INDONESIA TOWARDS THE YEAR 2000-)

by : Sumitro Djojohadikusumo

General Observations The views presented here are a rough sketch of certain features it the trajectory of Indonesia's evolution between now and a generatior hence, towards the end of the century. This paper deals with somt fundamental problems and identifies key issues in the problem area; under review. It indicates the significant variables which bear on tht likely course of events. It includes a normative element in the sense that we do not wish to remain passive objects of whatever forces anc trends may appear as "imminent" on the horizon. These should on the contrary move us to influence them so as to foster the growth and progress of our society under conditions of social stability and justice. However, normative desiderata must be based on a realistic comprehen• sion of the present and the recent past. Perspectives of the future, even as more glimpses, help us to envisage some of its requirements as preconditions for a bearable human existence. They provide the needed additional dimensions to the context within which we must take action now or in the immediate term to ensure that future requirements can be met. Conversely, current policies and programmes have ramifications that shape the distant future to an important degree. Our present decisions and actions affect for better or worse the pattern of our sociecy through• out the remainder of this century. It is well therefore to ask ourselves continuously what the major longer term implications are of present day policies.

In the preparation of this paper I have received valuable assistance from the following associates, who are directly or indirectly connected with my work: Mr. Moh. Arsjad. Deputy-Director. Institute of Economic and Social Research, University of Indonesia ; Dr. William C. Hollinger. Consultant to the Indonesian Government; Dr. Thee Kian Wie, Project Director of the "Study on Indonesia's Long Term Growth Perspectives" ; Mr. Th. Sangian. Staff member. Office of the Minister of State for Research. They have undertaken a great part of the preparatory work and I have bene• fitted from their comments and observations during a series of discussions. The responsibility for the views expressed, for the interpretation of subject matters and for the deficiencies attendant there to is entirely mine.

EKI, VOL. XXIIl NO. 3. SEPT., 1975 211 In general I subscribe lo what is fashionably called the "systems — approach" in analysing and assessing the working of the social process, i.e. the need to look at the totality of all aspects of a problem rather than to focus attention on an isolated phenomenon'). Nevertheless within the scope of this paper I have confined myself deliberately to two in• terrelated "routes of variables" pertinent to Indonesia's future. The routes are interrelated as they use the same key variable, population growth, as a common point of departure. Also, each of the routes is seen in the perspective of the year 2000 as the common "terminal date".

In the Indonesian setting, as in other developing countries, popula• tion is the single most important dynamic factor among a range of other social and economic dynamics. Population growth is the given reality for the rest of this century and beyond, even when we take into consideration the possible results of vigorously pursued population policies. This being so, two categories of questions come to the fore.

The first category relates to the basic requirements of the Indone• sian people in the year 2000. They are expressed in quantitative terms of food, habitation, clothing, health and education facilities. I have no desire to join the debate on the "quality of life". Not do I imply that the aforementioned components approach even remotely the criteria for life's quality that have gained currency in circles concerned with the subject. What I do emphasize is that without the future capability to provide our people with a minimum degree (which I shall spell out later) of those mundane necessities, then social stability and political via• bility will seriously he endangered. Viewed from this angle, Indonesia's future development depends critically on our ability- to make the best possible use of our natural resources, in perpetuity with a minimum of waste and for the benefit of the greatest number of people. This can he done only by enhancing the scope of human activities and by raising the quality of human resources. It is in connection with the develop• ment of our natural and human resources that the important role of

1) Mesarovic and Pcstel use the term : a "holistic" view or approach, meaning that "everything seems to depend on everything else". Cf. Mihajlo Mesarovic and Eduard Pcstel ; "Mankind at the Turning Poinl", 1974. p. 21. I have in previous writings on diflerent subjects tried lo develop some characteristics of such an approach by vievzing things in interrelationships within a broader spectrum. Cf. Sumitro Djojohadikusumo : "7/ic I'ulure of the Pacific Community", Wellington. 1972 and "Pacing the Issues of Growth-Southeast Asian Perspective", Toronto 1973.

212 EKI. VOL. XXIII NO. 3, SEPT.. 1975 science and technology — of the advanced, the adaptive and the pro• tective kind — come to mind -). The second category of questions stems from the view we have of the structure and pattern of present conditions. At this point in timi! we ask where structural relationships which bear on societal pattern; lead to by the year 2000. We proceed with conventional extrapolatioi of gross domestic product, in aggregate and per capita, over the rangt of growth rates we think to he desirable, or feasible or to he a com hination-mix" of such considetations. Sector coefficients of growth elasti city and size elasticity are applied to the aggregate projections to obtair projected growth rates disaggregated over main sectors. They consequent• ly imply a structural change of the economy with reference to relativt sectoral contributions to national income and, perhaps by inference attendant occupational activities. Sector growth entails also a considera• tion of the resource base and of the expected scope for growth of part• icular sectors of the economy.

Each of the two "routes" indicated above contains elements of judgements and choices pertinent to "desirability" and "feasibility". But we must also face the question of "acceptability". To what extent a course of events will he accepted by the community-at-large related to the sense of equity which may or may not prevail. We must therefore take a look at the structure and pattern of income distribution among social groups : as they arc now and as they arc in the perspective of future evolution. By comparing the results of the two routes and infusing in such comparison the "equity" aspects, we may through an iterative process obtain a contour picture of Indonesia in the year 2000. It should he obvious that the approach deployed and the views presented here are no more than a tentative probing into a realm of dynamic relationships, which require further studies in depth in almost all respects and concerning each of their major "building blocks".'')

'-) Cf. Sumitro Djojoliadil

EKI, VOL. XXIIl NO. 3. SEPT.. 1975 Tig Hence. I need hardly stress that where quantifications are used in this paper, they are not intended as forecasts and certainly not as predictions. They serve solely to illustrate the nature and magnitude of the problems and to illuminate their dimensions. Future developments must he viewed and frequently re-assessed in the light of the interplay between the social and political dynamics within the societies concerned and the external circumstances and trends shaped by the strategic, political and economic forces in the international setting. This is of particular relevance to Indonesia. Our country, as part of the Southeast Asian region, has always been an area for con• vergence of and conflicts between major power interests. External in• fluences may provide valuable stimuli. They can also impede national progress. It is fair to hold that a country's success in coping with its internal problems is an important factor in its ability to turn external forces into invigourating elements or at least to mitigate their adver.se impact.

We shall deal in a consecutive section with salient aspects of the regional and international context. Bearing in mind our remarks on the interplay between internal dynamics and external forces, cross-references between the national and the international spheres are sometimes mentio• ned hut mostly implied.

The Growth of Indonesia's Population Our demographers, starting with the results of the population census of I97I, have projected Indonesia's population to the year 2000. They have made projections on the basis of four alternative assumptions with respect to the degree of success of our programme to decelerate popula• tion growth. Those assumptions are : first, no change in fertility rates ; second, a decline in the fertility rate of 25 percent by the year 2000 ; third, a decline of 50 percent in the fertility rate ; and finally, a decline in the fertility rate sufficient to achieve a net reproduction rate of one (NRR = I) by that year.'') Under the circumstances we deem a 25 per• cent reduction of fcrliiily rates as the most realistic. Therefore, we will use for expositional purposes throughout the rest of this discussion the population projected on the basis of that assumption. A 25 percent decline in the fertility rate would lead to an Indonesian population of approximately 250 million by the end of the year 2000. This compares with the 120 million recorded in the 1971 census, or more than a

*) cf. Laponm PerUcmhangan Kebijaksanaan Riset (Progress Report on Researcli Policiesj, 10 December 1974.

214 EKI. VOL. XXIII NO. 3, SEPT.. 1975 doubling of population. Of the total population approximately 146 mil lion will be domiciled in Java and Madura. Thai would mean a populati density in these islands of 1105 per square kilometer. This is great el than the present density in the most populated and urbanized centres of Western Europe. This is the sense in which I refer to Java in the yeal 2000 as an "island city".

Requirements of the Year 2000 What capacity to provide foodstuffs is implicit in the populatic growth thus projected ? Our nutritional experts tell us that in oiirl climate and society our adult population should be consuming from 16(0l to 2600 calories per day. ranging from older women to younger me i.l While recognizing that for proper nutrition the diet must provide not only calories hut also protein and a whole range of protective element;, let us take calories as a surrogate for proper nutrition to get an ordtr of magnitude fix on the problem. Our nutritional experts also hold th: t at the present time our calory intake is below this desirable target by 19 percent. Therefore, to make up for the present deficiency and ii addition to provide a doubled population with its required food intake implies some 120 percentage increase in total food availability require! in the year 2000.

Is this a surmountable or an insuperable challenge ? We resort agai i to simplification so as to make our discussion manageable. Let us tak; rice as standing for the total basket of food products that our pcopl; would he consuming. Indonesia's national average output of measure: in terms of unmilied rice, or what we call "gahah", was 2.2 tons/h; for the years 1968 through 1972. This places Indonesia somewhere in th( middle of the range of Asian rice yields. Japan is at the high end o: the yield spectrum with 5.6 tons/ha ; other countries in Asia such a; India and the Philippines have average yields of 1.6 tons/ha, whih Thailand's average yield amounts to 1.9 tons/ha. These figures suggest that increased Indonesian yields can make : major contribuiion to meeting the requircmeius of the year 2000. Present practice in Indonesia in the highest yield areas and with the best farmer: has achieved an output of 5 tons/ha. Some experimental plots have yield figures almost double that amount as vvotiid he expected in the "hot house" attention wiiich such plots typically receive. In addition, Indonesia has a margin for further extension of cultivated area estimated by various aiitliorities to he approximately 41 million hectares, or 240 per cent of the presently cultivated area. It is recognized that presently

EKI. VOL. XXtll NO. 3. SliPT.. 1975 215 unfarincd but arable laud is almost certainly of lower suitability^ than land already under cultivation. However, we must keep in mind that the present average national yield is significantly below that already achieved in the most productive Asian economy. Japan, and also less than in such countries as Korea (4.5 tons/ha) and Italy (4.6 tons/ha). We mtist further allow for some contribution from an extension of cultivated area. It would therefore seem reasonable to expect that Indonesia could achieve an increase in total food output of approximately 150 per cent''') which compares with the overall requirements indicated before, 120 per cent. It goes without saying that correct policies must he pursued, complementary inputs and investments mobilized, and the best cropping patterns selected. It all adds up 10 the necessity of generating efforts which should he feasible at present levels of tested technology. There is embedded in this problem of food requirements relative to population growth, one of the most significant contours of Indonesia in. the year 2000. If Java will approximate an island city, then ipso facto the food Java consumes must he largely produced elsewhere in the country. This constitutes the crux of the food problem we must resolve over the next quarter of a century. It poses two difficulties. First, the soils outside Java are on average less fertile and less suitable to the current pattern of Indonesian food production with its dominance of rice. Furthermore in important areas their dynamics under cultivation are an unknown quantity. Vast areas in the islands outside Java that are presently unused or othcnvise ex• ploited by shifting cultivation consist of podsolic soils or highly organic peat soils. The dynamics of both soil types under conditions of sustained cultivation are not yet well understood. It is known that both are prone to heavy leaching of nutrient elements under our heavy rainfall climate. In addition, much of the podsolic soils are covered by the highly ob• noxious alang-alang grass. Effective and ecologically acceptable ways to eliminate this weed that chokes off vegetation are not yet clearly est• ablished. It is for the above reasons that the government is embarking on a comprehensive inventory and evaluation of the nation's soil resources. Indeed, one of the major features of the intervening period must be the

'>) Assuming : fa) a yield increase on existing land no 3.5 tons/ha. (b) tbe presently uncultivated area totalling two and a ball times cultivated land produces the present aggregate yield by year 2000.

