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Harnessing Demographic Dividend: The Future We Want
Republik Indonesia
Ministry of National Development Planning/ Bappenas – National Population and Family Planning Board/BKKBN
Presented at 50th Commission on Population and Development
April 5th, 2017
OUTLINE
1. Current situation
2. Population structural change in Indonesia
3. Harnessing Demographic Dividend
4. Implementation of program
2
Indonesia is facing population structural changes, over the
last 40 years we gained 20 years in life expectancy
3
Indonesia is currently reaping the benefits of the demographic dividend
15,000 10,000 5,000 0 5,000 10,000 15,000
0-4
10-14
20-24
30-34
40-44
50-54
60-64
70-74
80-84
In thousand people
Male Female Working School Lainnya Indonesia had one of the strongest and
most successful national planning initiatives in the world.
Early 70s program on family planning resulted more than half a reduction of number of children per woman.
Big variations still occur among provinces.
Dependency ratio 49,2% - means Indonesia has the largest working population in the region
Total labor force participation is 61%. Women’s participation is stagnant at less than 50%
Number of elderly (65+) is 13,7 Milliion; 24% of them still working (65+) and 16% of 75+
0
1
2
3
4
5
6
7
8
1971 1980 1990 1991 1994 1997 2000 2002 2007 2010 2012 2015
Total Fertility Rates at National and Selected Provinces, 1971-2015
Papua 2,59 (2015)
Jogjakarta 2,1 (2015)
Number of population 255,1 Million
Life expectancy increased to 70,8 years
Most of population lives in city (53,1% ) Early 1970s: The
start of village based contraceptie
delivery
2015
0
20
40
60
80
65-69 70-74 75-79 80-84 85+
Elderly Labor Force Participation (%), 2015
Male
Female
Total
4 Sources: Central Statistical Bureau, Supas and SDKI various years
149 MIO 1,103 PEOPLE/KM2
15,3 MIO 28,2 PEOPLE/KM2
55,2 MIO 114,8 PEOPLE/KM2
18,7 MIO 99,2 PEOPLE/KM2
6,9 MIO 13,8 PEOPLE/KM2 9,9 MIO
147 PEOPLE/KM2
Uneven Population Density, Distribution, and Demographic Transition: Some regions are already experiencing an aging population – targeted specific interventions are required for each province
Late transition Below replacement rate TFR,
large share of older population, window of opportunity has
passed
Early transition
Increasing share of children and working population, older
people start to increase
Pre-transition
stagnant declining fertility, later period of window opportunity
Uncertainty to reach the window of opportunity
High fertility, high mortality, low access to education and health,
Sources: 1. Adioetomo, Forthcoming IRSA Book Series on Regional Development No. 15, 2017; 2. Central Statistical Bureau, Supas 2015 5
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
Per capita Consumption of Education, by single age, 2012
private public
Rel
ativ
e to
lab
or
inco
me
30
-49
-
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
0 1 2 3 4 5 6 7 8 9 101112131415161718192021222324252627282930
Percapita Consumption on Education, by single age, 1993
private public
42%
58%
46%
54%
Human Capital Investment is the key to capitalize on the demographic dividend
Improvement on quality, access, and participation for better productivity
Education and training are vital to achieveing greater productivity with stronger links to industry
Public education expenditures has been increasing significanly following to the Law on Public Education
12 years compulsory education
Rel
ativ
e to
lab
or
inco
me
30
-49
Age Age
Sources: BPS, Bappenas, authors calculation using National Transfers Account
6
0.00
0.01
0.02
0.03
0.04
0.05
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
Per capita Consumption of health by single age, 2012
public health private health
-
0.01
0.02
0.03
0.04
0.05
1 2 3 4 5 6 7 8 9 10111213141516171819202122232425262728293031
Per capita Consumption of health by single age, 1993
private health public health
Mortality declining, life expectancy growing: health expenses start to increase. In 2014 Indonesia introduced a National Health Insurance scheme
Indonesia’s health pattern has gradually shifted from communicable to non-communicable diseases
Although it is not as significant as education expenditures, budget allocations for health have increased
Focus on infant mortality rate, improving nutrition, and reproductive health
Inclusion of health indicators into SDGs to promote healthy lifestyles
Promoting healthy and happy elderly populations
Sources: BPS, Bappenas, authors calculation using National Transfers Account 7
y = 5.1845x + 1.3646 R² = 0.0177
-3
-2
-1
0
1
2
3
4
5
6
-15% -10% -5% 0% 5% 10% 15%Nu
mb
er
of
Job
s C
rea
ted
(M
illi
on
)
Economic Growth (%)
Economic Growth vs Number of Jobs Created, 1989-2016
R² = 0.0261
0%
2%
4%
6%
8%
10%
12%
-15% -10% -5% 0% 5% 10% 15%
Un
em
plo
ym
en
t R
ate
(%
)
Economic Growth (%)
Economic Growth and Unemployment Rate, 1989-2016
With an increasing working age population, we need more quality jobs: the challenge is encouraging collaboration amongst government, private sector , and communities
Indonesia starts to experience growing number in working age population.
