creating enabling policy environments to strengthen local ... session 1... · only 2% of city...

CREATING AN ENABLING POLICY ENVIRONMENT TO STRENGTHEN

LOCAL ECONOMIESMari Elka Pangestu

FEB-UI and Indonesia Bureau of Economic Research (IBER)

The 14th IRSA International Conference, Surakarta, July 23 2018

What does strengthening local economy mean in the new normal?

What does strengthening local economy mean?

Same as at National Level: strong, inclusive and sustainable growth and development.

•How can this be achieved and not have strong growth be trade offs with sustainability and inclusiveness? Is it possible to have a strategy that achieves all three?

•How can this be achieved considering the “new normal”? New Normal: uncertain world economy, inequality, sustainable development, urbanization, climate change and technological disruptions

CHALLENGES FOR THE FUTURE: NEW

NORMAL

#1 New normal: rising global risk, but Indonesia shows a steady growth…

New Normal growth: 5.0-5.5 percent (based on current infrastructure, education, and productivity)

#2 New Normal: issue of inequity across region…

Source: EAP Team for Statistical Development, WorldBank, Riding the Wave Report 2017

Most Importantly….within country

Source: BPS, 2017

Higher competitiveness index and bigger size of economy are correlated with higher gini coefficient?

Jakarta,17%

EastJava,15%

East&NorthKalimantan,5% Central

Java,9%

WestJava,13%

BangkaBelitung,1%

Papua,1%

-3

-2

-1

0

1

2

3

4

5

0.25 0.29 0.33 0.37 0.41 0.45

Com

petitivenessIndex

GiniCoefficient

Scale:ShareofPDRB5%

Source: BPS 2017, ACI Competitiveness Index 2017

#3 Meeting the Sustainable Development Goals (SDG): National and Regional Action Plans

AMencapai atau hampir mencapai target SDGs

Asumsi business-as-usual, hasil proyeksi menunjukkan bahwa pada tahun 2030 indikator mencapai

atau hampir mencapai (97.5%) target SDGs.

BMendekati target SDGs

Asumsi business-as-usual, hasil proyeksi menunjukkan bahwa pada tahun 2030 indikator mendekati

target SDGs dan mencapai setidaknya 90% jalan menuju target SDGs.

CLebih dari seperempat jalan menuju target SDGs

Asumsi business-as-usual, hasil proyeksi menunjukkan bahwa pada tahun 2030 indikator mengarah

kepada target SDGs dan mencapai lebih dari 25% jalan menuju target SDGs.

DKurang dari seperempat jalam menuju target SDGs

Asumsi business-as-usual, hasil proyeksi menunjukkan bahwa pada tahun 2030 indikator tersebut

masih antara 25%-50% dari mencapai target SDGs.

EMasih cukup jauh mencapai target SDGs

Asumsi business-as-usual, hasil proyeksi menunjukkan bahwa pada tahun 2030, masih setengah jalan

(50%) atau lebih target SDGs dapat tercapai.

UNPAD SDG CENTER READINESS TO ACHIEVE SDG SCORECARD (40 indicators – 16 SDG)

10

Source: UNPAD SDG Center, Menyongsong SDGs: Kseisapan Daerah-Dearah di Indonesia (2017)

NATIONAL READINESS TO MEET SDGS (40 Indicators)

National Score 1.86 < C

Ony 24% (327/1383) provinces*indicators) projected to reach or nearly reach SDGs by 2030 with BAU

To reach SDGs by 2030 need hard work (national and regional)

11

A24%

B17%

C13%

D18%

E28%


AVERAGE SCORE BY PROVINCEOnly 13 provinces have score > 2 (C)