216 EKI, VOL. XXIII NO. 3. SEPT.. 1975 organization and execution of this massive progiamme of soil surveys, research and analysis loliovved by land development and extension setvicts to introduce on a vast scale sustainable cultivation practices based t 11 the findings of those studies. Offsetting these considerations, areas outside Java are be ten suited for producing food towards which our diet will likely shift: corn, S03 a beans, fruits and vegetables, sorghum, cattle grazing, and the like. Thtn also, we have only scratched the surface in the development of our marine fisheries resources and there is great scope lor increased inlar fish farming, particularly in areas intensive wet rice cultivation dous not take place so that lertiiizers and insecticides will not wash down into fish ponds. A word of caution is in order here. It is irighly nece sary that changes he effectuated in hitherto observable trends in die when people's incomes rise. Given the conversion ratios in the fodd chain, as adequate and improved diet for an expanding world population cannot be met if past correlations between incomes and meat persi: (parricularly heel). Poultry and legumes must play a larger relative ro in the world's food basket. Ways must be found to encourage this t population and incomes rise. Second, a vast new infrastructure will have to he put in plac The new farming and fishing areas themselves will have to he developec This involves clearing, contouring and the provision of feeder roat storage, processing facilities and so on. Over and above all that, marine transport and the distribution system will have to he expanded an J restructured. Thus, another major contour of the period between notv and the year 2000 will he shaped by the requitements of a vast invest ment programme as we progressively restructure and and relocate otr food production. It is precisely because the hulk of our food will have to he grown outside our major consumption centre and because marine fish will increase in importance that Indonesia must set high importanc on the archipelago principle in the law of the sea discussions. Such a 1 investment programme must he implemented in a timely fashion if w are to avoid hitter disappointment, even before the year 2000. The or• ganizational, administrative, and financial challenge is great, but it ca t he met.

The problems of hahitalion for an expanding population hecom even more challenging, again with particular reference to Java. I us the term "habitation" in a broader sense than that of mere housing. I: encompasses a range of community facilities, of which housing is onl one element. A synoptic view of Java in the year 2000. characterize: by conditions similar to that of an island-city will present a mixture

EKI, VOL. XXIII NO. 3. SI.PT.. 1975 217 of semi urban — semi rural lineament. The problems of ofercrowding will weigh heavily on such mcliopolilan centres as Jakarta and Surabaya. One can expect that in the coming decades Indoncsta's urban population growth will exceed overall population growth to the order of 6 to 7 per cent a year. Professor N. Iskandar, Indonesia's foremost demographer, has estimated that with Indonesia's population increasing to 250 million in the year 2000, 60 million people may live in pronouncedly urban areas which is about 22 per cent of total population. Although increased attention and resources have been devoted to city planning and housing development over the last few years, we are starting with a backlog of capital formation in these areas. Housing construction has failed to keep up with urban population growth, part• icularly housing construction for the lower income groups which form the hulk of the urban population. Rapid urbanization has consequently led to the widespread emergence of slums and semi-slums. In such "environment" people live in substandard housing. The ideal ratio between housing and population should he one house, or rather "dwelling unit" for every household. If one visualizes that by the year 2000 the average size of the Indonesian household is projected 6, then with an expected population of 250 million there would he approximately 42 million households. Hence by the year 2000 there should he approximately 42 million dwelling units available for Indo• nesia's population. With a growing population and expanding industries in tlie larger metropolitan areas, the demand for land will progressively increase over the years. This calls for major policies in regard to zoning and spatial planning. Otherwise the growing demand will lead to steep price increases of land. The housing shortage is most acute for the lower-income groups in the urban areas and public policy must assure that cheap land he set aside for building dwellings and other amenities for these groups. These dwellings should meet minimum adequate standards of habitation, such as the availability of elementary sanitation facilities, water supply, and cheap transport. Low cost land can usually be found only on the fringes of the metropolitan areas. Transport for the low-income people living in these areas might therefore create problems, if cheap public means of transportation are not sufficiently available. While the cheaper land in urban areas is set aside for the lower- income groups, the more expensive land should he allotcd to the middle- income and higher-income groups. With latrd becoming scarce and in• creasingly expensive, construction of high-rise dwelling units will become

218 EKI. VOL. XXIII NO. 3. SEPT.. 1975 imperative. This entails a major change in Indonesian cultural patter li and individual preferences. Location close lo new industrial estates as they evolve as part of the zoning and spatial planning effort, might ijc a long way towards solving the problem of transportation. These con plexes of dwelling units should not stand alone, but be accompanied py community facilities, such as shopping centres and schools, which ma a dwelling complex viable. A basic problem of habitation would he how much living spa would he required for the average Indonesian household. A yardsti of minimum standard of living would he about 50 of roofed space (jm a plot of 100 for a household consisting of six members. As hig rise living quarters become a feature of the Indonesian scene, comparah floorspace must he associated with adequat.e grounds and facilities su rounding the dwelling blocks. Related to habitation is the problem of water supply. This necess rates building a network of water reservoirs all over the country. The problem for the metropolitan centres is that they would have to reach further hack into their hinterlands to obtain a secure water supply. Consistent with the standards of a minimum adequate level of livlig we have adopted, the required water supply should he about 86 iitns per capita per day for the urban centres, the target stipulated in tl Second Five Year Plan (Repelita II). This target entails a major inves ment programme in the reservoir, purification and distribution system, is nevertheless a modest target. Present world-wide average urban hous hold water consumption ranges between 100 and 150 litres per capita per day in cities held to he meeting satisfactory standards. In Singapoie studies have indicated that 90 litres of high quality piped water is "social minimum" for the prevention of water-borne diseases in th: location, which is climatically similar lo Indonesia's.")

During the next twenty five years the cities along the northern coa; of Java, particularly Jakarta and Surabaya, would have to construct a|n elaborate water conservation system that would he able to control unde ground flows of water as well as surface flows of water. This migl create problems in regard to the provision of irrigation for agriculture as the urban centres would he able to outbid agriculture for the pre vision of water.

«) For the global averages see United Nations Secretariat: 'Tlie Demands Fc Water: Strategies, Procedures and Methodologies Par Forecasting Water Dt- mands", Part one, p. 71. For Singapore see G. Giinaratnam : "Domestic, h- dustrial, and Commercial IVatcr Demand in Developing Countries in Sout't East Asia with Particular Rejercnce to Singapore", 1972.

EKI. VOL. XXIII NO. 3, SEPT.. 1975 211 As the urban population keeps on growing and agricultural demand for water increases, water may become increasingiy expensive. Under sucti circumstances it will become imperative to economize on water consump• tion, particularly on the part of the urban population. Moreover, the increasing scarcity of water supplies and the attendant steep increase in the price of water will require the recycling of water. Investment in water-recycling systems would he expensive, hut with the high price of water, investment in these systems might eventually become economical. In fact, in dealing with the issues of habitation water may well he a more intractable constraint than land. While land in the sense of space does pose limits of a physical nature, both the relative price and congestion complications could he made amenable to remedial measures through correct public policies and spatial planning. Where water is in• volved, however, the nature of the physical constraint is much more open to an "overshoot" type of crisis.

Quality of water is a crucial and fragile characteristic for most uses hut vitally so for human consumption. Water of given quality becomes a depleting resource under particular patterns of use. In Java the water supply situation is deteriorating with respect to both quantity and qualit}'. Intensified human settlements along our streams with the sim• ultaneous movement of such settlements up to slopes of mountains generate pollution to rivers and reduce the water holding capacity of land. Quality declines and run-off is more rapid in the face of secularly rising demands. It is therefore urgent to reverse this collision course syndrome through sound management and conservation of water resources. What health facilities should he available by the year 2000 ? A steady improvement in the provision of health facilities is an important ingredient of existence for our people. It is also economically beneficial as improved health conditions would increase their productivity. To assess the availability of health facilities in Indonesia, let us take as indices the ratio of physicians, nurses and midwives per 10,000 people. Taking the ratio of the number of physicians per 10,000 people as an indicator of the availability of health manpower, the average ratio in Indonesia is at present only 0.46. This average does not reveal the wide gaps between the various provinces, e.g. between the Special Region of Greater Jakarta with the highest ratio of 3.54 physicians per 10,000 people and East Nusa Teng- gara (Fiores, Lomhok a.o.) with the lowest ratio of only 0.11 physicians per 10,000 people. As presently formulated, the government intends to raise the number of physicians and paramedic personnel by 2 percent

220 EKI, VOL. XXUl NO. 3, SEPT., 1975 each year. This means only 0.736 physicians per 10,000 people by the year 2000. Such ratio would be too low and \vc must therefore raise our sights. The rate of increase of annual output of physicians must he so increased that by the year 2000 the ratio could he 7 rather than 0.7, or in other words a total of 175,000 physicians for the whole of Indonesia. Total numbers alone would not suffice, unless arrangements are made (preferably by inducement) that the physicians could be spread and made available over the whole area of the country. In regard to physical facilities, the number of hospital beds per specified number of people serves as an indicator. In 1970 the ratio of hospital beds to people was on the average 7.41 per 10,000 people. This ratio should he raised during the next twenty-five years, preferably ten• fold to 70 beds per 10.000 people. The need to provide adequate health services for our people would require substantial investment outlays is the training of phj'sicians, dentists, pharmacists, nurses, and other paramedic personnel as well as in the expansion of training institutes for medical and paramedic per• sonnel. For example, for the year 1970 the Ministry of Health estimated that the total cost merely of training a student to become a doctor in Indonesia amounted to US $ 15,000. What should he considered as the required educational facilities ? We should look at the school attendance rate, i.e. the ratio of the number of school-going population and the school-age population. According to the census of 1971 the school-attendance rate for the 7-13 age population group (i.e. that age group which should he attending primary school) was 0.55 ; the rate for the 14-16 age group (i.e. that age group which should he attending junior high school) was only 0.29. For the 17-19 age group (i.e. that age group which should be attending senior high school) the rate was even lower, 0.13. The demands of a growing society call for steadily expanding edu• cational opportunities : during the initial stages primarily for the 7 to 13 age group, hut later also for the other age groups. Specifically, the Indonesian government has set for itself the target of providing sufficient educational opportunities for the entire 7 to 13-agc population group by the year 2000. In this connection the school-attendance rate for this age group would be 1.00. For the older age groups the school-attendance rates are also expected to rise steadily to 0.80 for the 14 to 16 age group and to 0.60 for the 17 to 19-age group. Raising the school-attendance rate to such a large extent within twenty-five years involves also raising the output of teachers very rapidly. Hence the necessity lo increase the number of teacher's colleges rapidly.

