Persistent informality prevents inclusive growth

Inclusive growth is poverty and inequality-reducing and characterized by inclusion or participation in the growth processes. This inclusion is in terms of employment and access to expanding capabilities via access to basic public goods such as education, health, and other livelihood-sustaining infrastructures. This is way beyond the simple definition of pro-poor growth, in absolute and relative terms.

This conceptual framework was part of the presentation delivered by Dr. Arief Anshory Yusuf, Executive Director of UNPAD’s SDGs center, at the 2nd Symposium of Asian Development Studies on Friday, 2 September 2016 held at University of Malaya, Kuala Lumpur Malaysia. The symposium was jointly organized by Korean Association of International Development and Cooperation (KAIDEC), Department of East Asian Studies, University of Malaya, and Institute of Strategic and International Studies (ISIS), Malaysia. The event was sponsored by the Korea Foundation.

On the second day of the symposium, Dr. Arief Anshory Yusuf shared a panel on “urbanization, social economy and inclusive growth in Asia”. Other speakers include Mike Douglas (National University of Singapore), Datuk Denison Jayasurya (Universiti Kebangsaan Malaysia), and Marife Ballesteros (Philippines Institute for Development Studies/PIDS), and Ilcheong Yi (UN research institute for Social Development, Geneva).

Furthermore, Dr. Yusuf noted that although Indonesian growth for the last two decades has been actually pro-poor in absolute term (reducing poverty), in relative term it has not. This is because the growth was still accompanied by unprecedented rising inequality. Some improvement, has been quite visible in other dimensions of inclusiveness such as access to basic infrastructure. However, inclusiveness in terms of employment opportunities has been worryingly stagnant. High and persistent degree of labor market informality has prevented inclusive access to decent job opportunities for hundred millions of Indonesians.

In his final remarks, Dr. Yusuf mentioned several policy recommendations for the current government to increase the chance of getting Indonesian growth more inclusive. First, we need to ensure that the massive infrastructure investment, that the government is currently undertaking, will create inequality-reducing growth particularly by providing better employment opportunities. Secondly, the large allocation of infrastructure spending should be balanced with social protection spending with similar magnitude to ensure more equal opportunity. Third, we need to make sure that the self-sufficiency agenda is not hurting the poor through rising food prices, and finally, we need to make sure that fuel subsidy won’t be coming back when the world oil price start rising again.

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