12

2,4

9

2,3

7

2,3

0

2,2

2

2,2

0

2,1

7

2,1

5

2,1

0

2,0

7

2,0

7

2,0

7

2,0

5

2,0

5

1,9

3

1,8

8

1,8

5

1,8

5

1,8

3

1,8

3

1,8

0

1,7

8

1,7

8

1,7

6

1,7

3

1,7

3

1,7

3

1,7

1

1,6

8

1,6

6

1,6

6

1,6

3

1,6

3

1,6

3

1,5

1

1,1

7

0

0,5

1

1,5

2

2,5

3

KA

LT

IM

KE

PR

I

DIY

RIA

U

BA

BE

L

JAT

EN

G

DK

I

JAT

IM

SU

MB

AR

BA

NT

EN

SU

LT

RA

KA

LU

T

JAB

AR

BA

LI

JAM

BI

MA

LU

KU

NA

SIO

NA

L

SU

LU

T

SU

LSE

L

KA

LT

EN

G

SU

MU

T

GO

RO

NT

AL

O

KA

LB

AR

BE

NG

KU

LU

LA

MP

UN

G

SU

MSE

L

KA

LSE

L

NA

D

NT

T

MA

LU

T

NT

B

SU

LT

EN

G

SU

LB

AR

PA

PB

AR

PA

PU

A

RELATIVELY NOT READYRELATIVELY READY


Some main results from the scorecard by region

◦ All provinces face critical challenges to meet the SDGs by 2030, without exception. Even DKI Jakarta still needs to reduce stunting by 6% more to reach SDG target. West Java needs to increase years of schooling by 2,5 years to reach SDG target.

◦ For all provinces (mostly far from ready): underemployment (< 35hours work), infant mortality, waste, CO2, gender (female labor force participation rate) and security/peace indicators

◦ Provinces which are behind in all of the 16 SDGS compared to other provinces: East Nusatenggara (NTT), North Maluku, West Papua, Papua

◦ For the more developed provinces: inequity and carrying capacity of urban areas and quality of the environment are major challenges

◦ Source: UNPAD SDG Center, Menyongsong SDGs: Kseisapan Daerah-Dearah di Indonesia (2017)

Source:

Image: NationsOnlineProject

#4 New Normal : Urbanization, By 2030, 70% of Indonesia’s population living in cities and

135 million consuming class

The annual rate of urbanization is 2.7% since 2010,

Name 2018 Population

Jakarta 8,540,121

Surabaya 2,374,658

Medan 1,750,971

Bandung 1,699,719

Bekasi 1,520,119

Palembang 1,441,500

Tangerang 1,372,124

Makassar 1,321,717

South Tangerang 1,303,569

Semarang 1,288,084

Depok 1,198,129

Indonesia has 11 cities with more than a

million people, 122 cities with between

100,000 and 1 million people,

and 242 cities with between 10,000 and 100,000 people.

http://worldpopulationreview.com/co

untries/indonesia-population/cities/

Indonesia’s Urban Story

◦ Every 1% growth in urban population correlated with per capita GDP increase of 13% India, 10%

China, 7% Thailand, but only 4% of Indonesia due to the congestion, pollution, and disaster

risks resulting from insufficient infrastructure investment.

◦ Indonesian cities are not spending well/enough infrastructure. Growth av 5.8% p.a. (2000s),

but infrastructure stock grew by only 3% of GDP, compared to China at 10% of GDP

◦ Insufficient investments in infrastructure and poverty:

◦ access of households to safe water 48% (50% more than a decade ago);

◦ sewerage coverage only in 11 of 98 cities

◦ Only 2% of city residents have access to centralized sanitation systems.

◦ High population density can put more pressure on existing infrastructure.

◦ Urban population density in Indonesia increased sharply, from 7,400 peopl/sqm (2000) to

9,400 people/sqm (2010)

◦ New urban land added/ new resident < 40 sqm, the lowest in the region.