EKI. VOL. XXIIl NO. 3. .SEPT., 1975 221 The ratio of number of teachers to number of students should be 1 : 30 at the primary school level, 1 : 20 at the junior high school level, and 1 : 15 at the senior high school level. University and college education should be expanded is such a way that the top 10 per cent of senior high school graduates can easily find entrance to higher institutions of learning. While investment outlays for the expansion of educational facilities would again appear huge, several studies on the sources of growth in various advanced as well as developing countries have indicated that the pay-off of investment in human capital is considerable and well worth the high costs of investment. Moreover, spreading educational opportunities evenly among broad layers of the population may go a long way in spreading economic opportunities also more evenly. In this way an important source of inequity in the distribution of wealth and income might he reduced in significance.

The structural Pattern of Indonesia's Growth towards the year 2000.

The process of our country's growth towards the year 2000 must entail a structural change with the broadening of its economic base and reflected is relative sector contributions to gross domestic product. Out resource base lies with primary production : food and non-food agriculture, fisheries and the extractive sector comprising mineral fuels, mineral ores and forestry products. Where until recently the hulk of production and exports comprised mainly agricultural commodities, a shift has taken place which is structural in nature due to fundamental changes in international demand-supply relations. It has important rami• fications for future developments, opening up greater possibilities for growth and for the strengthening of our balance of payments, but posing riddles from the viewpoint of population and employment. T'ne leading growth sectors are now and will he the "new", i.e. non-traditional sectors connected with the extractive industries : oil. minerals and timber. These are capital intensive and dependent on high technology. They are not very labour absorptive until the stage will he reached when the second• ary effects of forward and backward linkages of industrial activities generate sufficicst results. This takes a decade and longer, perhaps for the greater part of the 1980"s. In the meanwhile the larger number of the population find their livelihood in the iraditional sectors of agri• cultural production. Here technology is often loo simple and the increases in productivity can barely keep up with population growth. Such a situation of "technological dualism" creates social tensions leading to

222 EKI. VOL. XXIII NO. 3. SEPT., 1975 serious frictions if it is not mitigated by appropriate policies. The answer is to reinvest rapidly adequate ratios of the incremental benefits froii the growth resources to broaden our economic basis; in other words ta diversity in a "horizontal" sense by expanding the range of agricultur;! activities (with increasing emphasis on food production) and equally ii a "vertical" sense to accelerate the processing of commodities and to encourage (enforce if need he) "downstream" operations within the country. This can subsequently contribute to self generating forces in the manufacturing sector. In the intermediate period however, say between now and the yetr 1990, the thrust is likely to come from activities that increase the margin of value-added within our domestic economy in the producticn of food and non-food materials. During this phase industry and servici s would he "derived" sectors rather than "autonomous" engines of growth as such. This is not to say that these sectors arc unimportant. On tl e contrary, their "derived" nature does not at all exclude substantial d >- velopment in manufacturing and servicing. The population increase aid its locational distribution within Indonesia imply the need to crea :e mainly non-primary production employment opportunities for the large population that will be domiciled in Java. It is in the nature of :n industrial sector that once a certain level and pace of its development are attained, it tends to he dynamically self-generating. This is part because it generates a large share of its own investment funds (retain! c earnings) and partly because an important part of the input deman Is which will emerge are internal to the industrial sector itself. But agai in moving from where we are now at this point in time to that part• icular stage, we must fully exploit our present comparative advantages

As to the time profile of the growth process it may therefore useful in the light of the foregoing analysis lo envisage an intermedia period between now and 1990 within the longer term until the year 2000 as the "terminal" date. In the intermediate phase the resource based activities provide the airtonomous stimuli of growth, to be join later by an increasing role of industiies and services. This distincti of consecutive stages is also relevant in vie;v of the increased importanc! of oil and some other materials. The world-at-Iarge is experienci growing shortages and higher levels of prices in reference to energy fuels, some basic metals and indirstrial raw materials.') There will he

') Cf. Suiiiirro njojoli.Tilikiisiinio : "Energy and Rair Miitcrinh : Present and Futurp I'riris. Jiini.' 197-!

FKI. VOL. X.XIII NO. 3. .SI I'T.. 1''75 sustained demand for them which I expect to last well until the later part of the 1980's. Indonesia happens to he endowed with such materials.

The outlook for non-food agricultural commodities is on the other hand bleak, certainly is the short run. The decline in prices of these commodities will worsen in the current year of 1975"). It is generally expected that the prices of major commodities arc likely to fall hy 1980 to the average level of the 1960's. Which specific materials or commodi• ties, then, give the brighter prospects for our future in the sense that they can he expected to meet a sustained demand ? A study hy the expert staff of the IBRD mentions in this connection : food, sugar, beef, fishmeal. timber, petroleum and bauxite"). Indonesia has unexploited potentials for expanded output for each one of these commodities. I would add some other minerals and products of aquatic resources with which our country is endowed and for which in m.y view there will be intermediate term demand due to the world's increased needs, viz : nickel, tin. cooper and such industrial minerals as lime-stone, dolomites and andecite'").

What does all this mean to the expansion of our economic system in quantitative terms of GDP-growth rates ? Although Indonesia is a minor and even marginal member of the group of OPEC countries"), there is no doubt that oil (and natural gas) are making a growing contribution to its future. When the other resources mentioned above are also taken into consideration, then it appears plausihie that the current growth rate of GDP of over 7% per annum can be maintained for the rest of this decade.

What about the period beyond until the vear 2000 ? We have made a number of proiertions. which arc contained in the tables of the "Supplement" attached at the end of this paper^^)

«) cf. I.M.F. Report ID/7-I/A: "tVorW Economic Outlook 1975 — General Survey" December 24. 1974. ") TBUn-Report No. Sec M 74-489 : "Prospects for the Developing Countries". July 9. 1974. 19) Cf. Sumitro Djoioliailikusumo: "The Political Economy of ASEAN Resources". September 1974. !•) Tbc group average of OPEC of annual growtb rates is estimated at 11% of GDP for tbe period until 1980. IBRD-Report, ibid. 1-) I am greatly indebted to Moh. Arsjad for bis contribution in regard to the projections. The responsibility for the underlying assumptions of estimates of growtb rates, inccjuality ratios and poverty levels, and for their attendant deficiencies must be placed on me.

224 EKI. VOL. XXlll NO. 3, SEPT.. 1975 Their salient points are presented here in summarized fashion. Based on the annual GDP figures and their composition relative to sectors for the period of 1960-1973"), extrapolations are made for the consecutit phases of 1973-1980, 1980-1990 and 1990-2000. We have worked with three alternative assumptions of annu growth rates :

I : 1973 - 1980 : 7.35% II : 1973 - 1980 : 7.35% 1980 - 1990 6.50% 1980 — 1990 : 7.00% 1990 - 2000 6.00% 1990 - 2000 : 7.00%

III : 1973 - 1980 7.35% 1980 - 1990 7.50% 1990 - 2000 8.00%

In view of my earlier assessment of the role of resources relative to world demand-supply conditions, I consider alternative II as "reali able" and alternative III as "desirable" (which we must strive to achieve just the same). Even when, as is anticipated, the disparities surroundii g demand-supply relations of energy and basic materials will be largely rectified towards 1990. we should expect (as we have mentioned hefor;) that at such point the industrial and services sectors will have-attain* d sufficient momentum for selfgenerating dynamics. Hence it would n)t seem unreasonahie to assume a perpetuation of the annual growth rates of 7 per cent beyond 1990. It is also a must to bring about the conditions commensurate the course charted in alternative II. We should call to mind what his emerged as the necessity to meet our society's requirements as engenq- ered by population dynamics and as we approach the year 2000"). In the case population projections we have used one of the alten ative assumptions (25% decline in fertility rate) as the basis for further discussions. Similarly here, concerning growth projections : we use on one alternative (II) for the purpose of depicting the future magnitud and dimensions of aggregate income, leiels of living and distribution patterns. Thus with a 25% decline in fertility rates of population and anni rates of increase in gross domestic product of 7.35% during 1973-19k0

'••') Table 3A of Supplement. I '•*) It is my feeling that in such a context conditions under altern.itivc I wou|ld seriously impede our capability to do so.

TKI. vol.. Will NO, 1. Sl l'l.. I"7 225

and 7% during 1980-2000, the sequel of income_ per capita per yetr would be as follows : '"')

(in 1973 — prices)

1973 Rp. 53.050 (US$ 128) 1990 Rp. 112.770 (USS 272) 2000 Rp. 172.750 (US$ 416)1

It means that under-present conditions and the basis of 300 workin ; days per year, the average per capita income of our people is Rp. 17^ per day (or 42 US cents). The levels of living, expressed solely in average per capita income; and in 1973-prices. would be a little more than double in 1990 (fifteen years hence) and more than three-fold in the year 2000. Let us now look at the composition of GDP by industrial origin By applying to our GDP projections the sector coefficients of growth elasticity and size elasticity relevant to Indonesia we obtain the follow ing picture : "')

in Billion rupiah and 1973-prices

1973 2(KX) Agriculture 2.62cS (39.9%) S.74S (26.9%) 9.060 (21.6% Mining 617 ( 9.5%) 2.374 (11.1%) 3.829 ( 9.1% Industry & Construction 833 (12.60/,,) 4.198 (19.70/,) 10,263 (24.4%' Services 2.S27 (38.2%) 9.031 (42.30/,) 18.843 (44.99(, Gross Domestic Product 6.6t)S (100%) 21.3 48 ( lOOl/,) 41.99S ( 1(X)%;

While total GDP would increase by 466% Irom 1973-2000. there would he a relative decline of the role of the agricultural sector from almost 40% of GUP in 1973 to 27% in 1990 and further to 22% in the year 20(K). This process would be accompanied by the increasing importance of industry (4 construction) and services. The share of those sectors together would rise from 51% in 1973 to 62% in 1990 and 69% in the year 2000.

5'') Sec Table 4 B (if Siipplemenl. "') See Supplement. Tahlcs SA. SR. SC. /A and 7B. ''j Agriculture includes: animal husbandry, fisheries, forestry. Services include a.o. : government, banking, trade. trans|K)rtation & communications, tourism.

