25 Years of Reform, Economist: Inequality is Increasing

Armfalcon.com, JAKARTA — The Institute for Development of Economics and Finance (Indef) assesses that Indonesia’s economic condition has not changed much after 25 years of reform. If in the past the country was controlled by conglomerates, now Indonesia is in the vortex of an oligarchy. Inequality is also increasing.

Indef Senior Economist Faisal Basri said that inequality can be seen from the balance of the people’s banking accounts. Financial inclusion has indeed increased, but the number of those who do not have a banking account also shows inequality.

Faisal revealed that bank deposit assets are getting further away gap-his. There are 99 percent of public accounts with balances below IDR 100 million. Meanwhile, only 0.03 percent of people who have more than Rp. 5 billion in savings have recorded growth in value from 40 percent to more than 50 percent.

“The current inequality is enormous and it’s real because of income or at least savings,” he said during a discussion entitled ‘Reflections on 25 Years of Reform in the Perspective of the Economy and Corruption Eradication’, which was held by Core Indonesia, Tuesday (16/5/2023).

Conglomeration and oligarchy are among the causes that are still being maintained. Conglomerates are large companies that have many subsidiaries in various fields. While oligarchy is a form of government in a country, whose power is held by a certain group.

“Now we will see what happens after 25 years of reform, the conglomeration has changed into an oligarchy, because anti-Chinese sentiment is now the turn of the natives. Then the natives come in the name of all kinds of people who feel entitled to come to the bank,” he said.

According to him, in the pre-reformation era, natural resources were still managed by the state and had a large contribution to state revenues through taxes. However, these conditions are very much different today, one of which is related to coal.

In 2022, coal exports amount to IDR 850 trillion, but the state is said to be reluctant to collect export taxes. This also keeps the country from getting a windfall profit. According to him, this condition was able to open a loophole for entrepreneurs in this field to determine who Indonesia’s leader would be in next year’s general election.

“Given IDR 100 trillion for the upcoming presidential election, it’s over. He decides, do I want this one or want this one, “he said.

In addition to the occurrence of oligarchy, domestic conglomerates now also control the natural resources in Indonesia. Such a thing, according to Faisal, did not happen in the past.

“At that time conglomerates did not control natural resources as they do now. Natural resources were controlled by the state, Pertamina owned 100 percent of the state, Pertamina as operator and regulator, all went into the State Budget,” he said.

One example, said Faisal, is Pertamina. The oil refinery company used to be 100 percent state-owned. Pertamina used to function as both operator and regulator.

He said Pertamina before the reform contributed to the state revenue and expenditure budget. Pertamina’s tax contribution, he said, reached 60-70 percent.

According to him, at that time, tax revenue was still very low. “Tax revenue is still low, Pertamina contributes 60-70 percent to taxes, so 100 percent can be said that natural resources are managed by the state and are included in the budget,” he said.