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The Constraints Development in
Indonesia
By: David Raja Marpaung S.Ip M.Def
David Raja Marpaung. Associate Lecture University of Indonesia, also Indonesia Politic and Defense Consultant. Email:[email protected]
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Outline
Condition of Indonesia
PESTEL analyze
Political, Economical, Socio cultural,Technological, Environment, Legal
Conclusion
David Raja Marpaung. Associate Lecture University of Indonesia, also Indonesia Politic and Defense Consultant. Email:[email protected]
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Introduction:
Condition of Indonesia1998 become a momentum for Indonesia history as
a nation and also as a country.
At the point it was became an accumulation of
struggle to change Orde Baru regime. For more32 years, Indonesia commanded by Soeharto andhis cronies. Under this regime, corruption growthfertile.
But in the 10 years of reformation, there is only alittle essential change in Indonesia development.
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Development Constraints in PESTEL Framework
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Indonesia
Development
Constraints
Political
Economic
Sociological
Technological
Environmental Legal
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Politics
1. Corruption
Corruption is main issue in the body ofIndonesia government.
Indonesia in the number 38 as the most corruptgovernment in world (TII). And in Asia regionIndonesia is the second most corrupt country
after Philippines.Level of corruption in Indonesia is around 20-30
percent from national budget (Kompas).
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Effect of corruption
The direct impact of corruption
is decreasing of public
expenditure. So the target of
economic growth can not beachieved. Corruption also
destruct the morality.
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2. High cost of democracy
The direct popular vote for local since June 2005increase the national budget for election. Before
the time, the leader was chosen by legislative.
Rp 25 trillion for 350 local election and Rp 48 trillion for
national election.
Effect of high cost of democracy will reduce the budget
for another sector, especially health and education.
But investment in politic can not give short impactto the society. This is long term investment.
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3. Disintegration
Issue of disintegration especially in Papua and NAD makeunstable and insecure condition. These make investorbecome worried to invest their capital, even theseregion have rich natural resources.
So it is will reduce or make the economic growth runslower. Beside that, government must budgeting extracost for military operation. Once again, it reducinganother sector budget allocation.
Indonesian cost for military operation in these area is
around Rp 1,3 trillion (annually).
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4. Ineffective bureaucracy
The structure of Indonesia government is too big or not
efficient. This make the bureaucration process becomelonger. The impact is making very difficult to make adecision. And it make long process to use the nationalbudget.
Beside that there are no good coordination between one
department and others. Every institution make their ownplan without cooperation with others.
These two things will make the practice of economy becomeslower, include the development process.
Beside of that, the use of the budget is not transparent. It can
trigger potential issues of corruption.
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Economy
1. Poverty
36 Million from 213 million citizen of Indonesia are the
poor (Ind Govt). But World Bank says with the
indicator 2$ per a day per person consumption,about 50 percent people still live in poverty.
Government give directly fund aid (cash transfer) Rp 14
trillion in 2008 for the poor.
Obviously, the poverty number can be the burdenbecause government should expend the extra cost
for subsidy, example: education, health, and energy
consumption.
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2. Unemployment
9,70%
12,50%11,80 %
9,20 %8,70 %
10,60 %
Unemployment rate in Indonesia
is still high. This is became a
burden for the government. Job
creation still limited because not
equal with the worker agenumber. The quality of workers is
low so can not compete with
international competition. That is
why we just depend on domestic
worker market.
Unemployment also bringinequality economy distribution,
so only some people that enjoy
the development. Furthermore,
unemployment potentially rise
social conflict.
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3. InflationInflation rates are fluctuative so thegovernment difficult to make
decision, especially in budgeting.
Example: high price of oil trigger
high inflation so push the
government to rebudgetting national
budget.The direct effect of inflation is the
price of goods become higher and
the value of money going to reduce.
So the target of public expenditure
can not be achieved.
6,3 %
13,2%
10,5 %
6,10 %6,6 %
11,9 %
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4. Foreign Loan
137,2
130,4135
141,5
135,7131
In billion US$
30-40 Percent of national
budget is allocated to pay
the interest of foreign loan.
So the budget for
investment become limited.It make the Indonesias
economy will be depend on
the policy of other
countries.
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5. Lack of infrastructure
The infrastructure which support economy sector in
Indonesia still limited and in bad condition. For
example: the infrastructure of roads, bridges and
ports. Unworthy infrastructure makes ineffective and
inefficient of economy and development process.
The lack of infrastructure can not make the economic
process growth well.
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Socio-Cultural
1. Low quality of human resources
Indonesia Human Development Index (HDI) is in
108 position among 177 countries. Malaysia
in 63, Thailand in 78, and Singapore in 25. Thisdata showing that the level of education
quality and health service in Indonesia is still
low. Low quality of society will be the obstacleof development so can not produce maximal
goods and service and can not compete with
other countries.
