OECD ECONOMIC SURVEY OF INDONESIA 2018 PROMOTING A MORE INCLUSIVE AND RESILIENT ECONOMY
Bali, October 10th 2018 http://www.oecd.org/eco/surveys/economic-survey-indonesia.htm
@OECDeconomy @OECD
Living standards have risen 100
1996
2006
100
2016
90
90
80
80
70
70
60
60
50
50
40
40
Indonesia
OECD EMEs
Indonesia
OECD EMEs
Access to electricity in rural School enrollment, secondary, areas, in % in %
Indonesia
OECD EMEs
Life expectancy (in years)
Note: “OECD EMEs� (Emerging Market Economies) is the average of Chile, Hungary, Mexico, Poland and Turkey. Source: World Bank, World Bank Development Indicators.
2
Poverty has receded Percentage of the population below the poverty line
30
Urban
30
Rural
25
25
20
20
15
15
10
10
5
5
0
0
1990
1995
2000
2005
2010
2015
Note: The poverty rate is the percentage of the population below the poverty line, which is based on the minimum expenditure for food equivalent to 2 100 kilocalories per day, and basic housing, clothing, education and health needs. Source: Statistics Indonesia.
3
Economic growth has been solid GDP and investment growth, year-on-year percentage changes 10
10
Investment
GDP
8
8
6
6
4
4
2
2
0 2013
0
Source: CEIC.
2014
2015
2016
2017
2018
4
Inflation is low Consumer price inflation, year-on-year percentage changes 9
9
8
8
Target band
7
CPI
Core CPI
7
6
6
5
5
4
4
3
3
2
2
1
1
0
0
2013
2014
Source: CEIC; Thomson Financial.
2015
2016
2017
2018
5
Exports are growing again Export volumes, 2011Q1 = 100, seasonally adjusted 140
140
Exports
Export markets
130
130
120
120
110
110
100
100
90
90
80 2011
80
2012
2013
2014
Source: OECD, OECD Economic Outlook database.
2015
2016
2017
2018
6
Rising imports have widened the current account deficit Current account balance, in % of GDP, seasonally adjusted 4
4 Current account balance
3
Trade balance (goods and services)
3
2
2
1
1
0
0
-1
-1
-2
-2
-3
-3
-4
-4
-5
-5
2011
2012
2013
2014
Note: Trade balance is on a national accounts basis. Source: OECD, OECD Economic Outlook database.
2015
2016
2017
2018
7
Financial markets are less developed than in neighbouring countries Bond market size, in % of GDP 250
250 Corporate
Government
200
200
150
150
100
100
50
50
0
0
IDN
VNM
PHP
CHN
Source: Asian Development Bank, AsianBondsOnline.
THA
SGP
MYS
KOR
JPN
8
Monetary policy is appropriately balancing growth and stability Policy and exchange rates 10
110
9
105
8
100
7
95
6
90
5
85
4
80
3 2
70
7-day reverse repo rate (left scale, %)
1 0
75
Previous policy rate (left scale, %)
65
Nominal effective exchange rate (right scale, index, 2010=100) 2010
2011
2012
2013
2014
Source: CEIC; OECD, OECD Economic Outlook database.
2015
2016
2017
2018
60 9
The fiscal deficit has been contained Central government fiscal deficit, in % of GDP 2
2
1
1
0
0
-1
-1
-2
-2
-3
-3
1990 Source: CEIC.
1995
2000
2005
2010
2015
10
Government debt is low Gross general government debt, in % of GDP, 2017 90
90
80
80
70
70
60
60
50
50
40
40
30
30
20
20
10
10
0
0
Source: IMF, World Economic Outlook Database; Bank Indonesia; OECD, OECD Economic Outlook Database.
11
Low government revenues limit spending Social government spending, in % of GDP, 2016 or latest
Source: IMF, Government Finance Statistics Database; OECD, Government at a Glance Database.
12
State-owned enterprises play an important role 6
6
5
5
4
4
3
3
2
2
1
1
0
0
GBR EST NLD LVA MLT KOR JPN IRL DNK SVK CHL LUX ISL CAN BEL BRA BGR DEU AUS NZL USA MEX AUT PRT FIN CZE ISR HUN GRC ESP ZAF LTU CHE SVN SWE ITA NOR FRA TUR ROU HRV IND RUS POL IDN CHN
Broader scope
Scope of state-owned enterprises
Note: This indicator measures the involvement of state-owned enterprises across sectors of the economy. Source: OECD, Product Market Regulation Database.
