Muhammad IkraOktawidya Intan

Widya Pratiwi

MIDDLE INCOME

Guruh Arina PutraPutri Rizky D

Rakhmad Adi S

Middle Income TrapDefinisi :• Countries stagnating and not growing to advanced country level.

(ADB, 2012; Worldbank 2012)• Growth slowdown and stuck in the middle-income status. (Gill

and Kharas, 2007; Eichengreen et al, 2011)

Definisi trap dalam kerangka lamanya waktu dalam kelompok middle income :• lower middle income (LM) :

bila berada dalam status LM selama 28 tahun atau lebih

• upper middle income (UM) : bila berada dalam UM selama 14 tahun atau lebih

Income Clasification(World Bank)

High(> US $ 12.615)

Middle

1. Upper(US $ 4.085 – 12.615)

2.Lower(US $ 1.035 – 4.085)

Lower(< US $ 1.036)

Typically, countries trapped at middle-income level have: (1) low investment ratios; (2) slow manufacturing growth; (3) limited industrial diversification; and(4) poor labor market conditions

Which Countries Are Still Stuck in Middle Income Trap?

www.wikipedia.org (2012)

Russia

BrazilMalaysia

Which Countries Are Still Stuck in Middle Income Trap?

1 Russia

2 Brazil

3 Malaysia... Stuck in the Middle for years

Why They Still Stuck in Middle Income Trap?

Annual growth falls by at least 2 percentage points a year

... Economic growth in Russia to 1.6 percent in the first quarter of 2013 Russian consumption was bouncing

off such a low base from the 1998 financial crisis; “Russian flu”

... An overvalued currency; A war in Chechnya; A bloated government led Boris

Yeltsin to default on a $5.5 billion loanInvestment in Russia is shrinkingThere are a lot of wealthy people in Russia,

but they don’t invest much

1 Russia

2 Brazil

3 Malaysia

... Losing source of Economic growth

Innovation gap

Oil prices have stabilized

Fading consumer spending power

GDP (PPP) per capita is $ 17698 in 2012

Why They Still Stuck in Middle Income Trap?

1 Russia

2 Brazil

3 Malaysia

Brazil depends on natural resources and cheap labor

Since the debt crisis of the 1980’s, Brazil has failed to revive the structural transformation and per

capita income growth >> their economy most likely stagnate or decline

GDP (PPP) per capita is $12,528 in 2014

Poor economic policy timing and lackluster investment in some sectors have hurt Brazil’s

economy ever since Dilma Rousseff took over in 2011.

Underperformance of investment >> competitiveness problems of Brazilian industry and manufacturing due to very high labor costs; Brazil’s unemployment around 5.5 percent

Why They Still Stuck in Middle Income Trap?

1 Russia

2 Brazil

3 Malaysia

Private investment has sunk precipitously, from more than a third of GDP in the mid-1990s to only some

10% today

Labor productivity is growing more slowly than in the 1990s.

R&D spending remains frighteningly low, at about 0.6% of GDP (compared to 3.5% in South Korea).

Malaysia has been among the best performing economies in the world since World War II, one of

only 13 to record an average growth rate of 7% over at least a 25-year period

GDP growth has slowed up, from an annual average of 9.1% between 1990 and 1997 to 5.5% from 2000 and 2008

GDP (PPP) per capita is $14774.64 in 2012

Why They Still Stuck in Middle Income Trap?

• Lack of Innovation and investment in R&D• Inefficient use of the infrastructure• Insufficiency of the amount and quality of higher education and vocational training• Mono-/oligopoly of main industries by state-owned enterprises• Lack of government’s ability to formulate and implement a comprehensive economic growth

strategy• Poor governance, Spread of corruption• Policy for excessively protecting low-productivity industries (including agriculture)

Inability or Limitation to improve productivity

• Failure of facilitating domestic demand• Failure in implementing income redistributional policy measures• Delay in human development (education and health-care for the bottom of the pyramid),

shortage of government budget for economic reforms

Inability to solve the problem in their own Countries

KOREA HAD ESCAPED MIDDLE INCOME TRAP

SINCE 90’s

# Government commitment in TFP

# COMMITMENT IN R&D

# High Quality in Education system to create creative

and innovative human capital

How ‘bout Indonesia??Pontensi & Tantangan

Negara dengan Populasi Terbesar

China

India

USA

Indon

esia

Brazil

Pakist

an

Niger

ia

Bangla

desh

Rusia

Jepan

g -

400,000,000

800,000,000

1,200,000,000

1,600,000,000

Jumlah Penduduk

Negara Jumlah Penduduk

China 1.349.585.838

India 1.220.800.359

USA 316.668.567

Indonesia 251.160.124

Brazil 201.009.622

Pakistan 193.238.868

Nigeria 174.507.539

Bangladesh 163.654.860

Rusia 142.500.482

Jepang 127.253.075

Dengan jumlah penduduk terbesar keempat di dunia, Indonesia tengah menyongsong “bonus demografi”

Indonesian Middle Class

•60 %, $3,850

2012

PDB Per Kapita & Golongan Kelas Menengah

Tingginya Permintaan Domestik

Kendaraan Bermotor

Indonesia annual domestic traffic (millions of passengers carried): 2005 to 2012

Pertumbuhan Sektor Ekonomi

Pertumbuhan Ekonomi

Tantangan Indonesia

• Perlambatan Pertumbuhan Ekonomi

Tantangan Indonesia• Meningkatnya Net Impor

• Tidak mampu mengendalikan sumber daya alam sebagai pertumbuhan ekonomi dari waktu ke waktu

Tantangan Indonesia

• Produktivitas usaha yang rendahTantangan Indonesia

• Kualitas Sumber Daya Manusia

Tantangan Indonesia

• Produktivitas SDMTantangan Indonesia

• Kemiskinan & Pengagguran

Tantangan Indonesia

• Kesenjangan Penghasilan

Tren kesenjangan yang terjadi di perkotaan dan pedesaan

Tantangan Indonesia

How to Avoid Middle income trap

• Invest massively in human capital.• Invest in infrastructure. • Boost spending on research and development.• Guard against excessive capital inflows. • Last but not least, green growth should be encouraged

to conserve resources and protect the environment.