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2. Horizontal and vertical conflict
Horizontal conflict is often happen in Indonesia., because of theimbalance of economy and social, and also because of issue intribe and religion.
Example: Tribal war in Papua, ethnic conflict in Kalimantan,religion conflict in Maluku.
Vertical conflict happen because of unsatisfied district to thecentral government. It because the decision from the centralgovernment can not accepted or not represent the localaspiration.
The conflict build unsurely and unsecure condition for
investment. Beside that the economic cost of conflict is alsohigh, because the government need to rebuild infrastructuresand other destroyed infrastructure.
Friction between central and local government will createdistrust of the society, so the government plan will not work
properly.
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3. Urbanization
Migration from rural to urban area is higher in order to
looking for the better welfare. Almost 60 percent of
total population of Indonesia is centralized in Java
island. In 2025, level of urbanization in Indonesia
predicted achieve 68%.
This make scarce of human resources in rural area and
also create a gap of development between rural and
urban area. Urbanization also potential to appear ofsocial problem.
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Technology
1. Gap of Technology
Because of low quality of human resources. No technology transfer from the
high tech country. Indonesia just buy the product and not the technology
so the technology growing slowly. Low of technology make limited
quantity and quality of production. It make the Indonesia product can
not compete with developed country. Beside of that Indonesia onlydevelop technology based on manufacture.
2. Less support from government
There are minimum budget for research technology, so the strategic industry
can not growth well. The budget only 0,07 percent from the GDP. But inneighbour country like Malaysia, the research budget is 2 percent from
the GDP.
Because of limited budget, Indonesia do not develop high technology for
public consumption, such as electricity and public transportation.
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Environmental
1. Potential natural disasterThe geographical position of Indonesia is in ring fire. It make the naturaldisaster potentially happen: volcano eruption, earthquake, and tsunami.
Government must spent a lot of money for the reconstruction program. Forexample: Reconstruction budget for Aceh and Nias when tsunami hitthese area in 2004, need Rp 8,4 trillion from national expend budget.
2. Environment hazard
The destruction of rain forest in Kalimantan become the snow ball effect. Thedestruction not only for forest area but also trigger natural disaster suchas flood and eruption.
The quality of human resources (quality of life) threatened because of naturalhazard that coming from pollutant. Because mining pollutant destroyquality of water, like in Minahasa. Then Industrial waste estimated at0.25 million tons in 1990, has reached over 1.2 million in 2001.Approximately 80% of this waste is hazardous, contaminated by heavymetals and other chemicals.
David Raja Marpaung. Associate Lecture University of Indonesia, also Indonesia Politic and Defense Consultant. Email:[email protected]
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Legal1. Bad law enforcement
The quality of law apparatus still not maximal. This is provedby a lot of corruptor defendant was punished free or lightpunishment.
Beside of that, the law apparatus still have low morality. Itproved by bribing in the court.
Illegal logging and illegal fishing is still in big number, becauseof less control from the government.
2. Unfair low enforcement
The government can intervene the process of law. Prosecutorcan make stop investigation letter with the advice ofgovernment. This is often happen to the law cases involvingentrepreneur or government leader.
David Raja Marpaung. Associate Lecture University of Indonesia, also Indonesia Politic and Defense Consultant. Email:
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3. Low respect to the intellectual right
The piracy growing in Indonesia is the prove of
low respect to the intellectual right. The
government do not give big attention to the
piracy case. In the future it can kill the societymotivation to creation. Furthermore, it can be
the inhibition of development.
David Raja Marpaung. Associate Lecture University of Indonesia, also Indonesia Politic and Defense Consultant. Email:
[email protected] Raja Marpaung. Associate Lecture University of Indonesia, also Indonesia Politic and Defense Consultant. Email
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Conclusion
Corruption is become the main problem of
development in Indonesia. So we should
maximize the role of The Corruption
Eradication Commission.Make the bureaucracy more effective through
one roof policy.
In economy factor, poverty have linkage withunemployment. So the solution is the creation
of jobs.
David Raja Marpaung. Associate Lecture University of Indonesia, also Indonesia Politic and Defense Consultant. Email:
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Low education give impact to the increasing ofsocial conflict. So the government should give
more attention to increase the education
quality.
Long gap technology with the other country.
The government have to begin the transfer
and develop technology.
Restructure of environment policy in order tominimize the natural hazard. Beside of that
need the forceful rule of company duty to
make analyze of the environment impact.David Raja Marpaung. Associate Lecture University of Indonesia, also Indonesia Politic and Defense Consultant. Email:
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Bad law enforcement also become a
development constraint in Indonesia. So
Indonesia need a transparent law process
through maximize the role of press and non-
governmental organization.
David Raja Marpaung. Associate Lecture University of Indonesia, also Indonesia Politic and Defense Consultant. Email: