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The Indonesian economy has enjoyed strong and stable growth over the past decade and a half, leading to impressive reductions in poverty and major improvements in living standards. But challenges remain to continue to converge towards higher-income countries, according to the latest OECD Economic Survey of Indonesia.


The Survey, presented in Jakarta by OECD Secretary-General Angel Gurría and Indonesian Minister of Finance Bambang Brodjonegoro, notes that economic growth has slowed in recent years and suggests that accelerating the pace of reform is needed to ensure sustainable and inclusive growth that benefits all Indonesians. Despite a slowdown in 2014 and a challenging international environment, Indonesian GDP growth is projected to reach 5.3% in 2015 and 5.9% in 2016.

“Indonesia has been through a remarkable transformation, with tens of millions of people lifted out of poverty,” Mr Gurría said. “Today Indonesia is out-performing most of its regional neighbours, and most other emerging market economies, but by accelerating reforms it can do even better, grow even faster, and ensure that all Indonesians share the benefits of growth. Improving the education system and the country’s infrastructure will be critical to future success.”

Mr Gurría also presented a new OECD Education Policy Review of Indonesia, with Minister of Culture and Elementary and Secondary Education Anies Baswedan, during the same news conference. The Policy Review points out that Indonesia faces a unique window of opportunity: with 43% of its 250 million-strong population under the age of 25, the country is already endowed with the human resources necessary to propel growth, provided its workforce is equipped with the right skills.

To reap the demographic dividend, the Indonesian government must raise the quality of education, through improvements in teacher training, professional development and increased accountability. It must extend participation in the education system, to ensure that all students have an equal chance to progress to higher levels of learning. And it must strive for greater efficiency within the education sector.

The Economic Survey points out that the central government’s strong fiscal position – marked by low deficits and low public debt – offers the opportunity to raise greater revenues to fund higher spending targeted at improving education, boosting infrastructure and expanding the social security system.

Better targeting of existing social security programmes would ensure that measures to alleviate poverty, including cash transfers, health care spending and food subsidies, benefit those most in need. Reducing high levels of labour market informality, through the easing of labour market rigidities, would improve incentives for workers to join the social security system, the Survey said.


Indonesia should also do more to make the most of its natural resources, notably by increasing agricultural productivity, through technical assistance and training, while improving farmers’ access to credit. It should also seek to diversify energy sources away from fossil fuels, notably by promoting investment in its abundant geothermal resources.