Fiscal Policy Office. November 2011

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1 Fiscal Policy Office November

2 Introduction 1. Declining fertility & infant mortality have changed Indonesian demographic structure, which are : A. Reducing in the proportion of young unproductive ages (< 15 years). B. Increasing in number of infants who survive to older ages. 2. This increases number working age population which are potential to increase productivity through the declining age dependency ratio substantially. 3. This condition leads to economic bonus of demography called demographic dividend. Which is the road to the opening of window of opportunity (an opportunity for human capital development). 4. Based on history, Indonesia s window of opportunity had predicted open in , and 5. To prepare that time, Indonesian government have planned some policies, especially to improve the human resources. 2

3 Outline 1.Back ground Family Planning and Demographic Bonus 2.Indonesian Government Fiscal Measures: a. Health, b. Schooling, & c. Community Development The social and economic investments made by the Government of Indonesia (GOI) since the 1970s to improve the welfare of its population, particularly in health, schooling, nutrition, and community development 3

4 Family Planning and Demographic Bonus Family Planning Indonesia leads to demographic transition which contributes to Demographic Dividend and economic growth (Arsyad et.al., Tribute to Widjojo Nitisastro) 4

The introduction of new contraceptive methods, expands method choice and raises contraceptive prevalence. Percent using 70 60 50 38.5 47.7 49.7 54.7 57.4 60.3 61.4 40 30 31.2 26.8 20 10 8.6 18.

5 The introduction of new contraceptive methods, expands method choice and raises contraceptive prevalence. Percent using Sterilization Pill Injectable IUD Condom Traditional Implant Contraceptive use increases from virtually zero in 1960s to 57 per cent in Now one among two couples are using contraceptives. Source : Harjono Sujono 5

6 births per woman per 1,000 live births The impact of contraceptive use on the reduction of Fertility, but Mortality Rate 5.5 Fertility & Mortality Rate Fertility rate, total (births per woman) Mortality rate, infant (per 1,000 live births) The use of contraceptive has reduced the fertility, The reduction of fertility leads to the decreasing in infant mortality rate. The use of contraceptive prevents unwanted pregnancy, give women a portion to control the pregnancy, increase women s health and avoid maternal mortality.. Besides investing in family planning program is beneficial for the future generations through better education and health for the children, because of small family size. Source : Worldbank;

7 Rates The impact of contraceptive use on the reduction of fertility and lead to demographic transition Number in million, % increase 6.00 Trends in TFR and NRR, Indonesia, Projected annual number of births, death and rate of increase, Indonesia, Average number of children per woman births death 1.00 Number of girls replacing mother 1.00 rate of increase Year Year Average number of children per woman decreases, so does the number of girls replacing mother (replacement level). At the same period, the rate of increase and the birth decreasing too, on the contrary the mortality number (death) is increasing due to ageing population. Source : Prof. Sri Moertiningsih Adioetomo PhD Head of Masters Program on Population and Labor University of Indonesia;

Population in millions Demographic Transition leads to explosion of working age which will bring the Windows of Opportunity in 2020-2030 Percent Trend in number of children, working-age and older

8 Population in millions Demographic Transition leads to explosion of working age which will bring the Windows of Opportunity in Percent Trend in number of children, working-age and older persons, Indonesia, Dependency Ratio 0-14, 65+, total Indonesia working-age Young [<15] Total Bonus Demografi Window of Opprtunity children older persons Old [>65] 0 0 Year Year Age Dependency Ratio at its lowest level 44 young population compared to 100 workers The decline in proportion of children and increase in expectancy of life leads to explosion of workers especially the youth an opportunity to facilitate economic growth Increases again after 2030 due to the rapid increase of older population. Source : Prof. Sri Moertiningsih Adioetomo SE MA PhD Head of Masters Program on Population and Labor University of Indonesia;

9 Growth Percentage Age dependency ratio and Demographic Bonus > Working Age & Below 15 Year Old Citizen Growth Rate (Year on Year) 86 Childre n per 100 workers 54childr en per 100 workers 51 children per 100 workers 44 children per 100 workers >50 Increases again due to rapid increase of older people <15 working-age Year Growth of workers exceeds growth of children, Indonesia, an opportunity to boost up economic growth Abundant workers with productive employment will increase income per capita Increase in household savings lead to productive investment to open employment Small family value provides opportunity for women to enter labor market increase household income. Large numbers of good quality human capital is an asset to economic growth Source : Prof. Sri Moertiningsih Adioetomo SE MA PhD Head of Masters Program on Population and Labor University of Indonesia;

10 Indonesian Government Fiscal Measures : Health Health, the greatest of all we count as blessings. (Ariphron) 10

11 % of GDP Fiscal Policy in Health 2004 Oil Price Years (per 1,000) (per 1,000 live births) Health Expenditure to Life Expectancy Neonatal and Under-5 Mortality Rate Mortality rate, under-5 (per 1,000) Mortality rate, neonatal (per 1,000 live births) Health expenditure, total (% of GDP) Life expectancy at birth, total (years) Indonesia has raised health budget year by year in concern to improve the health of it citizen. It is indicated by the decreasing of Neonatal and Under 5 Mortality Since 2001 natural disaster has given Indonesia a lot of challenge, but still the percentage of malnutrition in recent years below the 1998 (crisis period) percentage. Source : World Bank 11

