High economic growth doesn’t guarantee that Indonesia will become a developed country, right? News – 1 hour ago

Jakarta, CNBC Indonesia – High economic growth is not a guarantee that a country will become developed. This is something that should be a serious concern for future presidential candidates.

Dean of the Faculty of Economics and Business, University of Indonesia, Teguh Dartanto, said that a country is considered a developed country not based on calculating a country’s annual economic growth alone, but rather based on Gross National Income (GNI) per capita. This means that it only measures the income of Indonesian citizens without taking into account foreign direct investment.

“That is calculated by the income of Indonesian citizens, so that if investment is dominated in our country or there is a lot of foreign direct investment, then that is not part of the GNI calculation,” said Teguh in the CNBC Indonesia Profit program.

“We need to understand that what is always conveyed to the public is only about economic growth,” he stressed.

Teguh said that GNI per capita growth is always 1% lower than annual economic growth. Thus, if the government targets the Indonesian economy to grow 5.3% this year, then GNI per capita growth will only grow 4.3%.

“So if we only grow 5.3%, then the actual income growth of the Indonesian population is only around 4.3%,” said Teguh.

Based on calculations by the Ministry of National Development Planning (PPN) or Bappenas, in order to become a developed country by 2045 and escape the trap of a middle-income country, Indonesia needs annual economic growth of at least 6%. So, according to Teguh, the actual growth so far is below 5%, which is still far from the target.

“But based on the experience of other countries, namely China, Malaysia, Thailand, South Korea and Brazil, after the average country falls into the category of upper middle income countries, only China is able to have growth above 6.5%,” said Teguh.

The Economic & Society Research Institute (LPEM) Faculty of Economics and Business, University of Indonesia, in its White Paper entitled From LPEM for Indonesia: Economic and Society Agenda 2024-2029, has also noted a number of signals that Indonesia could fail as a developed country by 2045.

Teguh was one of the authors of the white paper with a paper entitled Navigating Indonesia’s Path to 2045: Equality and Economic Mobility. According to him, Indonesia has not met the sufficient and necessary conditions to become a high-income country like China, Malaysia, South Korea, Thailand and Brazil, when they first entered the group of high-income countries.

LPEM FEB UI noted that Indonesia’s economic growth was relatively stagnant and never went far above the 5% level, credit growth per year never reached 15%, the tax to GDP ratio never exceeded 11% and was even only 9.9% in the last decade , to the industry’s contribution to GDP continuing to decline to now at 18% and extreme poverty persisting at 1.7%.

“We ourselves are honest and open that with the current conditions, or conditions like this, it is very likely that Indonesia will find it difficult to become a high-income country in 2045,” said Teguh.

[Gambas:Video CNBC]

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