EKI. VOL. XXIII NO, 3, SEPT.. 1975 227 The Pattern of Income Distribution I mentioned before that the extent to which the course and pattern of development and growth is "acceptable" is greatly influenced by the sense of equity (or the lack thereof) which prevails in the community- at-large. Sense of equity relates here to the distribution of wealth and income among social groups. Where gross disparities exist, vigorous policies and effective programmes to rectify them are of strategic import• ance. In approaching these problems. I shall follow and apply the criteria used and developed in a recent study, jointly carried out by the World Bank's Development Research Center and the Institute of Development Studies, University of Sussex.'") It is probably the most penetrating study to date on inequality and poverty in the context of the growth process. Unfortunately Indonesia does not figure in it, probably due to lack of reliable data. The concept of equity in the social process has as its twin aspects : "relative inequality" and "absolute poverty". Income inequality in relative terms is measured "hy the extent to which the income share of groups of individuals or households differs from their population share".") In this connection the question is posed : how much/which share of total income is received by the poorest 40 per cent of the population, how much by the middle 40 per cent, and how much of that income is enjoyed by the top 20 per cent ? The following categories and yard sticks ate used : conditions of high inequality pertain when the 40 per cent lowest in the income ranking of the population receive less than 12 per cent of total income, moderate inequality when they receive between 12 and 17 per cent low inequality when they receive 17 per cent and more. The extent of relative inequality is an important dimension of the problem of income distribution, hut it tells us little about the extent absolute poverty. There is equal concern of course with absolute levels of living in terms of food, clothing, shelter, health, education and so on. In his study covering a wide range of underdeveloped countries, Ahluwalia has used two arbitrary "poverty-lines" of annual per capita incomes of U.S. $ 50 and U.S. $ 75 (in 1971 prices).'") In the following i«) 'Redistribution with Growth", a Joint Study by the World Bank's Development Center and the Institute of Development Studies at the University of Sussex, published by Oxford University Press, 1974. t') Montek S. Ahluwalia: "Income Inequality: some dimensions oj the problem" in "Redistribution with Growth", ibid., p. 6, 10. 2") His study covers about 60 per cent pf the population in tbe developing countries (excluding China) and by tbe above yardsticks half of them live below the S 75 poverty line and one third below tbe S 50 poverty line ; Montek Ahluwalia. ibid., p. 11.

228 EKI. VOL. XXIII NO. 3, SEPT.. 1975 review with reference to Indonesia I shall use one measurement on the S 75 poveny-iine (in terms of 1973 prices). Much of the poverty problem reflects low levels of per capita 11- come as well as gross disparities of income distribution. However, , hi per capita incomes do not exclude high inequality. Nor do they ensu|re that there is no absolute poverty problem. For example, in France 1962 v'aen GNP per capita was $ 1,913 the lowest 40 per cent populatiibn group received only 9.5 per cent of total national income ; and in Ven|e- zuela in 1970 (GNP per capita $ 1,004) the share of the lowest 40 cent population group was 8 per cent of national income. As to absolute poverty, in Mexico with per capita income of $ 645 in 1969, near 18 per cent of the population lived below the S 75 poverty line ; Brazil in the same year ($ 347 per capita) 20 per cent of the populatior in South Africa ($ 730 per capita) almost 16 per cent of the populatior How are conditions in Indonesia and how will or rather shou they he in the future ? We have suffered and are still suffering, t sheer neglect in the past, from a lack of a reliable data base, althoujh serious attempts have of late been undertaken to rectify the situatic and improvements in our statistics are beginning to show. Various studies during the past year have probed into the prohle:ni s of Indonesia's income distribution.-') Many of them are of a partial nature, either confined to specific locations or dealing with certain aspects only. Very recently a thorough and fairly comprehensive stucy has been done relative to the situation in Java. It is still in draft for. n and I am at this point unfortunately not yet authorized to quote fro n it. However, from this and the other documents it can be inferrf t a with some reliability that for Jakarta under present conditions, tl lowest 40 per cent of the people receive 15 per cent or a little moie of total income, the middle 40 per cent gets 32 per cent of total ii. come and the top 20 per cent enjoys 53 per cent of total incom Conditions in the rural areas and in some other urban centres seem tjo indicate a relatively better ratio for the lowest 40 per cent of th population with a share of close to 20 per cent of income.

a.o. D.H. Penny and M. Singarimbun : "Popuhtlion and Poverty in Rural ]ava Some Economic Aritbinelic from Sri'narjo", 1973 : Hendia Esniara : "Region Income Disparity in Indonesia", 1974 ; Sayogyo : "Modernization without Dev lopment in Rural Java", 1972 ; Giistav F. Papanck : "Real Wages : "The Efjeit of Growth and Inflation on Workers Inconie. Income Distribtition and Labt Costs." 1974 : Uwighi Y. King and Peter D. Weldon : "Income Distribution artfl Levels of Living in Java I9(,3-1970". 1975. (Draft and not yet published).

EKI. VOL. XXIII NO. 3. SEPT.. 1975 229 As the future trend for the island of Java is one of semi-urban• ization with the burden of population density shifting to metropolitan agglomerations, I shall for the purpose of this discussion use Jakarta's pattern of income distribution as a point of reference. Let us compare it with the relative conditions in other countries of ASEAN and in some Latin American countries with a socio-economic structure somewhat similar to Indonesia's.

Share of Income received by households'^)

GNP Lowest Middle Top per capita 40% 40% 20% U.S. Dollar Population Population Population ASEAN countries Malaysia (1970) 330 11.6 32.4 56 Philippines (1971) 240 11.6 34.6 53.8 Thailand (1970) 180 17.0 37.5 45.5 Indonesia (1973 — GDP) 128 15 32 53

Latin America

Mexico 645 10.5 25.5 64 Brazil (1970) 390 10 28.4 61.5 Venezuela (1004) 1004 8 27 65

Indonesia and Thailand are low income countries with per capita income below $ 200 per annum. From the viewpoint of relative inequality Thailand rates as one of "low inequality" and Indonesia as one of "mode• rate inequality". The others all with per capita income exceeding $ 20^ per year belong to "high inequality" countries. This is plausihie in view of the low base of income in Indonesia and Thailand where the greater number of people get relatively a bigger share relative to the situation in countries with higher incomes.

How is existing relative inequality in Indonesia translated in terms of ahsolute poverty ? How many people in our country live below the poverty line of $ 75 per year ? With the lowest 40 per cent of the population receiving 15 per cent of national income, total annual income of that group is Rp. 991 billion, or a per capita income of Rp. 19.895 ($ 48) per year (as against an average national income per capita of

") Data related to countries other than Indonesia, from "Redistribution with Growth", ibid. Table I.l. p. S.

230 EKI. VOL. XXIII NO. 3. SEPT.. 1975 S 128)-''). All of our poorest 40 per cent, then, live way below tic absolute poverty line of $ 75 per year. It means that 50 million of oui: people live prcscnlly on a level of Rp. 66 or 16 dollar cents per persir per day. With 6 persons per household, more than 8 million household:; subsist on a family income of Rp. 396 per day. Clearly, this situation must he drastically rectified. If social stabil tj is to he maintained between now and the year 2000, then conditio i! of both relative inequality and ahsolute poverty must he tangibly imprcv- ed in the process of Indonesia's growth. To such purpose I would suggest that hy 1990 the lowest 40 jei cent of Indonesia's population receive 18 per cent of national incone (which would place us in the category of "low inequality") and at le: st 20 per cent (preferably higher) hy the year 2000-'). With these ratios in mind and on the basis of 25 per cent fertility decline in population and of annual GDP growth rates of 7.35 per cent for 1973-1980, 7 per cent for 1980-2000, the conditions for the lowest 40 per cent of population towards the yea.i: 2000 would look as fol• lows : -")

GDP — per capita Average National lowest 40% population Income per capit^

1973 Rp. 19,895 ($ 48) ($ 128) 1990 Rp. 50,748 (S 122) •• • • ($ 272) 2000 Rp. 86,374 ($ 208) ($ 461)

Thus, relative to the present the lowest 40 per cent of our popu tion would he lifted from the trap of absolute poverty with per capita income raised hy two and a half times in 1990 and by more than foil times in the year 2000. The ramifications for public policies are considerable. Much depen Is of course on the appropriate political and institutional framework th must he evolved in order to come to grips with the fundamental cans underlying maldistribution. Foremost among these is the conccntratidn

"•"•I Sec Tables 9. lOA and 1013 of Supplement. -') Ahluwalia. ibid., points our that the socialist countries have the highest degree of overall equality in the distribution of income. Their average income share of the lowest 40 per cent of the population amounts to 25 per cent of total income. This is suggested as an upiicr limit for the target incotne share which policy makers in under-developed countries can aspire. Sec Table lOB of Supplement.

EKI. VOL. XXIII NO. 4. SEPT.. 1975 231 of productive wealth, including ownership or control of agricultural land. I have an uneasy feeling that in this sense the distribution of productive wealth in our country is getting even more unequal than the distribution of income. Concentration of productive assets breeds greater concent• ration of incomes. The problem of poverty is linked to availability of land or at least to availability of capital needed to improve the quality of the land. Fiscal policies alone, of which the appropriateness is recog• nized as a necessary precondition, will in themselves not suffice to solve these problems. Policies in the field of education and health will cont• ribute to a rectification of maldistribution, although the results may not he ohservahie until towards the end of tlie intermediate term. Our concern with the required spread of accruing social and eco• nomic benefits to the poorer fractions of the population leads us to an acute awareness of the dimensions of investment programmes is the future. This was already apparent when we reviewed in an earlier section the basic physical requirements of our society in the year 2000. In turn the requirements of the future and the need for equity bring us inexor• ably back to the problems of growth.

Much as I have stressed that equity is an intrinsic ingredient of social stability, all these would he meaningless concepts deprived of operational significance without the process of growth at ;he appro• priate rates in flew of the population dynamics. The only social change that I can envisage in an environment of decreasing income is that of decay. Hence the magnitude, the pattern and the direction of future investments come to the fore, and inevitably the magnitude and dimens• ions of savings that will he required. We will have to form a picture ourselves as to their implications for the "resource-gap" (here,-in terms of the adequacy or inadequacy of financing sources) as well as for its concomitant the "halance-of-payments gap." All these aspects will have to be studied further in depth and in interrelationships with the require• ments of the future, the process and pattern of growth and the redistri• bution of income. In such a context our "huilding-hlocks" can hopefully be developed into a more cohesive contour of the future than I am able to do at this stage and within the scope of this paper.

International and Regional Aspects Indonesia as an intrinsic part of Southeast Asia is perennially exposed to the influence of outside forces. A new dimension to future developments is now added by Southeast Asia's potential in regard to

232 EKI. VOL. X.XIII NO. 3. SEPT., 1975 those resources which are the focus of demand on the part of the industrial nations. Clearly Indonesia's interest lies in the continued prevalence of. an international climate which gives her the scope and time to cope with het internal dynamics. It is also plausible to assume that no major powei will be prepared to see Southeast Asia become the exclusive fiefdom of another. | My views of the future is its international context and conditioned by a Southeast Asian perspective are connected with two general pro• positions.^") First, we live in a highly armed world, not only on the plane of strategic deterrence but also in terms of the weaponry that middle and smaller powers maintain. Hence the range and sets of balances on global, regional and sub regional levels tend to become as tenuous as they are complicated already. Our main hope is that a general awareness of this very situation cause chc powers that be to become more prudent in their considerations and expressions of the use of force. Second, the political and economic rclacionsliips between and among nations, hig and small, will he dominated by the interlocking problems of: food and population — energy, raw materials and environmental issues — continued inflation on a global scale and higher level of in• terest rates — instability of international trade and payments. Underlying these problems are fundamental changes and structural shifts in political and economic parameters, which have set in a process of radical transformation of global system. I have presented my views on the politics of international trade and resources on several occasions m the past."') I will thciefore resist the temptation to elaborate on them and will mention them only and in essence whenever relevant ii the context of the following discussion.

