Indonesia again recorded a new history in the national economic sector, where Indonesia was named a country with per capita income classified as upper middle class country countries. This proud news was conveyed after the Central Bureau of Statistics (BPS) announced per capita income or the average income of Indonesians reaching Rp. 56 million or $ 3,927 per year.
Based on BPS records, last year’s Indonesian individuals’ income rose 7.92 percent from 2017 amounting to Rp51.89 million or $ 3,876.8 a year or included in the lower middle-income category.
As we all know, the World Bank divides countries into four income groups, namely low-income groups with per capita income of US $ 995 and below, middle-income countries in the lower US $ 996-3,895, income countries middle to upper $ 3,896-12,055, and high or advanced income countries which are above $ 12,056.
The Head of Bappenas (National Development Planning Agency) Bambang PS Brodjonegoro previously said that Indonesia’s per capita income a year could touch US $ 23,199 a year or Rp324.79 million (assuming the current exchange rate is Rp14 thousand per US dollar). The income projection is based on an aggressive scenario. “Now Indonesia is in low middle income (middle to lower income), maybe 2020 can be upper
But another opinion was conveyed by a senior economist who is also a lecturer at the Faculty of Economics and Business, University of Indonesia (UI) Faisal Basri, increasing GDP per capita does not mean making Indonesia “go up the class”. Faisal has the reason behind the argument.
“GDP is the entire income of the people, companies, and government for a certain period, including the income of foreigners. If foreigners’ income is issued, we get Gross National Income (GNI),” Faisal Basri wrote in his article entitled “Indonesia Has Ridden a Class as a Middle-Income State?” as quoted on Thursday (02/07/2019).
Although, the World Bank uses the concept of gross national income (GNP) or Gross National Income (GNI) for calculating per capita income. Referring to BPS, PNB is GDP plus net income from abroad.
Despite improvements, Pieter Abdullah Redjalam, Director of the Center of Reform on Economics (Core) Indonesia Research, said that Indonesia was still mediocre. Because Indonesia has not reached halfway to being able to become a high-income country or a developed country.
The government is aiming for Indonesia to become a high-income country by 2045. Pieter explained that Indonesia needs to accelerate economic growth. If it is only in the range of 5% as it is today, then it can be ascertained that Indonesia will enter the middle-income trap.
Finance Minister Sri Mulyani Indrawati had said that there were four keys to escape from the middle-class income trap, namely improving the quality of human resources, building infrastructure, efficient and competent government bureaucracy, and appropriate policies to be able to withstand the global economic turmoil.