Source: World Bank, Indonesia Urban Story report

Slum area

Source: Titik Anas et al, Urban Amenities, Services and Industry Agglomeration (IRSA-IBER Panel 4E) – data PODES

Role of liveable cities and towns

Cities are important drivers of development and poverty reduction in both urban and rural areas, as they concentrate much of the national

economic activity, government, commerce and transportation, and provide crucial links with rural areas, between cities, and across

international borders

Urban living is often associated with higher levels of literacy and education, better health, greater access to social services, and enhanced opportunities for cultural and political participation

Urban amenities are related to agglomeration of services and manufacturing activities (Anas et al IBER-IRSA Parallel Session IE)

# 5 Climate Change: Indonesia Emission Baseline (BAU): 2000-2030 (Thousands of Ton CO2e)*

19

(*) Source: BAPPENAS

Energy and Transportation Waste Peat decomposition

• Indonesia is 10th among all countries in the World in total GHG emissions

IPPU1

(1) Emissions from Industrial Processes and Product Use

(2) Agriculture, Forestry and Other Land Use

AFOLU2 (no Peat) Peat fire

Indonesia’s NDC: 29% fair scenario

and 41% optimistic scenario with

support

Is there a trade off between CO2 emission and growth?

Jakarta,17%EastJava,15%

East&North

Kalimantan,5%

Central

Java,9%

WestJava,13%

BangkaBelitung,1%

Papua,1%

-0.02

0

0.02

0.04

0.06

0.08

0.1

0.12

-2 0 2 4 6 8 10 12 14

CO2Emission,tonpercapita

RegionalGDPGrowthYoY2017-2016(%)

RegionalGDPandCO2Emission:Positivelyassociated

#6 TECHNOLOGICAL DISRUPTION: INDONESIA DIGITAL PROFILE

143million

Internet Users

(55% population, grow 8% pa)

Users60%

Young population

(age <60 years old)

71million

Mobile Internet users

(28% population, grow 20% pa)

44%users

Access internet via

MOBILE ONLY

Internet users concentrated in Java

Source: APJII (2017)

Work- Traditional job, e.g.

LinkedIn

- New job, e.g. Gojek

riders, selebgram,

youtuber, vlogger

TECHNOLOGY,

ACCESS AND

REDUCING

REGIONAL

DISPARITY

Information- Price information

- Reviews

- Product

Market- e-Commerce

- SMEs

- Export-Imports

Financial

Services- 50% unbanked

(Findex, 2018)

- Fintech

- Microlending

Tourism- Ticket booking, e.g.

Traveloka

- Hotel booking, e.g. Trip

Advisor, Airbnb

- Digital branding, e.g.

#instagrammable

Public Services- Health

- Education

- Donation

DELIVERING STRONG, INCLUSIVE AND

SUSTAINABLE GROWTH & DEVELOPMENT

How to achieve strengthening the local economy in new normal?

How can the resources (economic/capital, natural, human, but also cultural and social) in the local economy, be the basis for this strong, inclusive and sustainable growth and development at the local level?

We need enablers and policies that will deliver utilize existing resources to strengthen the local economy:

• Basic infrastructure (electricity, sanitation, clean water) and physical infrastructure support, but sustainable infrastructure, connectivity and urban amenities (liveablecities),

• Productivity increase and getting out of the middle income trap: invest in human capital development (learning outcomes not just years of schooling), health (quality not just quantity) and basic infrastructure, training and upskilling addressing mismatch/technological disruption),

• The right pattern of agglomeration of services and manufacturing industries that will create jobs & sustainable development

• Creating the conducive investment and innovation environment

• The milestone events of 2015 have set a new global agenda focused on three simultaneous challenges:

• Delivering on sustainable infrastructure is at the center of all three challenges.

• Well-designed infrastructure can be pro-growth, pro-poor, and pro-climate: does

not have to be trade off

Source: New Climate Economy

Reignite global growth Deliver on the SDGs Drive strong climate action

#1. Infrastructure that is smart and sustainable: the future of growth and development (vs $1.5 T and projects)

25

Environment

EconomySocial

Sustainable infrastructure is crucial to the story

26


Why? The Three Doublings: Scale, Urgency and Opportunity

8

• The world’s infrastructure will roughly double in 15 years;

• The world’s economy will roughly double in 20 years;

• The population of towns and cities will double in roughly 40 years, and most cities will be shaped in the next 20 years.