-n Alastair Buchan views the Rlol)al system in terms i»f three dilterent "planes" of power relationships with attendant diflerent kinds of balances, viz : the strategic military [thine. second plane ol [lolitical relationships and a third one of economic relationships. Cf. Alastair Buchan : "The End oj the I'osl War lira". 1974. While Buchan's treatment of world power relations has greatly impressed me. I am more inclined to regard the political and economic planes as one re.ilm embracing intertwined problems and issues. For this particular section on intcrnationa and regional aspects I am also indebted to the views expressed and themes developed by Sir Robert Scott : "East Asian Speculation". Pacific Community October 1971 and Dick Wilson : ".Sino-.S'orifl Rivalry in Soutlieast Asia", it Problems of Communism, Sept/Oct. 1974. Cf. a.o. : Sumitro Djojohadikusumo : "Prospects and Constraints in Work Trade". 1972: "The Economic luturc oj the Pacijic Basin". 1973: "Energ) and Raw Materials: Present ami luture". 1974; "The Political Economy o^ ASEAN Resources", 1974.

FKI. VOL. XXIII NO. 3. SId'l.. 1975 233 On ihc siraU'gic plane ue can expect continued domination l)\ the Uvo super-powers, llie USA and the Soviet Union. On matters of stra• tegic h.alance and deterrence the relationship will he essentially bilateral. They are the two powers with the combination of strategic, political ..and economic strength which no other countr\ can hope to possess m this century. The Vladivostok agreement is a further important step in the perspective ol detente, and since S.M.T-2 began two years ago. Yet it leaves many questions unanswered because the understanding reached was piimarily on ceilings, with special reference to that new generation of strategic offensive weapons, the MIRV missiles (Multiple Independently Targetable Re-entry Vehicle), the technology of which the Soviet Union has mastered recently. Alreatly there is intensified debate between the two sides on the deployment of MIRV s within the range permitted by the ceilings. We will witness a long period of hard, tedious bargaining, perhaps lasting into the 1980's. In the meantime howeicr. both and each of the superpowers continue ro transfer more ol their respective retaliatory strength from land-based to submarine — launched missiles which is not forbidden under the Interim Agreement of S.ALT"'^) In this connection too we read that the Poseidon programme is being pressed forward as is the Trident submarine-''). . the powerful sueces.sor of Polaris (in spite of Trident's high cost of reportedly one billion dollars per hoar). This has important ramifications for the fate and future of South- cast Asia. For it is quite possible that in the course of time a great part of the retaliatorv strength of the .siqieipoweis will shift from the land to the oceans. This is probably a main reason for the collusion of the two superpowers and their common stand in the on-going debate on the Law of the Seas and in their averse position vis-a-vis the Principle of the Archipelago, which Indonesia considers as one of the most vital and basic tenets in her existence as a nation-state, now and in the future. The great powers are on this issue joined hy Japan, motivated by economic and political considerations. Ironically it i.s China among the major powers which has come out in support of Indonesia's position, again for reasons of her own. My government has made its views siiffifi- ently clear on various important occasions and I need not he repetitive here. However, the question of straits and archipelagos is another issue, ringed with a combination of strategic, political and economic facets.

•-•"l Alastair Buctian. ibid., p. 116. ••"') Editorial in International Herald Tribune. February 12. 1975.

234 FKI. VOL. XXIIl NO. 1. SEPT., 1975 which I anticipate to remain dominant, in Southeast Asia as elsewhe The next Caracas conference on the Law of the Seas will likely another session in a sequel of many more to follow. Whai is need foremost is agreement on a rcdcj'miuou of "innocent passage", nor or in hroad concept bm sufficiently spelled out so as to have opeialionn value. In the realm of political and economic relationships the "tablea is somewhat different, in contrast to the siltiation two decades ago neither of the superpowers any longer dominates its respective spherts of alignments or groupings. Neither the U.S.A. nor the Soviet Union can dictate or impose their will unilaterally; each in his own sphere )f interest (once designated as'"blocs") must go through a process of pe- suasion. This has been demonstiatcd since the outbreak of the "cil crisis" when the U.S.A. iiad to undertake successive steps of persuasic n sometimes combined with pressures in her efforts lo achieve a commcn stand among consuming countries, to establish the international Enerjy Agency, and most recently ro get a floor price for oil imports accepted. — with great rcseriations on the parr of. the other members to he stitL As a matter of fact, the U.S. role of primus inter paris ratht t than pater familias. at least in political and economic entities matters, had become apparent long hclore the energy crisis, it reflected the ri- emergence of Europe and Japan as economic entities of great strengtl Developments of a similar kind have occurred within the Communist camp. Apart from the schism and the ensuing rivalry between the Soviet Union and China, the monolithic fabric has given way to "poly-centrism" always short of consideration on the strategic plane of course. Thus w have seen the international texlure develop as regional groupings and i i economic terms as agglomerations of economic power: U.S.A.. E.E.C Japan. Soviet Union.^COMECON. and presently China emerging as major factor on the world scene. Transcending the delineations of rcgiona entities and the boundaries of nation-states arc the operations of th so-called multinational corporations. It is within such a constcllatior that suh-regiqnal groupings have evolved within major geographic rcg ions."") partly as a response and a reflex on the part of small nation who do not wish to remain helpless pawns in games played by others For another part it is also due to the working of forces and iactor

It has been onv ol niy criticisms of Mcsarnvic-rcstcl's work. "Mankind at tbr Turninn Point", ibid ibat ibcy disregarded tlie emergence of snb-reuions ot this nature in tbe "iiuillilevel model of world system" wbieh ibey have de- veloped.

FKI vol.. .XXIII NO. V SI PI.. 0175 235

inherent in their own societies. They have made their respective govern• ments realize that their countries' inlercsts would be better safcgua dbJ through institutionalizing collaborative arrangeineiUs. Such a (sub) regi mal grouping is ASEAN which was preceded hy similar arrangemenl; |in Africa and in Latin America. I would expect the above "tableau" of political and economic relationships to coniinue throughout this century, with possible variat ons here and there. But. with one additional and most important dimension, to wit: the "materials problem" which brings forth a delineation o:: at least a distinction between resource-rich and resource-poor countries. This type of grouping will sometimes cut across the boundaries of :ejj- ional and sub-regional spheres, and at other rimes coincide with some of them. The spectre of acrimonious postures berween oil produi ing and oil consuming nations (and often among the oil consumers th ;m- selves) is symptomatic of this added dimension. Its preponderance is iue to the role of energy as the most strategic of basic materials and to the current overdependence of energy on oil. Bur we can expect other

alignments of resource-owning countries coming to the fore : of vary irig shades, whether as carrels or other types of looser associations, and with varying degrees of success. It has its counterpart of course in effc rjs to form consumers' associations, such as we already witness. It is o niy CO he hoped that in the course of rime the postures of confrontar on give way to reconciliation and arrangements of accomodacion on muti ally acceptable terms of equity.

Ever since the outbreak of the energy crisis I have maintained t lat the world is moving to (or rather in search of) new points of equilihri im at higher levels of costs and prices, with particular emphasis on ene fuels. I base my position on a combination of factors related to he nature of the technologies involved, economic realities and environmen|t:(] considerations"'). Substantive support lor some ol my propositions is to he found in an excellent assessment of "Project Independence" hy t hO MIT Energy Laboratory"-), particularly where reference is made to t :ie "scaling up factor" connected with the capacity (and its iimilations) 4 the energy engineering and construction sectors in the world. The ieacji times and costs pertaining to the expansion of energy sources (convent!

*') Cf. Sumitro Djojohadikusumo : "Pola Peiigembaiigaii Eiicrsi: Tinjauan Jatigka P( n jang", 1974 (The Pattern of Energy Development; The Long Term View) ; alsa "Energy and Raw Materials" ibid. 3'-') Cf. Technology Review, May 1974; passim.

EKI. VOL. XXIII NO. 3, SEPT.. 1975 onal and new) will be respectively much longer and greater than people have thought or been led to believe until now. These sketchy observations hear directly and indirectly on the present and future relationship between Southeast Asia and outside powers or centres of power. As to the concept of Asia, we accept Buchan's distiuctiou between four sub-systems ; (1) the Islamic States of South• west Asia, (2) the Indian Sub-continent, (3) Southeast Asia, (4) Pacific Asia."-') The four sub-systems are interteiated, hut there is a varying degree of emphasis in the intereiationships. For example, there iS a diminishing reiationship between the Indian Sub-continent and Southeast Asia, patalleiicd hy a closer reiationship between Southeast Asia and Pacific Asia. This trend is expected to prevail in the future. The stake of the U.S.A. in Southeast Asia continues to he great on the strategic as well as the political-economic planes. The "inward looking" trend among infiuenliai American groups does not mean that the role and interests of the U.S. in Southeast Asia will he reduced. Its presence and posture may take on different features, hut it is a matter of the emphasis of American concern with Southeast Asia which has changed. The concern itself will not diminish. The European Community's reiationship with Southeast Asia will have a small poiiticai continent. Individual countries of Europe may continue to have many different links with Southeast Asian countries, hut the Community as such is apparently more preoccupied with its internal affairs, its relations vis-a-vis the U.S. and Japan, and its over• tures to its Eastern neighbours. Only since the "oil shock" jolted the European countries have they displayed frenetic activities outside their orbit and mostly in terms oi relations with the oil producing countries of Southwest Asia. The E.E.C. is important to Southeast Asia as a market and a source of supply and because the E.E.C. is a major trading partner in the world hy any standards. But the reverse is not the case. South• east Asia is unimportant to E.E.C. in relative and absolute terms. E.E.C.'s position vis-a-vis Southeast Asia has been since its inception, one of benign indifference". I hesitate to venture a judgement at this stage as to whether or not that attitude will change. The Soviet Union has considerably intensified its endeavours througli diplomatic and economic activities to expand its influence in Southeast Asia. It is of course part of its role as a universal power and therefore an aspect of maintaining balance on the strategic plane. It should he

33) Alastair Buchan, ibid., p. 281.

238 HKl. VOL. XXIIl NO. 3. SEPT.. 1975 equally seen in the light of its preoccupation with China. While t le detente between the Soviet Union and the U.S.A. is likely to contin (short of which there won't be such a thing as the human eco-syste anyway) and also the thaw in relations between the U.S.A. and Chin there are on the other hand no signs that the tensions between tie the Soviet Union and China will diminish. We therefore take into accoupt that those tensions will prevail in the intermediate term. The Sino-Soviet rivalry in Southeast Asia is a complicating fact that will be felt in the politics of our region. In the context of tlie "triangular" relationship of rivalry between the USA. the Soviet Union and China, the change to outward appearance of U.S. presence (wi the curtailment of its commitments relative to the Indo-China statejs)! has tended to sharpen the competition between the two other members" In the longer run China is likely to have the edge over the Soviet Unit^n because of her closeness to Southeast Asia and of her affinity wi part of the latter's population, which happens to occupy a strong at d even dominant economic position in the countries concerned. On tljie other hand these realities pose a dilemma for China. It makes h suspect in the eyes of Southeast Asian governments. We will see contin ed ambivalence in China's policies vis-a-vis Southeast Asia. She has assure the established goveinments of Southeast Asian countries in terns of normalized relations, hut at the same time she would not want alienate the local radical movements within the respective countries, the future, China will deem it in her interest to normalize as much possible her relations with established governments of Southeast Asi J, due to a preoccupation with reconstruction and development problems within her own boundaries as much as to her real fear of the Soviet Union. China's priorities for the future will be the demands for reco i- struction and social and economic development, in which context siic: will keep her external lines open to give her the manoeuvrability in tlie face of the Soviet policy of encirclement. The indications were the-e already since the Party's Xth Congress in 1973 and have become clear :r after the recent Fourth National People's Congress. It seems of little reievance to apply the stereotype criteria of "moderates" versus "raqi-

«*) Cf. Dick Wilson, ibid. Wilson differentiates, from tlie viewpoint of U.S.-.Soviet-China rivalry, betwetn ttvo "sub-theatres", viz the "landward" part of .Southeast Asi.a ,ind the "sea-i ward" part of Southeast Asia. While I consistently distinguish between tie ASEAN part of Southeast Asia as a distinct community of political entiti;s and the other countries gcogrnphirallv located in Southeast Asia, among wlii the Indo-China states can probahly he regarded as having a distinctive line|a- meiif. politically and otherwise.

