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OPENING REMARKS VICE MINISTER OF NATIONAL DEVELOPMENT PLANNING/NATIONAL DEVELOPMENT PLANNING AGENCY AT THE REGIONAL WORKSHOP ON SOCIAL INCLUSIVENESS IN ASIAS MIDDLE INCOME COUNTRIES 13 September, 2011 Jakarta, Indonesia

Assalamualaikum Warahmatullahi Wabarakatuh, Good morning Ladies and Gentlemen, It is an honor and a pleasure to welcome you to this important Regional Workshop on Social Inclusiveness in Asias Middle Income Countries. Let me thank you first for attending this workshop. Some of you must have travelled great distances to be here. We are here today to share experiences and goals in the need for collective solutionfinding of how to implement more balance between economic and social development. Asia is in the midst of a truly transformation. In the recent Asian Development Bank document, Asia 2050: Realizing the Asian Century, Asias GDP is projected to increase from US$16 trillion in 2010 to $148 trillion in 2050, or half of global GDP. It is based on the Asian century scenario, that shows the seven high-income developed economies (Japan, China, South Korea, Singapore, etc) and the 11 middleincome-status economies, including Indonesia, would maintain their momentum for another 40 years and adapt to the shifting global economic and technological environment by continually recreating their comparative advantage. The document, however, also shows the risk that could cause a major setback to Asian growth. In the middle-income trap scenario, the report assumes that the current converging economies could fall into a middle-income trap over the next five to 10 years due to the combination of bad macro-policies, exuberance combined with lax financial sector supervision, conflicts, natural disaster, demographic factors and weak governance. These countries are caught in the middle-income trap because they are unable to compete with low-income, low-wage economies in manufacturing
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exports as well as are unable to compete with advanced economies in high-skill innovations. Such countries cannot make a timely transition from resource-driven growth, with low-cost labor and capital, to productivity-driven growth. Economic growth and increased income are important, but are not enough to reduce poverty. Here is a point where we have to start with the pro-poor or inclusive growth. Inclusive growth starts from the premise that societies based on equality tend to perform better in development. Countries with more equal income distribution are likely to achieve higher rates of poverty reduction than the unequal countries. Inclusive growth is also about an outcome and a process. On the one hand, it ensures that everyone can participate in the growth process, both in terms of decision-making for organising the growth progression as well as in participating in the growth itself. On the other hand, it makes sure that everyone shares equitably the benefits of growth. Meanwhile, ILO reports that most Asian countries have largely held up well during the latest global financial crisis and resume rapid economic growth in 2010. Asian unemployment rates were slightly impacted by the crisis, but other issues such as youth unemployment, vulnerable employment, and gender-based inequities in the labour market remain. Such unfortunate circumstances require us to work hard to create more productive jobs that are able to improve the livelihood of the people, including the poor. It is in line with what Armida Alisjahbana, the National Development Planning Minister, said in a recent seminar on Asia 2050 that what Indonesia must do in order to achieve its long-term economic goal is to work hard on the implementation issues of what have been laid out in the master plan. This means a new attitude towards policy implementation and a new generation with more capable and competent Indonesians. It implies that participation without benefit sharing will make growth unjust and sharing benefits without participation will make it a welfare outcome. The Government for sure cannot work alone to attack poverty, it has to work hand-inhand with the community. Therefore, besides applying different kind of social protection and asisstances as well as micro credits, Indonesia has also promoted community-driven development through the National Program for Community Empowerment (or PNPM). This program emphasizes pro-poor focus of decentralizing spending to the community level that could improve community participation in enggaging public decision making process in order to solve their owns problem of poverty. Due to the geographic condition and imperfect market, there have been difficulties to fulfill peoples needs and reach the poor especially in remote and isolated areas. The poverty focus of spending at local level by providing block grants to villages and subdistricts would make comunity needs directly assessed, designed or planned, and
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implemented. Evidence from participatory planning experiences suggests that having a facilitated process encourages the poor to participate in determining their actual needs. Currently, Asia's developing countries are home to two-thirds of the world's poor. These people tend to spend more of their incomes on food and will be hit harder by rising food prices. Asian Development Bank estimates that a 10 percent increase in food prices drags another 64 million people below the $1.25 a day poverty line. A 20 percent increase in prices pushes up the number in poverty by 129 million. In 2050, when demographic figures of Asia are impressive by nearly 5 billion growing population, widens income inequality inevitably could potentially lead to social tensions. Hence, our commitment to social inclusiveness and promoting pro-poor economic growth is essential. As Mahatma Gandhi said: The poor of the world cannot be helped by mass production, only by production by the masses. People must be at the center of any development. Youth are also vulnerable. According to ILO reports, in 2010 the global level of unemployment has reached 205 million people with 77.7 million being youth aged between 15-24 years or 12.6% of the world population. Unemployed youth contribute a substantial share in total unemployment, despite the fact that they represent a small fraction of the working-age population (age 15 and over). Youth unemployment rates are much higher than those of adults. While world average is three to four times higher, youth unemployment in Indonesia, like in other Southeast Asian countries, could be five to six times higher than adult unemployment. Furthermore, youth are over-represented in the informal economy and in precarious employment conditions. Female youth unemployment rate significantly exceeds the male rate and in most cases young females are heavily underrepresented in the workforce. Youth also frequently experience underemployment. The youth issue should be carefully addressed because their idleness and vulnerability may contribute to social pressure. There are at least five issues to be addressed to make sustainable long-term economic growth more inclusive and equitable: 1) harness the full potential of entrepreneurship and innovation to create breakthroughs in science and technology as it is an essential factor in transforming any country from a developing to developed level; 2) improve human development, as nevertheless, sophisticated technology is useless without educated, well-trained and healthy people; 3) improve governance as democracy requires a clean, efficient, and professional bureaucracy; 4) support comprehensive action in searching for alternative, safe energy sources to reduce the speedy depletion of non-renewable energies; and 5) ready to compete in the global competition in order to win in our domestic market. Local entrepreneurs should be ready to compete with their international competitors at all levels.

Indonesia has initiated a 10-15 year master plan, named Master-Plan in Accelerating Indonesias Economic Expansion and Development (MP3EI). One of its objectives is to create better living conditions and more jobs. We expect that the outcomes of this master plan will transform Indonesias economy from number 17 in the world to number 10, i.e. achieving income per capita of USD 14,000 to 15,000 or GDP of USD 4 to 4.5 trillion by 2025. Through the implementation of this master-plan, we hope that at least 45 million new jobs will be available within the next 15 years (3 million jobs per year or 400,000 jobs for every 1% of economic growth and average 7% for 15 years in the 22 focus areas). To take full advantage of such a momentum to create growing economy that is based on inclusiveness, balanced and sustainability, it becomes even more critical for us to establish a vibrant and fair labor market that contributes regionally and globally. During this workshop, we will hear from a range of global and local participants about how they are translating the aspirational principles of the Inclusive growth into concrete actions. In the near future I hope we will have a chance to assess the sea change that is taking place in policies and programs that are more pro-poor. Finally, I would like to thank to Asian Development Bank for choosing Jakarta as a place for the workshop and hard work to organize this event. I am sure this conference will be very productive, contributing to our better understanding toward the inclusive growth. Thank you very much for your attention. Wassalamualaikum Warahmatullahi Wabarakatuh.

Lukita Dinarsyah Tuwo