• Similar story in Indonesia


• The window for making the right choices is uncomfortably narrow because of a shrinking

carbon budget, the lock-in of capital, technology and emission patterns for decades and because

remedial measures will become progressively costly.

• Postponement of actions is highly dangerous because of increasing uncertainties and likelihood

of catastrophic risks even if there is a linear relationship between concentrations and temperatures.

• At the same time the attractiveness of a low-carbon growth path is increasing, because of

technological and cost advances. It is also clear that strong climate action has important co-benefits

in terms of sustained growth, improvement in the quality of life with economic benefits, and delivery

on the SDGs. (Bappenas Low Development Carbon Initiative)

• BUT if we do not take the opportunities now, 2°C target will be out of reach with all the grave

consequences.

• Next twenty years will be decisive in world history: deep responsibility as well as great opportunity.

A Narrow Window of Opportunity

10


Source: OECD, Investing in Climate, Investing in Growth

Policies are integrated and are reinforced by each other: Three components of a well-aligned policy framework for climate and growth

6

The way forward

◦ Be clear on the objective: strong, sustainable and inclusive development and sustainable infrastructure

at the center of it

◦ Identify Development Needs:

◦ SDG Framework

◦ Disaggregated investment requirements in sustainable infrastructure platforms: energy and transport, urbanization

and cities, agriculture, food and land use, forests (peat decomposition and peat fire), waste and industrial

processes and product use.

◦ Additional upfront financing costs for sustainability.

◦ Policy Drivers needed: sectoral approach to platforms (cross sectoral, stakeholders), address regulatory

and pricing issues, and institutions and capacity

◦ Incentives and disincentives: fiscal policy (budget – green tagging, green sukuk bonds, fiscal incentives), Government

guarantees, local government role, OJK: green financing guidelines (incorporated in interest rates and returns)

◦ Government policy (regulations and pricing): policy certainty and consistency over a long period of time and level

playing field; e.g. energy (renewable energy, PLN as single buyer), removing price distortions (fuel subsidy, pricing

resources appropriately and pricing of delivery)

Examples of Green and Smart

• Green and smart buildings, roads, telecommunications etc

• Biznet building broadbands at village level

◦ Sustainable food and land use (use of land, water, waste management)

◦ E.g. CO2 emission from agricultural growth along Bengawan Solo River Basin (infrastructure,

technology-smart, and policies to incentivize or disincentivize)

◦ Sustainable and smart public transport (public transportation that uses non fossil

fuel, energy, efficiency, smart technology for efficiency and management)

◦ Sustainable public transport (trans semarang rapid transit bus – paper in IRSA))

◦ Example – smart systems for (Eg. Big data for Bus Rapid Transit (BRT) in DKI Jakarta)

Connectivity matters…Access To Electricity

PAPUA47.78

SULTRA

74.47

NTT

58.93

NTB

72.22

KALTARA

77.37

KEPRI

76.37

KALTENG

73.32

91.16% National Electrification rates

(2016)

Source: PwC, Power in Indonesia 2017

Connectivity matters…Mobile and Communications Connectivity

Source: www.opensignal.com, APJII (2017)

Mobile Coverage: All providers in All types of connection

Internet Users are

concentrated in

JAVA

http://www.opensignal.com/

… so does the capacity to utilize

Source: SUSENAS, 2014Image: http://www.emitraindonesia.org/

02# INVEST IN HUMAN CAPITAL

◦ Reduce stunting, increase female labor participation rate

◦ Education and skills:

• not just quantity but quality (55% of 15 year olds are functionally illiterate - PISA score

Indonesia still among the lowest group of the ranking)

• Learning not years of schooling (IBER_IRSA Panel 4E, Education in Indonesia, Daniel

Suryadarma)

• Mismatch skills, education and jobs (IBER-IRSA Panel 4E, Indonesian workforce: skills

for the future), and paper on synchronizing the job market (vocational schools) (Panel

1J W.H. Adi Wijoyo and G.F Dharmawan)

