Asia-Pacific News

Insecurity Troubles Indonesia’s Middle Class

Anthony Deutsch in Jakarta

Rini Hartati’s husband died of typhoid four years ago, leaving her as the sole breadwinner for their two young children.

Supporters of Presidential candidate Susilo Bambang Yudhoyono hold a poster showing their idol on June 27, 2004 during a large rally in the Indonesian capital Jakarta. Tens of thousands of Indonesian supporters came to the rally the last one in Jakarta before voters go to the polls on July 5.
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Half of her modest income as a sales assistant now goes towards school fees, and Ms Hartati, 35, has given up the family car.

Indonesia’s steady economic growth has lifted millions of people from poverty into the middle classes along with Ms Hartati. But, rather than feel secure, many remain financially vulnerable and have become increasingly disillusioned with a government seen as unable to provide basic public services across the vast island nation of 240m people.

Without any real social security, Ms Hartati’s family is at risk of slipping into poverty if confronted by another serious economic setback, such as one of them falling ill.

This is not what tens of millions of voters had in mind in 2009 when they re-elected President Susilo Bambang Yudhoyono.

In his campaign, the retired general had vowed to make education and healthcare available to all Indonesians as well as to fight entrenched corruption.

Only two years into his second five-year term, a perceived failure to deliver on his pledges has pushed Mr Yudhoyono’s approval rating to an all-time low. Some people openly long for the days of the late authoritarian ruler Suharto, whose brutal regime built clinics and schools and provided staple food and fuel, even at the village level.

“The government has not fulfilled its promises. The healthcare services and education are too expensive for us,” said Ms Hartati. When her children need medical treatment, she cannot afford to take them to well-equipped hospitals and has to use cheap local clinics instead.

Hospital fees can run to hundreds of dollars per day, or more than a month’s salary, and are often not covered by state medical insurance.

Such a sense of disillusionment poses political problems for the government and could also damage efforts to increase state revenues. About 9m Indonesians filed tax statements in 2010 out of 20m registered taxpayers, official figures show. As the finance ministry tries to increase the tax base, it will face staunch opposition if authorities are not seen to be delivering decent services.

Political stability since the collapse of Suharto’s 32-year rule helped create one of the fastest-growing economies in the world.

Under Mr Yudhoyono, expansion has been spurred by a boom in commodity prices and consumer spending. Gross domestic product growth is expected to top 6 per cent this year, two-thirds of it domestically driven.

About 131m Indonesians, or 55 per cent of the population, now earn at least $2 a day – almost 50m more than in 2003 – an income that makes them middle class, according to the World Bank and Asian Development Bank.

But some development experts question whether $2 a day really counts as middle class.

“Those that have just been lifted out of poverty cannot be labelled as middle class. They are continuously at risk of falling back,” said Monique Kremer, a sociologist at the Dutch Scientific Council for Government Policy.

The real middle class is closer to 40m, she says – a figure based on earnings of more than $4 per person.

Meanwhile, critics say the country’s infrastructure is decades behind the hopes and aspirations of its population.

“Buying a new car is very easy. The dealers offer us low interest rates with low monthly payments,” said Ms Hartati. “This helps economic growth, but the government has failed to provide better infrastructure. We‘re not able to drive our car comfortably because of traffic jams, and public transport is a nightmare.”

Observers recognise the challenge facing Indonesia’s leaders.

“In future, this growing middle class will be consuming more and will demand better jobs and higher quality health services and tertiary education,” said Stefan Koeberle, World Bank Indonesia director, in a recent report. “Policymaking in the medium term will need to meet these new demands.”

About a fifth of Indonesia’s annual budget is spent on subsidies for the poor, for items such as fuel, rice, fertiliser and electricity.

Critics argue that the government should be spending on ports, power plants, bridges and sanitation and public services.

The government estimates that more than $150bn should be spent on basic infrastructure during Mr Yudhoyono’s term through to 2014, but it has allocated only a third of that amount.

“The government has a successful policy to achieve economic growth, but is failing in healthcare, education and infrastructure,” said Ms Kremer. “If Indonesia wants to develop further, it must build its middle class. You cannot develop on poverty alleviation alone.”