13
A demographic dividend will boost economic growth Change in the working-age population share over 2015-30, in percentage points 3
3
2
2
1
1
0
0
-1
-1
-2
-2
-3
-3
-4
-4
-5
-5
-6
-6
High-income countries
China
World
Source: United Nations, World Population Prospects: the 2017 Revision.
Indonesia
India
14
Pervasive informality traps many in low-quality jobs Informality rates, in % of total employment
80
80
70
70
60
60
50
50
40
40
30
30
20
20
10
10
0
0
CHL
ZAF
BRA
CRI
TUR
ARG
COL
Notes: Estimates may differ from national sources due to definitional differences. Source: OECD calculations from national labour force surveys.
MEX
IDN
PER
15
Employment regulation is relatively strict
2
1
1
0
0
Note: Flexibility of employment regulation is from the Economic Freedom Indices calculated by the Fraser Institute and ranges from 0 (low economic freedom) to 10 (high economic freedom). Source: Fraser Institute, Economic Freedom of the World Index.
MYS
2
HUN
3
PHL
3
ZAF
4
IND
4
CRI
5
COL
5
MEX
6
CHN
6
RUS
7
CHL
7
ARG
8
THA
8
TUR
9
IDN
9
BRA
More flexibility
Flexibility of employment regulations, 2016
16
Improving skills remains a challenge Educational attainment of 25-34 olds, % Tertiary education
Upper secondary or post-secondary non-tertiary education
40
30
30
20
20
10
10
0
0
Source: OECD (2018), Education at a Glance 2018.
RUS
40
OECD
50
CHL
50
ZAF
60
ARG
60
COL
70
BRA
70
TUR
80
CRI
80
IDN
90
MEX
90
IND
100
CHN
100
17
Key recommendations for making the economy more resilient and inclusive • Deepen domestic financial markets to mitigate risks of capital outflows. • Improve targeting of social assistance, including by shifting towards more conditional transfers. • Improve the transparency and governance of state-owned enterprises, including by strengthening their supervision and selection of board members. • Pilot lower levels of employment protection and discounted minimum wages for youth in special economic zones. If successful, extend them. • Further simplify business regulations to encourage formalisation and collect user feedback to improve the online single submission system. • Introduce regular teacher evaluations and link teacher remuneration more closely to performance and ongoing training. See the Key Policy Insights of the 2018 Economic Survey of Indonesia for more. The Survey includes two thematic chapters related to: raising revenues to meet spending needs and developing a stronger and sustainable tourism sector.
18
RAISING MORE REVENUES TO MEET SPENDING NEEDS
19
Tax revenues are relatively low Tax revenues including social security contributions, in % of GDP
35
35
30
30
25
25
20
20
15
15
10
10
5
5
0
0
IDN
MYS
PHL
Note: Based on the OECD definition of tax revenues. Source: OECD, Revenue Statistics Database.
MEX
COL
TUR
ZAF
BRA
20
Registration has expanded but there are still too few taxpayers Registered taxpayers, millions 40
40 Government taxpayers
35
Corporate taxpayers
35
Individual taxpayers
30
30
25
25
20
20
15
15
10
10
5
5
0
0
2006
2008
2010
2012
Note: Married couples typically pay tax as a household using the same taxpayer number. Source: Directorate General of Taxes.
2014
2016
21
Top personal income tax rates bite at high levels of income 25
Income threshold for paying lowest and highest marginal tax rates, as a multiple of average earnings, 2016 Brazil
South Africa
China
25
Indonesia
20
20
15
15
10
10
5
5
0
0
Lowest tax rate
Highest tax rate
Source: ILO, ILOSTAT Database; EY (2016), Worldwide Personal Tax and Immigration guide 2016-17.
22
Value-added tax has revenue-raising potential Value-added and sales taxes, in % of GDP, 2016 or latest 12
10
10
8
8
6
6
4
4
2
2
0
0
USA PHL MYS CHE AUS IDN MEX JPN KOR CAN IRL TUR COL ITA LUX ESP SVK OECD BEL ZAF GBR NLD FRA DEU POL CZE AUT LTU LVA SVN CHL ISL PRT NOR FIN ISR SWE EST DNK NZL HUN BRA
12
Source: OECD, Revenue Statistics Database.
23
Male smoking rates are high Percentage of population smoking, in %, 2015 80
Male
70
Female
60 50
40 30 20
Source: World Health Organisation.