◦ Health: spending on health is still among the lowest as well, challenges of

universal health care delivery (quantity, quality; puskesmas and local government

role)

#3 Liveable cities and locations: cultural and social resources, urban amenities ◦ In general: regions with high proportion of manufacturers (proxy by share of employment) are not regions

with high density of modern services (high human capital services). Among urban amenities, variables that

are positively correlated with agglomeration of modern services sector is higher education – the existence of

public university in particular (Titik Anas, et al IRSA-IBER, Parallel Session IE)

◦ Other papers in IRSA – Indonesia’s city network, Indonesia’s mentropolitan spatial planning etc

◦ Types of urban amenities:

◦ Telecommunication facilities for internet based activities – intenet connectivity (Market and Finance)

◦ Schools as source of human capitals

◦ Banks for financial transactions – access to finance

◦ Hotels to facilitate business travellers

◦ Entertainment centres for the welfare of workers and their families

◦ Retail - Market

◦ Public space

◦ Creative and innovative spaces (innovation) – local wisdom

◦ Openness to talent

EGI Manufacturing Index by Province (from Survei Industri)

37

0,000

0,010

0,020

0,030

0,040

0,050

0,060

0,070

0,080

1990 2013Source: Upcoming, Titik Anas, Teguh Yudo, Miryana Vinka

Higher Education

The A accredited higher education institution are also concentrated in Jawa

0

5000

10000

15000

20000

25000

Ace

h

Bal

i

Ban

gka

Bel

itun

g

Ban

ten

Ben

gkulu

D.I

. Y

ogy

akar

ta

D.K

.I. Ja

kar

ta

Go

ron

talo

Jam

bi

Jaw

a B

arat

Jaw

a T

enga

h

Jaw

a T

imur

Kal

iman

tan

Bar

at

Kal

iman

tan

Sel

atan

Kal

iman

tan

Ten

gah

Kal

iman

tan

Tim

ur

Kep

ula

uan

Ria

u

Lam

pun

g

Mal

uku

Mal

uku U

tara

Nusa

Ten

ggar

a B

arat

Nusa

Ten

ggar

a…

Pap

ua

Pap

ua

Bar

at

Ria

u

Sula

wes

i B

arat

Sula

wes

i Sel

atan

Sula

wes

i T

enga

h

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wes

i T

engg

ara

Sula

wes

i U

tara

Sum

ater

a B

arat

Sum

ater

a Sel

atan

Sum

ater

a U

tara

A B C

Source: Upcoming, Titik Anas, Teguh Yudo, Miryana Vinka

Higher Education

High concentration of higher education institutions in Jawa – particularly in West Jawa and Jakarta

Source: Upcoming, Titik Anas, Teguh Yudo, Miryana Vinka

Tale of Two Cities: South Tangerang vs Bekasi

◦ Bekasi is more manufacturing

agglomerated (less urban amenities,

quantity of hospitals and universities,

but once adjust for quality differ from

South Tangerang)

◦ South Tangerang is more services

agglomerated (better urban amenities

– less pollution and slum area, and

better quality education and health

facilities)

◦ PODES data does not have quality

measures

Source: BPS, Economic Census 2016

0%

10%

20%

30%

40%

50%

60%

70%

80%

Bekasi Bekasi_kota South Tangerang

Manufacturing Low Services High Services

#4 Conducive and Investment And

Innovation Environment

Overall Competitiveness

Source: Asia Competitiveness Institute

Macroeconomic Stability


Financial, Businesses and Manpower Conditions


CONCLUSIONS

Conclusions

◦ Strengthening of local economy needs to use new frame of strong, inclusive and sustainable development with SDG (regional) and Climate Change in mind, and prioritize the areas that will have most impact. Then identify the development needs given resources, and identify a sustainable development strategy that is medium/long term with clear impact, policy drivers and support (central and local government, stakeholders, crowd in private sector)

◦ Evidence based policy making very important – role for continued improvement in data and research (academic study and policy relevance eg IRSA, IBER; research quality and networking)◦ Data needs: BPS (Susenas, Census Economy, PODES, Sakernas), IFLS, etc. Researchers

input and work with BPS, access to data

◦ Private sector competitiveness surveys at the regional level.

