Interview: Jim Yong Kim
What measures and policies can further support Indonesian GDP growth in the coming years?
JIM YONG KIM: Investment in both people and infrastructure is critical for accelerated, sustained growth. To build human capital the focus needs to be on preparing tomorrow’s workforce to be as competitive as possible. Indonesia must invest in children, by focusing on priority interventions to address childhood malnutrition, expanding access to early-childhood education and improving the quality of education, thereby turning increased spending into improved learning outcomes.
Regarding infrastructure, there are two critical points: closing Indonesia’s infrastructure gap and increasing private-investment levels. Indonesia needs to collect more revenue to expand the government’s capital expenditure budget in a fiscally viable way. Indonesia will also have to attract more private-sector capital. There are trillions of dollars around the world sitting in negative interest rate bonds and low-yielding securities. If the right policy framework is put in place, we can help move some of that capital off the sidelines to invest in building infrastructure in Indonesia. Reducing restrictions, adopting smart and efficient regulations, and providing legal certainty to investors are key elements to improving the business environment.
What does the World Bank recommend to reduce poverty and economic disparity in Indonesia?
KIM: We believe there are four pillars of action to reduce inequality in Indonesia. First, ensuring that all children have an equal start in life by improving the delivery of vital services across the country. Second, closing gaps in the labour market by creating high-productivity jobs in the formal sector, and a system to upgrade skills and enable all workers to access these jobs. Third, an efficient and responsive system of social protection to help poor people cope with crises like natural disasters. Lastly, using fiscal policy more effectively to reduce inequality where it is needed the most.
How can Indonesia improve access and quality in both the health and education sectors?
KIM: In the health sector two key challenges are to eliminate chronic childhood stunting and to achieve universal health coverage (UHC). Over a third of Indonesian children under five are stunted. The World Bank is working with the government to address this challenge. We brought lessons from other countries which have reduced stunting rates dramatically. We have set up a highly coordinated approach across multiple sectors and various levels of government. Additionally, Indonesia aims to achieve UHC by 2019. While nearly two-thirds of Indonesians now have social health insurance coverage, improving outcomes will require higher investments. At 1.4% of GDP, public health expenditure is among the lowest worldwide. The country also needs to invest more wisely in interventions such as prevention and primary care. In the education sector Indonesia has implemented major policy reforms, most notably allocating 20% of the national budget to the sector, decentralising education provisions and reducing financial barriers for school students. The World Bank is supporting capacity building to improve sector monitoring and supervision. We are also helping to design performance-based planning and budgeting at all levels of government, and improve in teacher-management systems and early-childhood interventions.
How could the ease of doing business be improved?
KIM: Indonesia has accelerated the pace of business reforms in recent years, and those efforts are paying off. Our Doing Business report for 2018 shows that, for a second consecutive year, Indonesia carried out seven reforms, the highest single-year count for the country. However, there is room for more improvement in the business environment, such as reducing complex regulations; strengthening institutions to protect property rights; and eliminating restrictions to competition and entry for both foreign and domestic companies.
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