Briefing with Australian Department of Foreign Affairs and Trade (DFAT) in Jakarta

Budy Resosudarmo and Chris Manning from the ANU Indonesia Project briefed the Australian Department of Foreign Affairs and Trade (DFAT) in Jakarta on 15 March 2017.

They presented their findings on two topics, the first on labour market challenges and policies in an era of uncertainty and slower economic growth, and the second topic on traditional social institutions and development outcomes in Eastern Indonesia.

Chris spoke on the labour issues. He argued that Indonesia currently faces two major challenges in an unpredictable international and domestic environment: providing people with better, more secure jobs and raising productivity to help improve living standards and reduce poverty. Global threats to economic growth can potentially undermine both. Fortunately, low rates of inflation and a conservative fiscal policy have helped counterbalance these negative influences. In the longer term, the government is searching for new strategies to increase productivity through investment in skills through training funds, apprenticeships and more vocational training along the lines of the ‘German’ model. But the argument for greater government support in these areas has not been made clearly enough.

Budy discussed development in Eastern Indonesia. Despite decent macroeconomic growth during the last 14 years, Eastern Indonesia is still plagued by persistent income poverty and rising income inequalities. Most analyses have proposed three causes for this lack of inclusive growth: lack of access to productive employment opportunities, unequal access to opportunities due to weak human capital and an uneven playing field in terms of physical infrastructure and capital ownership, and inadequate provision of social safety nets. Various development programs targeted to resolve these issues have been implemented with limited success. It is argued that the very root of the problem is actually due to the existence of extractive traditional social institutions. That is, some Indonesian traditional societies organise themselves so that a few select sections of society receive privileges at the expense of the rest of society. The caste system in Bali and the indigenous hereditary slavery institution in Sumba are used as the case studies in the survey.

The discussion was attended by approximately 30 people from DFAT and related agencies. It was opened by Steven Barraclough, the head of the Economics Section, and was chaired by Bridie Rushton.