EKI. VOL. XXIIl NO. 3, SEPT.. 1975 239 cals" to the higher echelons of China's leadership. What has come out of the People's Congress is that the relative importance of Politbureau members seems connected with their "dual function" as key-members of the State Administration. Furthermore there is the substance of Prime Minister Chou En Lai's report to the Congress, which was focussed on a development programme designed to see China through to the end of the century, a programme of China's Year 2000. By 1980, five years hence, China is to have gained sufficient strength for the "take-off" which should then lead her to a position of a leading world power. By the year 2000 China is to be in the front rank of the world through a process of "comprehensive modernization" in the intervening period. This part of the Prime Minister's report gives relief to the composition of China's State Council (i.e. Council of Ministers). More than half of the 12 Vice Premiers have had long years of either practical or planning experience in key sectors of China's economy."") The above mentioned strands in China's economic considerations and poiiticai motivations will influence her future relations with South• east Asia and with Japan. prime importance to our area. Let me reiterate that close relationships The relationships between Japan and Southeast Asia is obviously of are inevitable. In fact they are there already. Japan's presence and influence is in evidence everywhere in the world, but particularly so in what is some• times referred to as the "Pacific Basin". The question is whether in the course of the next twenty five years relations will he smooth or whether they will he fraught with tensions and frictions of a volatile nature. Relationships in an atmosphere of mutual accommodation would be beneficial to both sides, hut cannot be taken for granted. It is a matter of evolving the modalities regarding the terms and conditions under which reiationships arc felt as equitable and mutuallv acceptable. Equitable and acceptable not oniv because they bring immediate benefits to specific groups of power and influence on each side of the fence, but within the entire frame of the fundamental social, economic and political dynamics that are sure to make themselves felt in an era of radical transformations all around. The constant in Japan's policy considerations is her need for cont- imipd access to the sources of materials and to export markets part-

3ri) cf. John Gitling.s : "Peking strives for lift-ofi". The Guardian Weekly, February 1. 1975.

240 EKI. VOL. XXIII NO. 3. SEPT.. 1975 icularly in the developed countries where the effective demand is. On materials, Japan is the least autarchic of the major powers. Apart from oil, she is also entirely dependent on the imports of nickel, baux te, coking coal and uranium. It lias struck home in full force on acco int of the oil crisis. The search for materials has extended her economic and diplomatic activities across the world to an even greater extitjt than the search for markets. With that came a new awareness of :he need to expand her overseas investments. Some years ago the idea of a "Pacific Free Trade Area" was gain nk ground in government circles, prominent business groups and resea ch organizations in Japan and elsewhere. It was conceived as an arran je- ment involving the advanced countries of the Pacific, i.e. : Japan, i he U.S.A., Australia, New Zealand and Canada. The less developed countrie^ of the Pacific (read : Southeast Asia) were to he given "associate statu;']. The carrot held in front of these "associates" was that such an arrangcr ment of industrial countries could allegedly seive as a better framewt rk tor assisting the expansion of trade and the development of the i !sl: developed part. On behalf of ASEAN I registered my misgivings a id serious objections to schemes of that sort. Tiicy were based on the fallacy of comparative advantages ; or rather on a particular interpret• ation of comparative advantage which in its application would reinfoicd existing comparative disadvantages and would condemn us to remain in perpetuity-producers and exporters of (unprocessed) raw materials.'"] Conditions have changed. The recognition that the materials imbalance will last for some time has turned thinking in different directions. Tid relations with Southeast Asia and with other resource-owning countrie^ of the Middle East, in Latin America (Brazil, Mexico) and in Afri (Nigeria) remain high on the scale of Japanese priorities. But it is China that emerges as a preferred partner, on poiiticai and economic grounc s From the long term view of Japan's interests (of which overseas inve; ment becomes a necessary ingredient) she looks for "strong" partners to those countries with internal stability which at the same time occujiy a dominant position in their immediate vicinity ; and who own resourc ;s| of course. The only country in Asia apart from herself that measui is up to such criteria is China. On the other hand, because of China power, Japan would want to remain closely associated with the U.S.A. Hence she has a vital interest in the continuation of the thaw in U.S. Chma relations, despite her peevishness about the way in which Kissing; r re-established those relations.

30) Cf. "The Future of the Pacific Community", ibid.

EKI, VOL. XXIII NO. 3, SEPT.. 1975 24 Japan's trade with China increased substantiaily during 1973 and 1974. Japan's exports comprised rolling stock, heavy equipment and machine tools while obtaining coking coal in return. Oil imports from China are expected to become important in the near future. China's oil production vviii reach reportedly a level of some 400 million tons by 1980, most of it intended for exports to Japan. On her part China iooks to Japan for high technology products that she will need in the course of her own reconstruction and development programme. As Japan is also a main supplier of capital goods to Southeast Asia, she may in this scheme of things aspire to be the "iin'K" between China and Southeast Asia by functioning as a workshop for both in terms of capital goods and high technology products."') Japan's need to expand her overseas investments is connected with the advantages of utilizing cheaper labour, the securing of raw materials and a wish to shift polluting industries out of the Japanese islands. The preferred sectors for investment will he raw materials ventures, hut also iron and steel industries, processing manufacturing and in future on an increasing scale chemical projects. The preferred pattern of investment as can he observed in South• east Asia, Latin America, the Middle East and also in Australia is to link the investment with a long term sales and purchase agreement (a 20 years period is not unusual) relative to the output of the project. In other words a combined investment and trade package "that locks in a supplier on a semi-permanent basis"."") There is the concomitant benefit that such Japanese overseas plants will need on a continuing basis the machinery and spareparts from Japan. Japan's industrial com• plex of the future is geared to a domestic industry that will increasingiy concentrate on the production and exports of high-technology value added products, such as transport equipment, aircraft, computers, electronics, etc. Such a programme depends on Japan's continued ability during the next ten to fifteen years to generate substantial export surplusses. —in ail likelihood at the risk of antagonizing her competitors even more. The above "tour d'horizon" was meant mainly to indicate important elements in the external conditions and forces relevant to the future of our country as part of Southeast Asia. It is in that perspective that Indonesia will intensify her efforts to foster the cohesion of ASEAN.

*T) Cf. Matin Woollacot: "Towards an Eastern Co-Prosperity Sphere" ? in The Guardian Weekly, Jan. 4, 1975. 35) Cf. Martin Woollacot, ibid.

242 EKI, VOL. XXIII NO. 3, SEPT., 1975 ASEAN has emerged as a community of political entities design ;d to develop a common appioach to problems and issues emanating from "outside" on arising within its own confines. It should become an portant instrument for intra-regionai cooperation and a mechanism conduct its relations with the major centres of power. An importait gecpoliticai consideration is also that a regional solution to pendiug problems may be the only practical way to preserve the independen - of its member countries and to safeguard their future in the light It world forces and trends depicted earlier. The population of ASEAN countries will amount to some 260 m1i- lion in 1980. of which 153 million will live in Indonesia. Hence, ASEA^I is potentially a hig market hy any standard. It is only to he expect; d that ASEAN cooperation will he more directed towards an expansicn of intra-regionai trade hy evolving concerted and coordinated policies :n trade, industry and resource development. Intra-regionai cooperation s economically feasible and it may he dictated hy force of circumstanc If current trends are allowed to continue in the same direction, the countries of Southeast Asia will be over-dependent on a limited number or external markets, as outlets as well as suppliers. In fact that point is dangerously close where Japan is concerned. Japan's share in Soutf- east Asian trade has increased and will continue to do so. It will he very large in 1980, with Japan's share in the exports of Southeast Asii expected to be at some 40 pec cent on the average. It will for som; individual countries perhaps exceed 60 per cent. On the other ban i the share of Southeast Asian countries in Japan's trade has decrease i and on present trends it may become insigniiicant hy 1980, except foe cettain specific kinds of materials. Much as I have stressed that clos: cooperation heuveen Southeast Asia and Japan is inevitable and that i; can he very beneficial to both, excessive dependence is poiiticaiiy ane socially disturbing."'') Under such conditions the much vaunted economic complementarity heuveen regions becomes a "complementarity trap" hy which economic "interdependence" is turned into de facto subjugation. Intra-regionai arrangements will give a firmer foundation for steady industrial growth within ASEAN. In such a context planned collaborative arrangements by member countries of ASEAN in regard to larger-scale industries point to interesting possibilities.'") The establishment of such regional industries does not lead to eco• nomic isolation of ASEAN from the rest of the world. Nor will economic

3") Cf. : "The Economic Future of the Pacific basin", ibid. *") Cf. Report by a United Nalions Team : "Economic Cooperation for ASEAN", 1972.

EKI, VOL. XXIII NO. 3. SEPT., 1975 243 intercourse with Japan and other industrial countries diminish. It will if anything expand in value and volume, but its structure and pattern and the categories and kinds of goods traded will he undergoing changes. An important consequence is that ASEAN countries will he dealing with industrially advanced countries on more equitable terms. This, in turn, will benefit the general climate of economic and poiiticai relations. Therefore ASEAN vviii remain outward looking hy virtue of its geo• graphy as much as hy the dictates of the economics of member count• ries. This is not in the least in reference to those resources in which the major powers will show a more than ordinary interest. Here it is important that we clearly recognize the points of convergence as well as those of possible collision. It is well thetefore that Southeast Asian nations as resource-owning countries make explicit their considerations and aspirations in regard to resource policies, lest their leaders in and outside governments he accus• ed hy the future generations of negligence."') In an era of materials imbalance the ASEAN countries will insist on an appropriate share of both "economic rents" and "monopolitic rents" connected with the development of non-renewahie resources. In the course of events they will want participation in successive stages of the production cycle. Demands will be pressed for m situ processing ol the basic material, and subsequently for forward integration into the fabricating process. The intermediate and long term objectives entail that these "growth sectors" provide increasing inputs into the national economy in terms of added value, employment and the acquisition of technology. At this juncture I would like to point to the common interest on resource and resource policies between Southeast Asia and Australia, and by extension New Zealand and later Papua New Guinea. The com• mon problems of a similar nature in respect to natural resources con• stitute a strong foundation for close cooperation between Australia and ASEAN countries. In the light of future international developments I anticipate even closer relations between ASEAN countries, Indonesia particularly, and Australia, not only on economic grounds hut also for strategic and poiiticai considerations, Between the policy objectives of resource-owning countries such as Australia and Indonesia on one hand and those of Japan as the major resource-searching power of the Asia/

244 EKI, VOL. XXlll NO. 3, SEPT., 1975 Pacific region, there are of course areas of actual and potential conflict. But collaborative arrangements for mutual accommodation and coope• ration that will he workable for some length of time are possible. They require a new mode of thinking, and above ail a continuing dialogue between the leading exponents of government, poiiticai groups, business circles and inteiiectuais. Coliahorative arrangements in the sense above should he vigorously pursued. Their benefits far outweigh the temporary gains that are derived from short sighted behaviour which only leads to chronic recriminations and frictions. It will not be easy, hut it can he done.

