By: Eko B. Supriyanto, Chairman of Infobank Media Group
Jakarta – Indonesia is a rich country, that’s an old story. Our country is rich in memories. The Koes Plus song “Tongkat Kayu” is not wrong. But the contents of the Indonesian earth are not very rich. In fact, when compared to other countries, the wealth of our natural resources (SDA) is still inferior. Now, if there are still stories about Indonesia being rich, then it is only a “hallucination”. Economic growth of 8 percent with the SDA economic engine will not be realized.
Either it has been “robbed” by colonial bandits, or it has been dredged up massively for the last 25 years, and still for the last 10 years by oligarchic “kings” who “have intimate relations” with politicians and powerful officials. The era of decentralization has opened up opportunities for massive exploitation of natural resources to “finance” the power of officials.
According to data on natural resource wealth, such as data from Visual Capitalist (2021), IEA (2022) and World Bank (2024), it turns out that Indonesia is not among the countries that have abundant natural resources. In fact, it is not even in the top 10 countries that are rich in natural resources. Russia is a rich country with USD75 trillion in natural resources reserves. Followed by the United States (US) at USD45 trillion (2), and Saudi Arabia at USD34 trillion (3).
Next, Canada USD33 trillion (4), Iran USD27 trillion (5), China USD23 trillion (6), Brazil USD22 trillion (7), Australia USD20 trillion (8), Iraq USD16 trillion (9) and Venezuela USD14 trillion. It is not known what rank Indonesia is in, but according to observer Kurtubi, Indonesia’s state wealth reaches IDR 200,000 trillion. Or, if converted to US dollars, it will reach around USD12.3 trillion.Yes, it could be number 11 or 12 as the country with the greatest wealth.
The core of the problem is that Indonesia has been relying on natural resources. And, the problem is that Indonesia’s natural resource reserves are not as rich as other countries.So, it’s time for Indonesia to stop thinking as a country with abundant natural resources.The trouble is, if it relies on natural resources, then Indonesia’s economic data only improves if commodity prices rise.But in the midst of rising commodities, it will simultaneously switch (substitute) other cheaper natural resources.
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In fact, according to many economic observers, downstreaming will not be sustainable if it only relies on natural resources. In fact, Indonesia must master technology, master the supply chain, improve the quality of human resources and be broad-based. Not only that.
The Downstreaming will not work well if industrialization collapses. The trouble is, over the past 10 years, there has been severe de-industrialization.Factories closed and moved to Vietnam and closed down to lose the competition.
So far, Indonesia’s economy is still favored by God by growing by 5 point because of commodities and public consumption.Indonesia’s economy will grow when commodity prices rise, and will slope slightly when commodity prices fall. Indonesia’s economy should be higher if commodity products that go through “back channels” or illegally can be stopped.
There are 13 “Chronic” Economic Diseases
According to the latest edition of the Infobank report, the results of the Infobank Editorial Board panel, there are 13 “chronic” diseases of the Indonesian economy. For example, corruption and budget leakage, buying and selling of laws and justice gaps, online gambling.Also, low state revenue and debt burden, income and welfare disparities and limited employment.
In fact, the economic diseases are no less chronic, such as business uncertainty and expensive bureaucracy, the latent danger of inflation and interest rates, weakening purchasing power and the collapse of the middle class, weak human resource quality, low financial literacy, digital and cyber crime, climate change and rampant illegal imports.
Those are the 13 “chronic” diseases of the Indonesian economy. And, if we still hypothesize that Indonesia is still “gemah ripah loh jinawi” as a rich country with abundant natural resources reserves, then we are actually having a “wet dream” in the daytime. It is not easy for the current government to eliminate the disease simultaneously.
However, the policy option that can be taken is to “clean up” from within the government itself. Many doubt the grand vision of 8 percent growth managed by an “Obesity Cabinet” whose ministers are of low quality, many even call them KW3.
The government must at least close budget leakages and corruption. If we use the approach of Soemitro Djojohadikusumo, the Indonesian economic scholar about the Incremental Capital Output Ratio (ICOR) in the late 1980s. Economic inefficiency can be seen from ICOR, which according to data processed by the Infobank Research Bureau reached 6.9 in 2023.
In 2000-2024 it reached 5.7. From year to year, ICOR continues to rise. This means that the higher the ICOR the worse, and inefficient or translated leakage occurs. When compared to Singapore whose ICOR is 3-4, and Malaysia in the range of 4-5, then ICOR in Indonesia is higher. Well, if you compare Singapore, or the ideal ICOR at 3-4, then in Indonesia there has been a leakage of 70-72 percent.This is terrible.Inefficient and leaking everywhere.
Well, that level of ICOR if it is associated with the APBN which reaches Rp3,121 trillion, then there has been inefficiency or you could say a leak of 70 percent, so the APBN money that is wasted is Rp2,250 trillion.If ICOR can be reduced, then economic efficiency will occur. This is the reality that the Prabowo-Gibran government will face. That big leakage is what the Government must prevent.
That is the main requirement, apart from the fact that it must grow by 8 percent in quality. Quality economic growth means growth that can result in the creation of a large workforce. Unlike now, the available jobs are in the informal sector, which is unable to increase income amid high price increases.
Although Indonesia, according to data from the International Monetary Fund (IMF), is the world’s 8th largest economy based on Gross Domestic Product (GDP) adjusted for purchasing power parity (PPP) in 2024. The IMF data from the “World Economics Outlook Update January 2025” shows that Indonesia beat France and the UK.
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However, this does not mean that Indonesia will easily become a developed country. The size of the economy does not mean that it is enjoyed by the entire Indonesian population.There are problems that Infobank emphasizes, namely the quality of growth, income and welfare gaps and low human resources, making Indonesia not easy to become a rich country with a per capita income of USD12,000.
Moreover, Indonesia has been relying on natural resources and it turns out that Indonesia’s natural resources are not very rich. In fact, the “brutal” extraction of natural resources has resulted in natural destruction and poverty in pockets where natural resources are located. Natural resources have been increasingly enjoyed by rich people in cities and abroad with the backing of high-ranking officials.
It is time for a change in the direction of economic development. The establishment of Danantara and the Ministry of State Revenue can be used as a “new engine” for Indonesia’s quality economic growth of 8 percent. Don’t be too proud of having natural resources that Indonesia is not very rich in. Downstreaming without a strong domestic industry is like eating sour vegetables without salt.
An interesting question is, will Indonesia be old and rich, or maybe old and not rich?
Indonesia may not become a rich country if the “chronic” economic disease is not eradicated from now on. It’s time not to just “omon-omon” which will make Indonesia a failed state in 2040 because of 13 economic chronic diseases – which turned out to be the foundation of economic development based on natural resources that are not very rich. And it turns out that Indonesia is not very rich in natural resources when compared to 10 other countries in the world.(*)