In the last five years, there has been an unstable jobs creation, compare to levels of high economic growth
Unemployment rates and number of unemployed declines.
However, there are still more than 32 million workers working less than 35 hours per week
More than half of informal workers 0
10
20
30
40
0
10
20
30
40
200220032004200520062007200820092010201120122013201420152016
Mil
lio
n P
eo
ple
Part-timer/Voluntararyunemployed
Half-unemployed/Forcedunemployed
% out of totalworkers
Sources: National Statistics Bureau, Bappenas, various years 8
Indonesia’s economic growth has played an important role in reducing poverty and increasing the populations’ standard of living
Along with high economic growth, especially during 1990’s and early 2000s, there were trends of increasing inequality. The commodity boom in the early 2000 was one of the main causes of the increasing inequality
Jobs created still in favor those in the highest quintile contributing to high income disparity between the richest and the poorest
0.3
5
0.3
5
0.3
4
0.3
3
0.3
3
0.3
3
0.3
2
0.3
2 0.3
4
0.3
4
0.3
5
0.3
6
0.3
7
0.3
08
0.3
29
0.3
2
0.3
2
0.3
63
0.3
64
0.3
68
0.3
68
0.3
78
0.4
10
0.4
10
0.4
13
0.4
05
0.4
02
0.3
94
0.3
0.32
0.34
0.36
0.38
0.4
0.42
1965 1970 1976 1978 1980 1981 1984 1986 1987 1990 1993 1996 1997 1999 2002 2003 2004 2005 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
In the last two years, inequality has started to gradually decline
Sources: Central Statistic Office, several years
Asian Financial
Crisis
Start declining
Regional inequality: large varitation in productivity amongst provinces (per capita production relative to 30-49 production, 2012, selected provinces)
-
0.5
1.0
1.5
2.0
2.5
3.0
0 5
10
15
20
25
30
35
40
45
50
55
60
65
70
75
80
85
90
+
DKI Jakarta
earning Self
-
0.5
1.0
1.5
2.0
2.5
3.0
0 5
10
15
20
25
30
35
40
45
50
55
60
65
70
75
80
85
90
+
East Kalimantan
Earning Self
-
0.5
1.0
1.5
2.0
2.5
3.0
0 5
10
15
20
25
30
35
40
45
50
55
60
65
70
75
80
85
90
+
Bali
Earning Self
-
0.5
1.0
1.5
2.0
2.5
3.0
0 5
10
15
20
25
30
35
40
45
50
55
60
65
70
75
80
85
90
+
East Nusa Tenggara
Earning Self
-
0.5
1.0
1.5
2.0
2.5
3.0
0 5
10
15
20
25
30
35
40
45
50
55
60
65
70
75
80
85
90
+
West Papua
Earning Self
DKI Jakarta had the smallest dependent ratio (0,37) the most productive
East Nusa Tenggara had the highest dependent ratio (0,69) the least productive
Provinces had the same pattern on composition of production.
Almost half of the provinces rely on the self-employed income (more than 50%)
Sources: Central Statistic Office, author’s calculation, 2012 10
Future Trends
“Indonesia’s population will continue to increase but with at slowing down rate, along with rapid urbanization.
