana-desa-cara-jokowi-prioritaskan-pembanguna
n-daerah
20
https://news.okezone.com/read/2019/02/26/605/2022901/membandingkan-kartu-sakti-jokowi-pada-2014-
dan-2019
21
https://finance.detik.com/berita-ekonomi-bisnis/d-4509655/jokowi-pamer-penerimaan-dari-tax-amnesty-ba
gaimana-datanya
22
https://www.sepulsa.com/blog/perbedaan-kis-bpjs#:~:text=Berbeda%20dengan%20BPJS%20umumnya%2C
%20Kartu,BPJS%20bagi%20yang%20tidak%20mampu).
23
https://finansial.bisnis.com/read/20190124/215/881985/disebut-sebagai-program-jokowi-paling-sukses-ini-
manfaat-kartu-indonesia-sehat
IV. Conclusion
From the physical investment side, both investment, and savings in Indonesia (as a
proportion of GDP) have overall been increasing from 2009-2019 (indicated accumulation process).
From the human investment perspective, all factors including education, employment in service and
industry, public healthcare, public services, as well as technology development index have indicated
there was an accumulation process from the year of 2009 to 2019. Additionally, the fall in
employment rate for agriculture also supports the aspect of human capital investment. However,
some data was not available in certain years, so the graph of the several indicators were used to
determine the overall growth. On the other hand, government revenue did not seem to have
positive growth over years. To conclude, Indonesia has experienced the accumulation process,
mostly contributed by the physical and human investments, as the downtrend of government
revenue did not support its process.
Jokowi’s development policies follow the pattern of the accumulation process. This is
concluded from analyzing four out of the many policies and programs Jokowi had set since his start
of governance in 2014. The first being the issuance of ​Undang-undang Nomor 6 Tahun 2014 Tentang
Desa a​ s the amount of ​Dana Desa a​ llocation increased drastically from 2015 (Rp20,7 triliun) to 2019
(Rp73 triliun). The Indonesia Pintar program has also allocated a significant amount as an
expenditure for education. Furthermore, the tax amnesty program showed a promising result and
could lead to an increase in government income. Lastly, as mentioned above, one of Jokowi’s
programs during his governance is ​Kartu Indonesia Sehat ​(KIS), which is considered successful since
many people have felt the impact of the program, and it has also promoted economic growth in
Indonesia.