The Middle Income Trap:Challenges For Indonesia

The "middle income trap" has become one of the focuses of academic debate since its introduction by the World Bank.However,due to its lack of a unified and clear definition,the current academic community has questioned whether the "middle income trap" is real and whether a country has fallen into the "middle income trap",the judgment of the "middle income trap" is controversial.In the early 1990s,Indonesia experienced rapid economic growth.In 1993,the per capita GNI in Indonesia reached 796 US dollars.It entered the ranks of low-middle-income countries for the first time.Later,after the Asian financial crisis in 1998,Indonesia fell back to low-income countries.After five years of efforts,Indonesia returned to low-middle-income countries in 2002.However,after experiencing rapid growth over the past 10 years,the growth rate of the Indonesian economy began to slow after 2013,and the per capita GNI has a declining trend and the economy is under pressure.Based on the per capita GNI and the length of stay in the middle-income stage,whether the country is caught in the key indicator of the"middle income trap,or not,combined with Indonesia's development reality,Indonesia is very likely to face the challenge of the "middle income trap." The main reason why Indonesia cannot overcome the "middle income trap" is a series of economic and non-economic factors,such as the inability of industrial structure to meet the requirements of economic development,lack of innovation capacity,low labor productivity,severe polarization between rich and poor,corruption of government,and backward infrastructure.In order to avoid being caught in the "middle income trap",the government of Joko Widodo is now making adjustments to the Indonesian economy,strengthening the government's economic functions,vigorously building infrastructure,adjusting social wealth distribution,enhancing financial capacity through multiple channels,combating official corruption,and guiding political and religious harmony.The reform is to some extent effective;however,due to the long-term malformed development of the economy,which led to a weak economic foundation and a host of social malaise,the government's reforms have not fundamentally reversed Indonesia's slide into the "middle income trap".Indonesia will still have a long way to go to get rid of the threat of the "middle income trap".