Demographic dividend will reach the peak by 2030.
Working population starts to decline.
Indonesia will shift from a situation of population mobility to non-permanent mobility” (Population Dynamic, UNFPA 2015)
11
The Future we will be or The Future we want ? –
sustainable, inclusive, and productivity-led path of development
40
45
50
55
60
65
70
75
80
1971 1980 1990 2000 2010 2015 2020 2025 2030 2035 2040 2045
Life Expectancy at birth by sex (years)
Male
Female
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
Future Total Fertility Rate, 2020-2045
Sources: Central Statistical Bureau, Bappenas, UNFPA (various years)
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
0%
10%
20%
30%
40%
50%
60%
70%
80%
19
71
19
73
19
75
19
77
19
79
19
81
19
83
19
85
19
87
19
89
19
91
19
93
19
95
19
97
19
99
20
01
20
03
20
05
20
07
20
09
20
11
20
13
20
15
20
17
20
19
20
21
20
23
20
25
20
27
20
29
20
31
20
33
20
35
20
37
20
39
20
41
20
43
20
45
Dependency Ratio
% <15
% 15-64
% 65+
DR
Dep
eden
cy R
atio
1. Getting the balance between population growth, fiscal sustainability, and environmental capacity right for Indonesia
2. Inclusive growth that emphasizes equal access to improvement of productivity and human capital
3. Comprehensive and sustainable social security system
255,1 juta Number of Population 1
318,7 juta
2015 2045
12
Towards sustainable consumption and production
Life-cycle financial
sustainability and
intergenerational financing
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
0 2 4 6 8 1012141618202224262830323436384042444648505254565860626466687072747678808284868890
Per capita Consumption and Production by single age, Indonesia (2012) compared to the USA (2010) value is divided by production of 30-40
USA consumption with large health expenses
Indonesia needs to maintain most suitable and sustainable consumption
Improving the elderly productivity, coverage of social security so do not fall to poverty
Improving productivity, maintaining the peak
Improving competitiveness, years of education, and relevance to jobs requirement
Sources: authors calculation based on National Transfers Account (NTA) methodology
Sustainability of environment
Over a decade, productivity has experienced positive change.
However there is room for improvement.
A fully implemented social security system may also shift the shape of old age labor income and consumption.
13
On average, potential gains with the best scenario of productivity and consumption is 0,62% to the economic growth will last only 8 more years...
POTENTIAL ANNUAL GAIN (PERCENTAGE)
PERIOD
1st DIVIDEND 2nd DIVIDEND
BUSINESS AS USUAL
SUSTAINABLE CONSUMPTION
AND PRODUCTION (IMPROVED
PRODUCTIVITY)
BUSINESS AS USUAL
SUSTAINABLE CONSUMPTION
AND PRODUCTION (IMPROVED
PRODUCTIVITY)
2015-2030 0,21 0,31 -0,19 0,31
2030-2040 (0,02) 0,08 -1,52 -2,62
2040-2050 (0,00) (0,01) -1,67 -2,62
PERIOD of positive dividend
58 yrs (end 2035)
81 yrs (end 2059)
32 yrs (end 2021)
23 yrs (end 2024)
Indonesia has a very short time frame to take advantage of the increasing in productive age groups
This is one way to realize high economic growth and escaping from lower-middle income trap
However, this achievement should not be on the expense of sustainable development principle
Investment in economic, social, and environmental aspects are vital
Development of a critical mass of a skill-intensive workforce
Policies to support maintaining fertility rates at replacement rate to maintain the momentum in growth and fiscal sustainability
Total 0,62%
Preparatory arrangment has been established to implement SDGs
14
INCLUSIVE GROWTH
(optimize economic growth potential, created as many as good jobs, pro-poor)
15
Cutting the intergenerational cycle of inequality: strategies for inclusive growth
Increasing job opportunities and
job intensive investment
Special intention to micro and small
enterprises
Nurture the growth of new
entreupreunerships
Strengthen the economy of the
villages
Improved access to basic services for the
poorest 40%
Reduce the burden of the
poor and vulnerable
Medium Term Development
Plan 2015-2019 (RPJMN)
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