VoxDev Development Economics S6 Ep24: Going for economic growth: Lessons from Indonesia
Jun 25, 2025
Chatib Basri, an economist and former finance minister of Indonesia, dives into the nation's ambitious 'Golden Indonesia' vision aimed at becoming one of the world's largest economies by 2045. He discusses the dangers of relying on commodity exports and the pressing need for industrial policies to diversify the economy. Basri highlights Indonesia's challenges like an aging population and the shift to informal employment while advocating for strategies that bolster manufacturing. He also tackles the controversial nickel export ban and its implications for local growth.
AI Snips
Chapters
Transcript
Episode notes
Economic Growth and Middle Class Shift
- Indonesia's economy grew steadily about 5% annually before 2019, boosting its middle class significantly from 4% in 2003 to 23% in 2018.
- Recent job creation has shifted mostly to informal sectors, causing middle-class share to drop, exposing challenges in formal job growth.
Commodity Boom's Impact on Manufacturing
- Indonesia's commodity boom boosted growth but caused mild Dutch disease, reducing manufacturing's GDP share and investment.
- High costs and bureaucratic hurdles impede manufacturing investment, while natural resources maintain profit margins despite corruption.
Policy Recommendations for Industrial Growth
- Prefer export taxes over export bans to encourage downstream processing and comply with WTO rules.
- Use tax incentives to promote training and human capital development, involving the private sector in industrial policy.