EKI. VOL. XXIII NO. 3. SEPT.. 1975 245 SUPLEMENT

I. Projection of Total Indonesian Population (1971-2001) Table 1 — Projection of total population at the end of year: 1921-2001. Table 2 — Piojection of total population in the middle of year: 1973-2000.

II. Realization and Projection of Gross Domestic Product, 1960-1980 Table 3A — Development of Gross Domestic Product, by type of activity, 1960-1973. Table 3B — Development of Gross Domestic Product composition 1973/74-1978/79. Table 3C — Projection Gross Domestic Product, hy type of activ• ity, 1973-1980.

III. Projection of Total and Per Capita Gross Domestic Product, 1973- 2000 Table 4A — Projection of Gross Domestic Product, according to various assumptions, 1973-2000. Table 4B — Projection of per capita Gross Domestic Product. according various assumptions with a 25 per cent fertility decline, 1973-2000.

IV. Coefficient Concerning Growth & Size Elasticity Table 5A — Standard coefficient concerning growth and size elasti• city in the world, 1970 and 1980. Table 5B — Result of regression concerning estimates of growth and size elasticity in Indonesia, 1960-1973. Table 5C — Estimate of the coefficient concerning growth and size elasticity used in the projection in Indonesia, 1973- 2000.

V. Projection of Gross Domestic Product and its composition according to type of activity, far various asstunptions, 1973-2000. Table 6A and 6B — Projection of Gross Domestic Product and its composition according to type of activity, on the basis of Assumption I concerning the development of the Gross Domestic Product and the 25 per cent fcrlility decline, 1973-2000.

246 EKI, VOL. XXIII NO. 3, SEPT.. 1975 Table 1. Projection of Indonesian Population, At tlie End of year : 1971-2001 (In Million Persons).

Average Annual Growth Rate (%) Assumption 1971 1981 1991 2001 1971-1981 1981-1991 1991-2001

1. Assumption I 120.1 154.1 204.5 277.3 2.51% 2.86% 3.09% 2. Assumption II 120.1 153.0 196.5 252.3 2.44% 2.52% 2.52% 3. Assumption III 120.1 151.9 188.8 227.7 2.37% 2.19% 1.89% 4. Assumption IV 120.x 151.5 186.0 218.9 2.34% 2.07% 1.63%

Source : Progress Report on Research Policy. Appendix IV C.

Note; Assumption I : Without Family Planning. Constant Fertility. Assumption II: 25 per cent Fertility Decline. Assumption III: 50 per cent Fertility Decline. Assumption IV : Fertility declines until NRR = 1.

Table 2. Projection of Indonesian Poptilation at the Middle of year : 1973-2000.

Assumption 1973 1975 1980 1985 1990 2000

1 Assumption I 124.7 131.0 148.5 170.1 196.0 265.0 2 Assumption II 124.5 130.7 147.6 167.0 189.3 243.1 3. Assumption HI 124.4 130.4 146.7 163.9 182.8 221.4 4. Assumption IV 124.3 130.2 146.3 162.8 180.4 213.7

Source : Processed from table 1. Salemba 4, 15 January 1975 - Institute for Economic and Social Research (LPEM) Economic Faculty University of Indonesia

Moh. Arsjad Table 3A. Gross Domestic Product, By Types of Activity, 1960-1973 (In Billion Rp., 1960 Prices).

Average Annual Growth Rate Tvnp of Activitv 1960 1965 1966 1969 1973 1960-1965 1966-1973 1969-1973 J, y VJ v J. y 1 .y

1. Agriculture 210.4 225.3 236.1 260.1 303.0 1.370/0 3.62% 3.89% a. Food, poultry and fisheries 160.3 173.8 184.3 203.6 236.0 1.63% 3.59% 3.76% b. Smallholders estate and large plantations 40.8 46.3 47.3 48.5 53.0 2.56% 1.63% 2.24% c. _Forestry 9.3 5.2 4.5 8.0 14.0 Neg. 17.60% 15.02% 2. Mining - 14.4 16.0 15.4 27.7 50.0 2.13% I8.320/0 15.91% 3. Industry 32.6 35.6 36.3 46.6 63.0 1.77% 8.19% 7.83% 4. Transportation & Communications 14.5 15.1 15.2 16.5 27.0 0.81% 8.55% 13.10% 5. Construction 7.9 7.4 8.4 12.1 27.0 Neg. 18.15% 22.22% 6. Services 110.4 130.5 130.5 167.8 237.0 3.40% 8.90% 9.02% Cross Domestic Product 390.2 429.9 441.9 530.8 707.0 1.96% 6.940/0 . , 7.43%

Source: Processed from B.P.S. (Central Bureau of Statistics) data.

Salemba 4. 7 February 1975 Institute for Economic and Social Research (LPEM) Economic Faculty, University of Indonesia

Moh. Arsjad Table 3B. Development of Composition of Gross Domestic Product, By Sector, 1973/74 — 1978/79.

1973/74 Average Growth Rate 1978/79 Estimate 1973/74 — 1978/79 Projection

1. Agriculture 40.2% 4.6O/0 35.6% 2. Mining 9.2% 9.O0/0 9.9% 3. Industry 9.8% 13.00/h 12.5% 4. Transportation & Communications 4.1% 10.0% 4.7% 5. Construction 3.7% 9.2% 4.0% 6. Services 33.0% 7.6% 33.0% Gross Domestic Product 100.0% 7.5 o/y 100.0%

Source: Draft of Second Five Year Development Plant. 1974/75 — 1978/79.

Salemba 4. 7 February 1975

Institute for Economic and Social Research (LPEM) Economic Faculty, University of Indonesia

Moh. Arsjad Table 3C. Projection of Gross Domestic Product, in 1973 Price, 1973-1980 (In Billion Rupiah).

Type of Activity 19731) 1980 Average Annual Growth R .te

1. Agriculture 2,628 3.600 4.60%=) 2. Mining 617 1.128 9.00 Co'-') 3. Industry 517 1.343 13.00%=) i. Transportation & Communications 261 509 10.00%=) 5. Construction 262 4S4 9.20%=) 6. Other 2.266 3,785 7.60%=) Cross Domestic Product 6.605 10.849 7.34%

Source: ') Central Bureau of Statistics, Economic Indicators. November 1974. =) Draft of Second Five Year Development Plan (1974/75 — 1978/79). Book I. page 6-5 (tabic 6-1).

Salemba 1. 7 February 1975

Institute for Economic and Social Research (LPEM) tconomic Faculty. University of Indonesia

Moh. Arsjad Table 4A. Projection of Gross Domestic Product, in 1973 Price, 1973-2000 (fu Billion Rupiah).

Year Assumption I Assumption I! Assumption U!

1973 tS.605 6.605 6.605 19S0 10.S52 10.852 10,852 1990 20.371 21.348 22.366 2000 36.4S1 41.995 48,286

Note : Average Annual Growtli Rate : Assumption I : 1973 — 1980 7.350/0 1980 — 1990 6.500,0 1990 — 2000 6.000/0 Assi(i)!pr;o;i // : 1973 - 1980 7.35% 1980 - 1990 7.00% 1990 — 2000 7.00% Assumption Hi : 1973 — 19S0 7.35% 1980 — 1990 7.50% 1990 — 2000 8,00%

S.ilcmba 4, 7 Febrtuiiy 1975 Institute for Economic and Social Research (LPEM) Economic Faculty. University ot Indonesia

Moh. Arsjad Table 4B. Projection of Per Capita Gross Domestdc Product, with the Assumption of @ 25 Per Cent Fertility Decline, 1973-2000 (In Thousand Rp., 1973 Proices).

Year Assumption I Assumption II .Assumption 11'

1973 53.05 53.05 53.05 1980 73.52 73.52 73.52 1990 107.61 112.77 118.15 2000 150.07 172.75 198.63 Percentage of Increase 1973 — 1990 102.85% 112.57% 122.71% 1973 - 2000 182.88% 223.64% 274.42%

Source: Processed from table 2 and table 4A. Salemba 4, 7 February 1975 Institute for Economic and Social Research (LPE.M) Economic Faculty. University of Indonesia

Moh. Arsjad

Table 5A. Standard Coefficient on Growth and Size Elasticity, 1970 and 1980.

1970 1980 Sector Growth Size Growth Size Elasticity Elasticity Elasticity Elasticity

1. Agriculture 0.54 1.02 0.47 1.02 2. Mining 0.70 1.04 0.94 1.04 3. Industry 1.36 1.13 1.36 1.13 4. Construction 1.15 0.58 1.15 0.58 5. Transportation 1.50 0.97 1.30 0.97 6. Services 1.03 0.98 1.03 0.98

Source: United Nations E.C.A.F.E.: Sectoral Aspects of Long Term Economic Projections with Special Reference to Asia and The Far East (Development Programming Techniques Series. No. 6). Bangkok. 1967. page. 9. Table 5B. Result of Regression between Gross Value Added by Types of Activity And Per Capita Gross Domestic Product and Total Population, 1960-1973.

Model : « Log V„ = a 4- ^ Hog Xi, + -/ Mog X2, R= = (83) (Sy)

in which : Vi 1 Gross value added of activity i in year t X Per Capita Gross Domestic Product in year t Y Total Population in the middle of year t R= = Coefficient of determination - - S Standard error of estimate. Type of .Activity a Y R2 1. .Agriculture 1.666818 0.638889 0.611111 0.9640 (0.091537) (0.118178) a. rood, poultry and fisheries 0.666877 0.611111 0.777778 0.9648 (0.123571) (0.150236) b. Smallholders estate and large plaiujtions 2.635532 0.222222 0.472222 0.8055 (0.136169) (0.165553) 2. Industry — 1.108384 1.666667 0.500000 0.9845 (0.124723) (0.151841) 3. Transporiation and communications — 2.251001 1.200000 0.700000 O.S240 (0.500000) (0.591608) 4. Constructions — 2.171130 4.305556 — 0.416667 0.9568 (0.372678) (0.471404) 5. Services — 2.819676 1.150000 1.300000 0.9762 (0.141420) (0.223607)

Salemba 4, 7 February 1975 Institute for Economic and Social Research (LPEM) Economic Faculty, University of Indonesia

Moh. AfSjad Table 5C. Estimate of Coefficient cn Growth and Size Elasticity, 1973-2000.

