Literacy, Wages Gain in Indonesia, But Income Equity Issues Remain

INDONESIA'S economic growth is being overshadowed by a growing disparity between rich and poor, according to experts here.

Now the world's fourth largest country in population, Indonesia has seen an average 6.5 percent growth in its gross domestic product over the past three years. Government statistics also show sharp declines in overall illiteracy and poverty rates.

"Life is now more prosperous," agrees Herodinya, owner of a small store selling scrap wood in a slum area near Jakarta. Like most Javanese, he uses only one name.

"In my parents' time," Herodinya says, "they didn't have any rice. Now we have plenty. [Yet] it's also true that the rich are becoming very much richer and the poor are getting poorer."

Even some wealthy businesspeople say this disparity has become the source of social unrest and blame the government for not doing anything. Recent government measures "only profit the conglomerates who don't even pay attention to poor people," said Probosutedjo, owner of the massive Mercu Buana business group and half brother of Indonesian President Suharto, at a recent conference.

The government must deal with a population increasing at the rate of 1.7 percent a year. That is less than population growth in the nearby Philippines or Malaysia, but still high enough that it is difficult for Indonesia to create sufficient numbers of new jobs.

After the huge fluctuations in oil prices of the 1970s, Indonesia began to diversify its industrial base away from reliance on black gold. It attracted a variety of light industries, including footwear, textiles, and clothing. It also promoted tourism.

The government has used some of the country's wealth to attack social problems.

Adult illiteracy has declined from 61 percent in 1960 to 23 percent in 1990, according to government figures.

In 1976, 40 percent of Indonesia's population lived under the official poverty line, according to World Bank estimates. Today the poverty rate is 17 percent.

But those statistics are misleading, says a labor leader who uses the pseudonym Ahmad.

The Indonesian government sets the poverty level too low for political purposes, he says. "If it were only increased slightly, the poverty rate would go way up."

Mari Pangestu, head economist at the Centre for Strategic and International Studies, agrees that the statistics are controversial. "But there has been a decline in absolute poverty," she insists. "It's the relative distribution of income that has not improved."

Labor activist Ahmad says workers read press accounts of sharply increasing company profits, but see no raises or improvements in their working conditions.

"Not only are workers victimized," he says. "Farmers and small landowners have to sacrifice their land when the government forces them to sell to the big companies. A very few people monopolize the profits."

Ahmad says this disparity in wealth has caused an unprecedented wave of wildcat strikes over the past year. The government-recognized trade union federation rarely sanctions strikes, so most are organized by semi-clandestine workers' committees. The government routinely declares the strikes illegal and arrests the leaders.

Government officials acknowledge the growing disparity in wealth and have suggested a variety of voluntary measures.

President Suharto and his ministers have urged big companies to transfer stock shares to cooperative enterprises. State-owned companies were encouraged to donate a percentage of their profits to small businesses.

But such schemes have been ineffective, according to economist Pangestu.

The government must "address the problem in a more broad-based strategy," she says. She urges higher taxes on income, land and capital gains.

"Many times land is undervalued for tax purposes," she says. "That could be a big source of income for the government."

Business magnate Probosutedjo also calls for the rich to pay higher taxes in order to provide greater social services. The estimated 27 million Indonesians falling below the poverty line "are the result of the government's negligence," he says.

Ahmad says workers are not waiting for tax reform. Workers' committees are planning more wildcat strikes in an effort to improve wages and working conditions. Most workers earn no more than the minimum wage of $2.40 per day, and many companies do not even pay that, according to economists.

Ahmad cites a survey by an AFL-CIO affiliated group in Jakarta that workers need wage increases just to come up to the minimum physical level for survival.

"That's about 30 percent more than the current minimum wage," he says.

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