Despite slowing down in recent years, Indonesia’s growth trajectory remains impressive. The country’s gross national income per capita has steadily risen, from $2,200 in the year 2000 to $3,524 in 2014. Today, Indonesia is the world’s fourth most populous nation, the world’s 10th largest economy in terms of purchasing power parity, and a member of the G-20. It has made enormous gains in poverty reduction, more than halving the poverty rate since 1999, to 11.3 percent in 2014.
Indonesia’s economic planning follows a 20-year development plan, spanning from 2005 to 2025. It is segmented into 5-year medium-term plans, each with different development priorities. The current medium-term development plan – the third phase of the the long-term plan -- runs from 2015 to 2020, focusing, amongst others, on infrastructure development and improving social assistance programs in education and health-care. Such shifts in public spending has been enabled by a reform of long-standing energy subsidies, allowing for more investments in programs that directly impact the poor and near-poor.
Considerable challenges remain in achieving Indonesia’s goals.
Out of a population of 252 million, more than 28 million Indonesians currently live below the poverty line and approximately half of all households remain clustered around the national poverty line set at 292,951 rupiahs per month ($24.4).
Employment growth has been slower than population growth. Public services remain inadequate by middle income standards. Indonesia is also doing poorly in a number of health and infrastructure related indicators, and as a result, may fail to reach some Millennium Development Goals (MDG) targets.
For example, data from 2013 shows that Indonesia still suffers 228 infant deaths for every 100,000 live births, while the MDG aims to reduce this to 105 deaths by 2015. At 190 maternal deaths for every 100,000 live births, maternal mortality also remains high.
Also, despite recent progress, access to improved sanitation facilities currently stands at 68 percent of the population, which remains significantly short of the MDG target of 86 percent.
The investment climate, though generally positive, faces continued regulatory uncertainties, shortcomings in infrastructure provision, and adjustments in minimum wages. However, the establishment by the Investment Coordination Board of a One-Stop-Service for business licensing has encouraged investors.
Last Updated: Apr 17, 2015