IDN
RUS
CHN
MYS
CHL
TUR
PHL
EME
ZAF
OECD
MEX
IND
BRA
0
COL
10
24
Property taxes are low Property tax revenue, in % of GDP, 2016 or latest 4.5 4.0
4.5 Other property tax
Recurrent taxes on immovable property
4.0 3.5
3.0
3.0
2.5
2.5
2.0
2.0
1.5
1.5
1.0
1.0
0.5
0.5
0.0
0.0
EST MEX LTU IDN SVK IND CZE PHL MYS AUT SVN CHL LVA SWE DEU HUN RUS TUR NOR PRT IRL POL FIN ZAF NLD CHN DNK CHE ISL NZL BRA COL JPN ESP GRC USA ITA AUS KOR ISR LUX BEL CAN FRA GBR
3.5
Source: OECD, Revenue Statistics Database; Ministry of Finance.
25
Key recommendations for raising revenues • Increase investment in tax administration, particularly staff, electronic services and databases. • Make greater use of information technology to strengthen monitoring and facilitate tax compliance. • Freeze the basic tax allowance for individuals to broaden the tax base. • Gradually lower thresholds for paying the top two rates of personal income tax. • Broaden value-added tax by removing most exemptions and lowering the threshold for compulsory registration. • Increase and harmonise tobacco excise across products. • Increase training and assistance for sub-national governments to improve the quality of property tax databases, valuation methods and tax administration. Raise the cap on property tax rates.
More in Chapter 1 of the Economic Survey of Indonesia 2018
26
DEVELOPING A STRONGER AND SUSTAINABLE TOURISM SECTOR
27
Tourist numbers have surged Tourist arrivals 14
1.4 Arrivals (left scale, in millions)
12
Share of world tourism (right scale, in %)
1.2
10
1.0
8
0.8
6
0.6
4
0.4
2
0.2
0
0.0
1995
Source: CEIC.
2000
2005
2010
2015
28
Tourism can help overcome regional inequality Coefficient of variation on regional GDP per capita, 2016 or latest 0.9
0.9
0.8
0.8
0.7
0.7
0.6
0.6
0.5
0.5
0.4
0.4
0.3
0.3
0.2
0.2
0.1
0.1
0
South Africa
China
India
Source: Statistics Indonesia; OECD, OECD Regional Database.
Brazil
Mexico
Colombia
Indonesia
0 29
There is potential to attract more and higher-spending tourists Foreign tourists’ expenditure, in % of GDP, 2016 12
10
10
8
8
6
6
4
4
2
2
0
0
BRA CHN RUS JPN ARG IND DEU CHL USA FIN CAN IDN KOR NOR GBR IRL SAU FRA NLD ISR MEX TUR ITA DNK POL CHE SWE BEL AUS ZAF LTU SVK LVA CZE HUN ESP AUT NZL SVN EST PRT LUX GRC ISL
12
Source: United Nations World Tourism Organisation; OECD, OECD Economic Outlook Database.
30
Infrastructure gaps are a drag on competitiveness Travel and Tourism Competitiveness Score, 2017 7
Airport infrastructure
Ground and port infrastructure
Tourist service infrastructure
7
6
6
5
5
4
4
3
3
2
2
1
1
0
0
Philippines
Vietnam
Indonesia
Malaysia
Note: The score ranges from 1 to 7 (best). Source: World Economic Forum, The Travel & Tourism Competitiveness Report 2017.
Thailand
Singapore
31
The growth of tourism can create many jobs Share of tourism in the economy, %, 2015 12
12 GDP
Employment
10
10
8
8
6
6
4
4
2
2
0
0
Indonesia
Source: Statistics Indonesia; OECD, Tourism Database.
OECD
32
Most protected areas are not open for tourists Protected areas, in % of total land 30
30
Most restricted
Other
25
25
20
20
15
15
10
10
5
5
0
0
TUR
IND
ARG
RUS
IDN
MEX
COL
CHN
ZAF
OECD
CRI
Source: Mackie et al. (2017), “Indicators on terrestrial and marine protected areas: methodology and results for OECD and G20 countries”, OECD Environmental Working Papers, No. 126, OECD Publishing, Paris.
BRA
33
Key recommendations for developing tourism • Give more prominence to revenue-based targets for tourism in future plans. • Incorporate needed infrastructure in forthcoming destination management plans to ensure sustainable development of tourism. • Expand vocational and on-the-job training to build tourism-related skills in the workforce, especially in areas with skills shortages. • Increase the coverage of protected areas, and consider opening more for tourism use, but with visitor controls including regulations, and appropriate user and concession fees.
More in Chapter 2 of the Economic Survey of Indonesia 2018
34
For more information
http://www.oecd.org/eco/surveys/economic-survey-indonesia.htm Disclaimers: The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.
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