Social and Economic Development
Hirschman, a German economist, conceived the idea that an economic development model must be changed by incorporating social elements. In his view, there are three key economic development targets – Poverty, Unemployment and Inequality – which can be potentially brought down if GDP per capita doubles.
Indonesia, which enjoyed high economic growth, also saw its Gini index increase in the period 1998-2021, albeit not significantly. In 2010, Indonesia registered 6.22 percent growth, jumping from 4.63 percent the prior year. However, the country’s Gini index also rose, from 36 to 40.5.
Economic growth hit 6.49 percent in 2011 and 6.23 percent in 2012, thanks to the commodity boom. The price of crude palm oil (CPO) surged from US$741.15 per metric ton in 2009 to US$1,193.37 in 2011. However, inequality was also on the rise. GRAPH-5
Thus, the Government should emulate Amartya Sen, who placed emphasis on the improvement of quality of life as the ultimate goal of economic development. To do this, the Government needs to change the focus of economic development, by improving the quality of human resources.
Human Capital Development
Human resource development in Indonesia unfortunately seems to be stalling, as indicated by labor productivity and technological readiness and innovation. Indonesia’s labor productivity is below that of neighboring countries, at 3.7 percent, according to APO Productivity Databook 2013, lower than Thailand (5.6 percent) and the Philippines (5.4 percent). This was due to the fact that the majority of workers had only completed a junior high school education or lower.
Another indicator is Indonesia’s Human Capital Index (HCI), published by the World Bank in 2017: it ranked 87 out of 157 countries. Among its ASEAN peers, Indonesia was lagging behind Singapore, Vietnam, Malaysia, Thailand and the Philippines. GRAPH-6
Improving the quality of education in Indonesia takes careful planning to address perennial problems. During the New Order era, educational development planning was centralized through SD Inpres, the massive primary school development program in the 1970s, implemented under the Soeharto presidency. It was deemed successful in lifting school attendance rates. The policy was even researched by Esther Dufo, the MIT economist who won a Nobel Prize in economics. Her research was titled “Schooling and Labor Market Consequences of School Construction in Indonesia: Evidence from An Unusual Policy Experiment.” But along with regional autonomy, the responsibility for education has shifted to local governments. Due to suboptimal planning and implementations, compounded by lack of coordination and readiness, education development in Indonesia has stagnated, despite the massive 20 percent budget allocated for the sector.
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One of the solutions offered is participation-based approach, which encourages active participation from students, teachers and parents. This is reflected in the School Self-Evaluation (SSE) process, meant to diagnose all existing problems in educational units. SSE aims to identify problems that arise one year after the start of a school year. The results of this internal diagnostic assessment are summarized in a report on school quality which portrays overall school conditions, based on prescribed standards.