MIDDLE INCOME

Guruh Arina Putra Putri Rizky D Rakhmad Adi S

Muhammad Ikra Oktawidya Intan Widya Pratiwi

Middle Income Trap

Definisi : 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)
Income Clasification (World Bank)
Middle

High (> US $ 12.615)

1. Upper (US $ 4.085 12.615) 2.Lower (US $ 1.035 4.085)

Lower (< US $ 1.036)

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

Typically, countries trapped middle-income level have:

(1) low investment ratios; (2) slow manufacturing growth; (3) limited industrial diversification; and (4) poor labor market conditions

at

Which Countries Are Still Stuck in Middle Income Trap?

Russia

Brazil

Malaysia

www.wikipedia.org (2012)

Which Countries Are Still Stuck in Middle Income Trap?

1 2 3

Russia

Brazil
Malaysia
... Stuck in the Middle for years

Why They Still Stuck in Middle Income Trap?

... Losing source of Economic growth 1 2 3

Russia

Brazil
Malaysia

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 loan

Investment in Russia is shrinking

GDP (PPP) per capita is $ 17698 in 2012

There are a lot of wealthy people in Russia, but they dont invest much

Innovation gap Oil prices have stabilized

Fading consumer spending power

Why They Still Stuck in Middle Income Trap?

GDP (PPP) per capita is $12,528 in 2014
Since the debt crisis of the 1980s, Brazil has failed to revive the structural transformation and per capita income growth >> their economy most likely stagnate or decline

1 2 3

Russia

Brazil
Malaysia

Brazil depends on natural resources and cheap labor

Poor economic policy timing and lackluster investment in some sectors have hurt Brazils 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; Brazils unemployment around 5.5 percent

Why They Still Stuck in Middle Income Trap?

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 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).

1 2 3

Russia

Brazil
Malaysia

GDP (PPP) per capita is $14774.64 in 2012

Why They Still Stuck in Middle Income Trap?

Inability or Limitation to improve productivity

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 governments 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 to solve the problem in their own Countries

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

How bout Indonesia??

Pontensi & Tantangan

Negara dengan Populasi Terbesar

Negara China India USA Indonesia Brazil Pakistan Jumlah Penduduk 1.349.585.838 1.220.800.359 316.668.567 251.160.124 201.009.622 193.238.868

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

Nigeria
Bangladesh Rusia Jepang

174.507.539
163.654.860 142.500.482 127.253.075

Jumlah Penduduk

1,600,000,000 1,400,000,000 1,200,000,000 1,000,000,000 800,000,000 600,000,000 400,000,000 200,000,000 -

Indonesian Middle Class

PDB Per Kapita & Golongan Kelas Menengah

Tingginya Permintaan Domestik

Kendaraan Bermotor

Pertumbuhan Sektor Ekonomi

Pertumbuhan Ekonomi

Tantangan Indonesia
Perlambatan Pertumbuhan Ekonomi

Tantangan Indonesia
Meningkatnya Net Impor

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

Tantangan Indonesia
Produktivitas usaha yang rendah

Tantangan Indonesia
Kualitas Sumber Daya Manusia

Tantangan Indonesia
Produktivitas SDM

Tantangan Indonesia
Kemiskinan & Pengagguran

Tantangan Indonesia
Kesenjangan Penghasilan

Tren kesenjangan yang terjadi di perkotaan dan pedesaan

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.