Harnessing Demographic Dividend: The Future We Want Presented at 5th Commission on Population and Development April 5th, 217 Republik Indonesia Ministry of National Development Planning/ Bappenas National Population and Family Planning Board/BKKBN
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 4 years we gained 2 years in life expectancy 3
Indonesia is currently reaping the benefits of the demographic dividend Number of population 255,1 Million 8 7 6 5 Total Fertility Rates at National and Selected Provinces, 1971-215 Early 197s: The start of village based contraceptie delivery Papua 2,59 (215) Life expectancy increased to 7,8 years Most of population lives in city (53,1% ) 8-84 7-74 215 4 3 6-64 5-54 4-44 2 3-34 1 1971 198 199 1991 1994 1997 2 22 27 21 212 215 Indonesia had one of the strongest and most successful national planning initiatives in the world. Early 7s program on family planning resulted more than half a reduction of number of children per woman. Big variations still occur among provinces. Sources: Central Statistical Bureau, Supas and SDKI various years 8 6 4 2 Jogjakarta 2,1 (215) Elderly Labor Force Participation (%), 215 Male Female Total 65-69 7-74 75-79 8-84 85+ 2-24 1-14 -4 15, 1, 5, 5, 1, 15, In thousand people Male Female Working School Lainnya 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 5% Number of elderly (65+) is 13,7 Milliion; 24% of them still working (65+) and 16% of 75+ 4
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 55,2 MIO 114,8 PEOPLE/KM2 15,3 MIO 28,2 PEOPLE/KM2 18,7 MIO 99,2 PEOPLE/KM2 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 149 MIO 1,13 PEOPLE/KM2 9,9 MIO 147 PEOPLE/KM2 6,9 MIO 13,8 PEOPLE/KM2 High fertility, high mortality, low access to education and health, Sources: 1. Adioetomo, Forthcoming IRSA Book Series on Regional Development No. 15, 217; 2. Central Statistical Bureau, Supas 215 5
Relative to labor income 3-49 Relative to labor income 3-49 Human Capital Investment is the key to capitalize on the demographic dividend Percapita Consumption on Education, by single age, 1993 Per capita Consumption of Education, by single age, 212.4.4.35.35.3 46%.3 42%.25 54%.25 58%.2.2.15.15.1.1.5.5-1 2 3 4 5 6 7 8 9 111121314151617181922122232425262728293 private public Age. - 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15 16 17 18 19 2 21 22 23 24 25 26 27 28 29 3 private public Age 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 Sources: BPS, Bappenas, authors calculation using National Transfers Account 6
Mortality declining, life expectancy growing: health expenses start to increase. In 214 Indonesia introduced a National Health Insurance scheme.5 Per capita Consumption of health by single age, 1993.5 Per capita Consumption of health by single age, 212.4.4.3.3.2.2.1.1-1 2 3 4 5 6 7 8 9 11112131415161718192212223242526272829331. 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15 16 17 18 19 2 21 22 23 24 25 26 27 28 29 3 private health public health public health private health 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 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 7 Sources: BPS, Bappenas, authors calculation using National Transfers Account
Million People Number of Jobs Created (Million) Unemployment Rate (%) With an increasing working age population, we need more quality jobs: the challenge is encouraging collaboration amongst government, private sector, and communities Economic Growth vs Number of Jobs Created, 1989-216 6 Economic Growth and Unemployment Rate, 1989-216 12% y = 5.1845x + 1.3646 R² =.177 5 4 3 1% 8% 2 1-15% -1% -5% % 5% 1% 15% -1 Economic Growth (%) -2-3 6% R² =.261 4% 2% % -15% -1% -5% % 5% 1% 15% Economic Growth (%) 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 4 3 2 1 22 23 24 25 26 27 28 29 21 211 212 213 214 215 216 Sources: National Statistics Bureau, Bappenas, various years 4 3 2 1 Part-timer/ Voluntarary unemployed Half-unemployed/ Forced unemployed % out of total workers 8