◦ Big data and analytics (researchers to work with those who own or manage big data)

ATTACHMENTS

48

Tujuan Indikator Target Kuantitatif Sumber

1 Penduduk miskin dengan garis kemiskinan $1.90 per hari (%) 0 UN

Penduduk miskin dengan garis kemiskinan nasional (%) Menurun 75% UN

2 Balita dengan tinggi badan pendek dan sangat pendek (%) pengurangan sebesar 40% UN, WHO

Balita dengan berat badan kurus dan sangat kurus (%) di bawah 5% UN, WHO

Produktivitas tanaman pangan (t/ha) 7.2 *

3 Angka kematian dibawah 5 tahun (per 1.000 kelahiran hidup) 25 UN

Angka kematian neonatal (per 1.000 kelahiran hidup) 12 UN

Angka harapan hidup saat lahir (tahun) 78.06 *

Jumlah kematian akibat kecelakaan lalu lintas (per 100.000 penduduk) Menurun 50% *

Penduduk dengan kebiasaan merokok tiap hari di atas usia 15 tahun (%) Menurun 25% *

4 Rata-rata lama sekolah (tahun) 12 *

APK Perguruan Tinggi Meningkat dua kali lipat *

Angka melek huruf usia 15-24 (%) 100% UN

5 Tingkat kesuburan wanita (kelahiran per 1.000 wanita usia 15-19 tahun) Menurun 50% *

Proporsi perempuan dalam parlemen (%) Meningkat dua kali lipat *

Tingkat partisipasi angkatan kerja wanita (%) 82.71 *

6 Rumah tangga dengan air minum layak (%) 100 UN

Rumah tangga dengan sanitasi layak (%) 100 UN

7 Rasio Elektrifikasi (%) 100 UN

8 PDRB Per Kapita (Harga Konstan 2016) (juta rupiah) ≈ US$3,956 *

Tingkat pengangguran dengan kriteria jam kerja <35 (%) Menurun 50% *

Penduduk usia muda yang tidak bekerja, tidak sekolah dan tidak pelatihan (%) Menurun 50% *

Penduduk usia 5-14 tahun yang termasuk ke dalam kategori pekerja anak (%) 0 UN

INDIKATOR

49

Tujuan Indikator Target Kuantitatif Sumber

9 Kondisi Jalan dengan Kualitas Baik dan Sedang (% dari Total Panjang Jalan) 100 UN

Rumah tangga yang pernah mengakses internet dalam 3 bulan terakhir (%) 100 UN

10 Rasio gini 0.21 *

Rasio palma 0.72 *

Persentase Pengeluaran Kelompok Penduduk 40 persen terbawah 26.61% *

11 Rumah tangga yang memenuhi spesifikasi rumah sederhana sehat (%) 100 UN

Rata-rata Partikulat 10 (PM10) 50 *

Rumah tangga kota dengan jaringan air ledeng (%) 100 UN

12 Rumah tangga dengan perilaku memilah sampah (%) 63.76 *

13 Emisi CO2 per kapita (tCO2/kapita) 29% turun dari data terakhir *

14 Area keanekaragaman hayati laut yang dilindungi (% luas perairan) 10 UN

15 Proporsi luas area hutan terhadap luas daratan (%) meningkat *

Area konservasi yang dilindungi (% luas wilayah) meningkat *

Persentase Lahan Kritis (kritis + sangat kritis) terhadap Luas wilayah (%) Menurun 50% *

16 Kejadian Pembunuhan (per 100.000 penduduk) Menurun 50% *

Jumlah tahanan (per 100.000 penduduk) Menurun 50% *

Risiko penduduk terkena tindak pidana (per 100.000 Penduduk) Menurun 50% *

Anak di bawah 5 tahun yang sudah memiliki akte kelahiran (%) 100 UN

INDIKATOR

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