12 Indonesian Government Fiscal Measures : Schooling A human life is a schooling for eternity. (Gottfried Keller) 12

13 Trillionn Rupiah Index Percent Fiscal Policy in Education Education Expenditure to Illiterate People Education Expenditure (LHS) Percentage of Illiterate People (15-44 year old) (RHS) Human Development Index Government's efforts in raise the education budget (20% allocation of total expenditure as 2010 constitution mandate) has resulted the decline of illiterate people in productive age, thus increase the Human Development Index. Indonesia gradually improving their education budgets in it s budget spending. Source : BPS & MOF 13

14 % Total 15> Government Education Program 1 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Above 15th Educational Attainment Tertiary School Secondary School Primary School Not Pass Primary Not/Yet School A 9-year compulsory education and out of school programs (Package of Study Group) are two elements that mutually supportive to the achievement of equal opportunities for education programs. These programs has proved a success story shown by the graph above. a. 9-years Compulsory Education started in This program requires that every citizen of Indonesia to attend school for 9 (nine) years old at the basic education level, ie from the first class level of Elementary School (SD) or Madrasah Ibtidaiyah (MI) up to 9 th class level of Junior High School (SMP) or Madrasah Tsanawiyah(MTs ). Source : BPS 14

Government Education Program 2 Adult Literacy Rate 8% 8% 10% 18% 33% 2004 90s" 80s" 67%

Illiterate rate, adult total (% of people ages 15 and above) Oil Price;2005 Youth

youth total (% of people ages 15-24) Illiterate rate, youth total (% of people ages

It s purpose is to improve knowledge, attitudes, and basic skills for the community

In 2004 National Education System Rule, Study Group is included in non-formal education

15 Government Education Program 2 Adult Literacy Rate 8% 8% 10% 18% 33% s" 80s" 67% 82% 90% % % Literacy rate, adult total (% of people ages 15 and above) Illiterate rate, adult total (% of people ages 15 and above) Oil Price;2005 Youth Literacy Rate 1% % % % 90s" 15% 80s" 85% 96% 99% 97% 99% Literacy rate, youth total (% of people ages 15-24) Illiterate rate, youth total (% of people ages 15-24) b. The Packed Study Group started in 1994, implemented in various institutions. It s purpose is to improve knowledge, attitudes, and basic skills for the community including school-age children who are lacking in access to formal. In 2004 National Education System Rule, Study Group is included in non-formal education category. Thanks to both program,s the literacy rate of Indonesian citizen has increased against the Illiterate rate. Source : Worldbank 15

16 Indonesian Government Fiscal Measures : Community Development Community Development is a long term value based process which aims to address imbalances in power and bring about change founded on social justice, equality and inclusion. (National Occupational Standards for Community Development) 16

17 Fiscal Policy in Community Development Rp Trillion Poverty Budget & Poor Citizen Percentage Poverty Budget (LHS) % Poor Citizen Forecast Lower Limit % Poor Citizen Forecast Upper Limit % Actual Poor Citizen High Increase in Oil Price % Rp Triliun % Infrastructure Budget vs Unemployment Rate 8.1% 9.1% 9.5% 9.9% Infrastructure Budget (LHS) Unemployment Rate (RHS) 11.2% High Increase in Oil Price 10.3% 9.1% 8.4% 7.9% 7.1% 6.6% 12% 10% 8% 6% 4% % % Indonesia continues to fight againts poverty and unemployment. This could be seen on Indonesia budget spending for those problem, which always tend to go up year by year. The impact of Indonesia s effort in enhancing the poverty elimination budget and unemployment is seen in the decreasing of percentage of poor citizens and unemployment rate. Source : BPS & MOF 17

18 Billions Strong & Sustainable Economic Growth Monetary Crisis Period Global Crisis Current US$ ,014 1,124 1, ,058 1,143 1,258 1,586 1,859 2,172 2,272 Monetary Crisis Period 2, US$ GDP (current US$) [LHS] GDP growth (annual %) [RHS] GDP Current & Growth 15 % ,500 3,000 2,500 2,000 1,500 1, GDP per capita Indonesia s Strong & Sustainable Economic Growth and population reduction result increasing in GDP per capita Indonesia GDP has risen since monetary crisis period, even with natural disaster in every region in Indonesia. Exp : Tsunami & Earth Quake 2004 & Even the global crisis happens in 2008, Indonesia growth rate didn t affect too much. This is an evidence that Indonesia s economic has gotten stronger. Source : Worldbank 18

19 Conclusion 19

20 Conclusion Indonesia s investment in family planning helps to promote economic growth which is sustainable even in the era of global financial crisis. This sustainable economic growth is largely due to the increasing purchasing power because of small family size have been achieved. Therefore, social and economic programs which are supported by relevant and appropriate fiscal policy, that is the current Government Fiscal Policy, Indonesia would be ready to welcome and use the window of opportunity. Source : Worldbank 20

21 Thank You Dankie 21

SECTION - 13: DEVELOPMENT INDICATORS FOR CIRDAP AND SAARC COUNTRIES

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