.35.35.34.33.33.33.32.32.38.34.34.329.32.32.35.36.37.363.364.368.368.378.41.41.413.45.42.394 In the last two years, inequality has started to gradually decline.42.4.38 Asian Financial Crisis Start declining.36.34.32.3 1965 197 1976 1978 198 1981 1984 1986 1987 199 1993 1996 1997 1999 22 23 24 25 27 28 29 21 211 212 213 214 215 216 Sources: Central Statistic Office, several years 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 199 s and early 2s, there were trends of increasing inequality. The commodity boom in the early 2 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
5 1 15 2 25 3 35 4 45 5 55 6 65 7 75 8 85 9+ 5 1 15 2 25 3 35 4 45 5 55 6 65 7 75 8 85 9+ 5 1 15 2 25 3 35 4 45 5 55 6 65 7 75 8 85 9+ 5 1 15 2 25 3 35 4 45 5 55 6 65 7 75 8 85 9+ 5 1 15 2 25 3 35 4 45 5 55 6 65 7 75 8 85 9+ Regional inequality: large varitation in productivity amongst provinces (per capita production relative to 3-49 production, 212, selected provinces) 3. 2.5 2. 1.5 1..5 - earning DKI Jakarta Self DKI Jakarta had the smallest dependent ratio (,37) the most productive East Nusa Tenggara had the highest dependent ratio (,69) the least productive Provinces had the same pattern on composition of production. Almost half of the provinces rely on the selfemployed income (more than 5%) Bali 3. 2.5 2. Earning Self 1.5 1..5-3. West Papua 3. East Kalimantan 3. East Nusa Tenggara 2.5 2. Earning Self 2.5 2. Earning Self 2.5 2. Earning Self 1.5 1.5 1.5 1. 1. 1..5 -.5 -.5 - Sources: Central Statistic Office, author s calculation, 212 1
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 23. Working population starts to decline. Indonesia will shift from a situation of population mobility to non-permanent mobility (Population Dynamic, UNFPA 215) 11
1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 21 23 25 27 29 211 213 215 217 219 221 223 225 227 229 231 233 235 237 239 241 243 245 Depedency Ratio 6. 5.5 5. 4.5 4. 3.5 3. 2.5 2. 1.5 1. The Future we will be or The Future we want? sustainable, inclusive, and productivity-led path of development Future Total Fertility Rate, 22-245 8% Dependency Ratio 215 245 255,1 juta Number of Population 1 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 318,7 juta.9 Life Expectancy at birth by sex (years) 8 75 7 65 6 55 Male 5 Female 45 4 1971 198 199 2 21 215 22 225 23 235 24 245 Sources: Central Statistical Bureau, Bappenas, UNFPA (various years) 7% 6% 5% 4% 3% % <15 % 15-64 2% % 65+ 1% DR % 12.8.7.6.5.4.3.2.1
Towards sustainable consumption and production Per capita Consumption and Production by single age, Indonesia (212) compared to the USA (21) value is divided by production of 3-4 1.4 1.2 1..8.6.4.2. Improving competitiveness, years of education, and relevance to jobs requirement Improving productivity, maintaining the peak Improving the elderly productivity, coverage of social security so do not fall to poverty USA consumption with large health expenses Indonesia needs to maintain most suitable and sustainable consumption 2 4 6 8 1121416182222426283323436384424446485525456586626466687727476788828486889 Sources: authors calculation based on National Transfers Account (NTA) methodology 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. Life-cycle financial sustainability and intergenerational financing Sustainability of environment 13
On average, potential gains with the best scenario of productivity and consumption is,62% to the economic growth will last only 8 more years... PERIOD POTENTIAL ANNUAL GAIN (PERCENTAGE) BUSINESS AS USUAL 1st DIVIDEND SUSTAINABLE CONSUMPTION AND PRODUCTION (IMPROVED PRODUCTIVITY) BUSINESS AS USUAL 2nd DIVIDEND SUSTAINABLE CONSUMPTION AND PRODUCTION (IMPROVED PRODUCTIVITY) 215-23,21,31 -,19,31 23-24 (,2),8-1,52-2,62 24-25 (,) (,1) -1,67-2,62 PERIOD of positive dividend 58 yrs (end 235) 81 yrs (end 259) 32 yrs (end 221) 23 yrs (end 224) 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,62% Preparatory arrangment has been established to implement SDGs 14
Cutting the intergenerational cycle of inequality: strategies for inclusive growth Medium Term Development Plan 215-219 (RPJMN) INCLUSIVE GROWTH (optimize economic growth potential, created as many as good jobs, pro-poor) 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 4% Reduce the burden of the poor and vulnerable 15
Medium Term Development Plan 215-219 (RPJMN) Thank you