1973-1980 Period 1980-2000 Period Type of Activity Growth Size Growth Size Elasticity Elasticity Elasticity El.isticity

1. Agriculture 0.47 1.02 0.47 1.02 2. Industry 1.75 1.13 1.55 1.13 3. Transportation 4 Communication 1.60 0.97 1.50 0.97 4. Construction 1.70 0.58 1.37 0.58 5. Services 1.09 0.98 1.09 0.98

Table 5D. Projection of Gross Domestic Product, by Type of Activity, 1973-1980 (In Billion Rp., 1973 Prices)

Type of Activity 1973 1930 Avera ge Annu.al Growth Rate R M T R M T

1. Agficiillurc 2,628 3.628 3,645 3,661 4.71% 4.78% 4.85% 2. f.iining 617 1,127 1.138 1.139 8.93% 9.14% 9.15% 3. Industry 571 . 1.204 1.225 1,246 11.24% 11.51% 11.790/0 4. Transportation + Communications 261 511 519 527 10.07% 10.31% 10.61% 5. Construction 262 495 504 512 9.51% 9.79% 10.04% 6. Services 2,266 3,780 3.821 3,873 7.58% 7.74% 7.96pb Gross Domestic Product 6,605 10,745 10,852 10,958 7.20% 7.35% 7.50%

Source: Processed from tables 4A. 4B and 5C.

Salentba 4. 7 February 1975 Institute lor Economic .inJ Soci.il Research (LPEM) Economic Faculty, University of Indonesia

Moh. Arsjad Table 6A. Projection of Gross Domestic Product. By Type of Activity. 1973-2000 (In billion Rp.. 1973 prices)

Average Annual Growth Rate Type of Activity 1973 1980 1990 2000 1973-1980 1990-2000 1980-1990

1. Agriculture 2.628 3.645 5.619 8.481 4.78% 4.41% 4.20% 2. Mining 617 1.138 2.288 3.674 9.14% 7.23% 4.84% 3. Industry 571 1.225 2.928 6.509 n.51% 9.100/0 S.31% 4. Transportation + Communicition 261 519 1.170 2.457 10.31% 8.46% 7.69% 5. Construction 262 504 981 1.790 9.79% 6.88% 6.19% 6. Services 2.266 3.821 7.335 13.570 7.74% 6.56% 6.26% Gross Domestic Product 6,605 10.852 20.371 36.481 7.35% 6.50% 6.00%

Source : Processed from tables 4A. 4B and 5C.

Table 6B. Development of Composition of Gross Domestic Product. 1973 Prices, 1973-2000 {%).

Type of Activity 1974 1980 1990 2000

1. Agriculture 39.79(% 33.590/, 27.58% 23.25% 2. Mining 9.340;, in.49"/b 11.23% 10.07% 3. Industry 8.64% 11.290/, 14.37% 17.840/0 4. Transportation -I- Communications 3.95% 4.78% 5.740/, 6.73 To 5. Construction 3.970/, 4.64'!;, 4.820,;, 4.91% 6. Services 34.31% 35.21% 36.2-% 37.20% Gross Domestic Product 1CO.CO% 100,00% lOO.OO'/o lOO.OOQb

Source : Processed from table 6A. Salemba 4. 7 February 1975 Institute for Economic and Social Research (LPEM) Economic Faculty. University of Indonesia

Mull. Aisjud Tabic 7A. Projection of Gross Domestic Product, By Type of Activity, 1973-2000 (In billion Rp., 1973 prices).

Average Annual Increase Type of Activity 1973 1980 1990 2000 1973-1980 1980-1990 1990-2000

1. Agriculture 2,628 2.645 5.745 9,060 4.78% 4.65% 4.65% 2. Mining 617 1.138 2,374 3,829 9.14% 7.62% 4.89% 3. Industry 571 1,225 3,151 8,093 11.51% 9.91% 9.89% 4. Transportation + Communications 261 519 1,256 3,033 10.31% 9.23% 9.21% 5. Construction 262 504 1.047 2.170 9.79% 7.57% 7.55% 6. Services 2,266 3.821 7,775 15.810 7.74% 7.06% 7.35% Gross Domestic Product 6,605 10.852 21,348 41.995 7.35% 7.00% 7.00% Source: Processed from tables 4A, 4B and 5C.

Table 7B. Estunate of Gross Domestic Product Composition, in 1973 prices, 1973-2000.

Type of Activity 1973 1980 1990 2000

1. Agriculture 39.79% 33.59% 26.91% 21.57% 2. Mining • -• 9.34% 10.49% 11.12% 9.12% 3. Industry 8.64% 11.29% 14.76% 19.27% 4. Transportation + Communications 3.95% 4.78% 5.88% 7.22% 5. Construction 3.97% 4.64% 4.90% 5.17% 6. Services 34.31% 35.21% 36.42% 37.65% Gross Domestic Product 100.00% 100.00% 100.00% 100.00%

Source: Prctcessed from table 7A. Salemba 4. 7 February 1975 Institute for Economic and Social Research (LPEM) Economic Faculty. University of Indonesia

Moh. Arsjad Table 8A. Projection of Gross Domestic Product, 1973-2000 (In billion Rp.. 1973 prices).

Average Annual Growth Rate Type of Activity 1973 1980 1990 2000 1973-1980 1980-1990 1990-2000

1. Agriculture 2.628 3,645 5,870 9,674 4.78% 4.8 5.12% 2. Mining 617 1,138 2.479 3.796 9.140/0 8.09% 4.34% 3. Industry 571 1.225 3,383 10.040 11.51% IO.68O/0 11.48% 4. Transportation + Communication 261 519 1,345 3.739 10.31% 9.990/0 10.76% 5. Construction 262 504 1,115 2,627 9.79% 8.26% 8.99% 6. Services 2.266 3,821 8,174 18.410 7.74% 7.580/0 8.45% Gross Domestic Product 6,605 10,852 22,366 48,286 7.35% 7.50% 8.00% Source : Processed from tables 4A, 4B and 5C.

Table 8B. Estimate of Gross Domestic Product Composition, in 1973 prices, 1973-2000 (%).

Type of Activity 1973 1980 1990 2000

1. Agriculture 39.79% 33.59% 26.250/0 20.03% 2. Mining 9.34% 10.490/0 ll.OSo/o 7.86O/0 3. Industry 8.64% 11.290/0 15.13% 20.79% 4. Transportation -I- Communications 3.95% 4.78% 6.01% 7.74% 5. Construction 3.97% 4.640/0 4.99% 5.44% 6. Services 34.310/0 35.210/0 36.55% 38.13% Gross Domestic Product 100.00% 100.00% 100.00% 100.00%

Source : Processed from table 8A.

Salemba 4, 7 February 1975 Institute for Economic and Social Research (LPEM) Economic Faculty, University of Indonesia

Moh,- Arsjad- Table 7A and 7B — Projection of Gross Domestic Product and its composition, according to type of activity, on the basis of Assumption II concerning the development of the Gross Domestic Product and a 25 per cent fertil• ity decline, 1973-2000. Table 8A and SB — Projection of the Gross Domestic Product and its composition, according to type of activity, on the basis of Assumption III concerning the development of the Gross Domestic Product and a 25 per cent fertility decline, 1973-2000. Table 9. Estimate and projection of Gross Domestic Product for 40 per cent of the total population in the lowest income bracket, 1973-2000. (in billion Rp., 1973 prices).

Year Assumption I I Assumption II Assumption III

1973 990.75 990.75 990.75

1990 3,666.78 3,842.64 4,025.88 9,657.20 2000 7,296.20 8,399.00

Note : This projection is based on the following assumptions : Assumption I: a) Average annual growth rate of Gross Domestic Product. 1973 — 1980 : 7.35% 1980 - 1990 : 6.50% 1990 - 2000 : 6.00% b) 40 per cent of total population in the lowest income bracket controls : 15 per cent of the Gross Domestic Product in 1973 18 per cent of the Gross Domestic Product in 1990 20 per cent of the Gross Domestic Product in 2000

Assumption II: a) Average annual growth rate of Gross Domestic Product. 1973 - 1980 : 7.35% 1980 — 1990 : 7.00% 1990 — 2000 : 7.00%

258 EKI, VOL. XXIII NO. 3, SEPT., 1975 b) 40 per cent of total population in the lowest income brac|ket controls : 15 per cent of Gross Domestic Product in 1973 18 per cent of Gross Domestic Product in 1990 20 per cent of Gross Domestic Product in 2000

Assumption III : a) Average annual growth rate of Gross Domestic Product. 1973 — 1980 : 7.35o/o 1980 — 1990 : 7.50% 1990 - 2000 : 8.00% b) 40 per cent of total population in ihe lowest income brac|

Table lOA. Estimate and Projection of per capita Gross Domestic Product for 40 per cent of total population in the low ;s^ income bracket, with the assumption of a 25 per c«n^ fertility decline, 1973-2000. (In Rupiah, 1973 prices).

Year 40 per cent Aistimpiion Assumption II Assumption Ill of population (In million person)

1971 49.,S0 J9.895 (USS 48) 19.895 (USS 48) 19.895 (USS 1990 75.72 48.426 (USS 117) 50.74S (US $ 122) 53.168 (USS i: zooo 97.24 75.033 (USS ISl) 86.374 (US S 208) 99,313 (USS 2

Percentage of increase 1973-1990 M3.gl% 155.08n/u 167.24% 1973-2000 277.11% 334.150/0 399.19%

Source : 1) Total population with the assumption of a 25 per rent fe-rtility decline 111 1973 TO 124.5 million; 1990 = 189.3 million and 2000 = 24 million. 2) Gross Uonicstic Product from table 1.

EKI, VOL. XXIII NO. 3. SEPT.. 1975 219 Table lOB. Estimate and projection of per capita Gross Domestic Prod• uct, with the assumption of a 25 per cent fertility decline, 1973-2000. (In thousand Rupiah, 1973 prices).

40 per cent of population in the lowest income bracket

Year Assumption I Assumption II Assumption III 1973 19.89 fUS$ 48) 19.89 (USS 48) 19.89 (USS 48) 1990 48.43 fuss 117) 50.75 (USS 122) 53.17 (USS 128) 2000 75.03 (USS 181) 86.37 (USS 208) 99.31 (US S 239)

Average annual growth rate

1973 - 1990 5.36% 5.65% 5.95% 1990 — 2000 4.460/0 5.45% 6.44% 1973 - 2000 5.04% 5.56% 6.12%

For total population

Assumption I Assumption II Assumption III

53.05 (USS 128) 53.05 (USS 128) 53.05 (USS 128) 107.61 (USS 259) 112.77 (USS 272) 118.15 (USS 285) 150.07 (USS 362) 172.75 (US S 416) 198.63 (US S 479)

4.23% 4.52% 4.81% 3.37% 4.35% 5.32% 3.92% 4.44% 5.01%

Salemba 4, 11 February 1975

Institute for Economic and Social Research (L.P.E.M.) Economic Faculty, University of Indonesia.

260 EKI. VOL. XXIII NO; 3. SEPT.. 1975