Economic Development and Millennium

Development Goal Achievement Efforts

in Indonesia and Malaysia:
A Comparative Study

Group D
Nidya Kartikasari MEP06055
Yasir Niti Samudro MEP06069
Etjih Tasriah MET06072
Mochammad Hadi Pratomo MET06080
Meenachi Muniandy MEY06123
 Economic Development and Millennium
Development Goal Achievement Efforts
in Indonesia and Malaysia:
A Comparative Study
Outline
1. Culture and Historical Background
2. Profile of Indonesia and Malaysia in 1970
3. Profile of Indonesia and Malaysia in 2004
4. Political Comparison
5. Economic Development Comparison
6. Achieving Millennium Development Goals
7. Challenges and Prospects
8. Conclusion
World Map
 Geographical Location
Indonesia
Area: 1,919,400 sq Km (5x of Japan)
Population: 225 millions (300 ethnics,
742 languages & dialects)
Archipelago (17,508 islands)
Climate: Tropical, Humid
Malaysia
Area: 329,750 sq Km (1x of Japan)
Population: 25 millions (Malay,
Chinese, Indian)
Peninsula, 2 main landscape
Climate: Tropical, Monsoons
 Commons and Similarities
• Language – Malayo-Polynesian
• Majority Muslim population
• Culture – Influenced by a number of religions such as Islam,
Hinduism and Buddhism.

• Natural resources (agriculture, minerals, forestry)

• Colonized by European (Anglo-Dutch Treaty in 1824)
- VOC/Dutch – Indonesia and British – Malaysia
 Period of Pre-Colonialism
Indonesia Malaysia
• Various autonomous • Some autonomous
kingdoms existed based kingdoms existed
on ethnics.
• War and conflict among • Relatively stable
kingdoms
• Trade of Spices & • Trade of Spices &
Agricultural product as Agricultural product as
main income main income
• Migration of the Indian, • Migration of the Arabian,
Arabian, and Chinese into Indian and Chinese into
Indonesia attracted by Malaysia attracted by
trade & religion trade & religion
 Period of Pre-Colonialism
Prosperity Period of Nusantara
• Spice Trade
• Strategic Location between the East and West
 Period of Pre-Colonialism
Prosperity Period of Nusantara
• attracted Europeans to invade Indonesia and Malaysia
• Anglo-Dutch Treaty in 1824
- VOC/Dutch – Indonesia and
- British – Malaysia
 Period of Colonialism
Indonesia Malaysia
• Migration of the Chinese, • Migration of Chinese and
Arabs and Indian Indian
• Social hierarchy ranks • “Divide and rule” between
the ethnics
• Development of plantation • Structured reform
economy (Cultivation
system)
• War and conflict • Relatively stable
• Introduced of basic • Introduced well-designed
modern governmental and modern governmental
administration administration
• Migration of European into • Migration of European into
Indonesia Malaysia
 Period of Post-Colonialism
Malaysia Indonesia
• Independence was • Declare independence in
granted by British in1957 1945
• Economic reform pre • Lost decade (1945-1955) –
independence – Malaya Revolution Period
Plan 1956 • Autocrat and Revolutionary
• First democracy election leadership style
was in 1951 • First democracy election‟s
in 1955
• Focused on state
investment in industry and • Began to focus on
economic development in
infrastructure the1960s
• Major exports of rubber, • Major exports of rubber,
tin and palm oil. palm oil, tea, pepper
 Post-Independence
Political Environment Comparison
Indonesia Malaysia
(Soeharto’s Era)
Government Type Presidential democracy Parliamentary democracy
Government’s Anti-communism, pro-West, Pro-West, ASEAN+3, Main
Focus ASEAN+3 aim to maintain the ethnic
to stabilize the country, pro-growth harmony
Government’s State-military control and autocratic Autocracy with strong
Characteristics leader executive branch
Democracy (Present)
Government’s Co-opting the unions and Providing growth and stifling
Functioned controlling the indigenous elite criticism

State-Labor Antagonistic, co-opted Antagonistic; union power

relations mostly eviscerated
 Key Indicators in 1970s
Indonesia
• Population: 134.4 million
• GDP growth: 7.55%
• Population below poverty
line: 54.2 million (1976)
• Population below poverty
line (%): 40.1% (1976)
• Unemployment: 7.8%
• HDI Index: 0.464
Malaysia
• Population: 12.3 million
• GDP growth: 7.1%
• Population below
poverty line: 6.06 million
• Population below
poverty line (%): 49.3%
• Unemployment:7.4%
• HDI Index: 0.615
 Key Indicators in 2004
Indonesia
• Population:223 million
• GDP: US$ 254.3 billion
• GNI per capita: US$ 1,130
• GDP growth: 5.6%
• Population below poverty
line: 36.2 million
• Population below poverty
line (%): 16.7%
• Unemployment: 10.3%
• HDI Index: 0.711
Malaysia
• Population: 25.6 million
• GDP: US$ 118.3 billion
• GNI per capita: US$ 4,520
• GDP growth: 7.2%
• Population below poverty
line: 1.46 million
• Population below poverty
line (%): 5.7%
• Unemployment: 3.5%
• HDI Index: 0.805
 Economic Policy Comparison
Indonesia Malaysia
Overall regime State-controlled Private sector driven
industrialization economy with the
government as facilitator
Foreign Direct Yes Yes
Investment
Market Reform Deregulation and market Deregulation and market
liberalization liberalization
Monetary Policy Price stabilization and defense State spending through
of foreign reserves domestic borrowing

Exchange Rate Dual rate that favored Before 1997 – free float
Policy exporters; managed peg XR; 1997 – pegged to US dollar
managed float 2005 - managed float
Tax Policy Manipulated regularly to target Excise duties on petroleum
specific sectors or industries exports; tax policy used as a
identified by government tool to target sectors.
 Government Development
Expenditure (%)
Indonesia
Sector 1969 1979 1989 2000 2004
Social 6.0 15.5 19.6 20.3 21.6

Health 2.6 3.5 3.4 4.1 3.8

Education 6.8 9.0 10.9 10.8 14
Sources: Hill, H. 1996, Bappenas
Malaysia
Sector 1970 1980 1990 2000 2003
Social 11.2 15.9 24.5 39.6 45.0
Services
Health 2.8 1.1 4.3 4.6 6.8
Education 6.1 7.5 15.3 25.4 25.9
 Achieving MDGs
Success & Challenges
Goal 1 – Eradicate poverty and hunger
Malaysia Indonesia
• Reduced poverty from • Reduced poverty from 40.1%
49.3% in 1970 to 5.1% in in 1976 to 16.7% in 2004
• Strategies:
2004
-Broad rural development
• Strategies: -Food self-sufficiency program
-Agriculture and rural -Wealth distribution (pro-equity)
development development
-Gov‟t expansion on public
-Labor-intensive export infrastructure esp. on
industrialization education, health, road, energy
- Channeling of public Challenges
investment into education, - Increasing inequality between
health and basic cities and rural areas
- Lower HDI compared to
infrastructure
neighborhood countries
Relationship of Growth and Poverty in
Indonesia
 Achieving MDGs
Success & Challenges
Goal 2 – Achieve Universal Primary Education
Indonesia
Malaysia
•In 1971, only 25.1% of population
• In 1970, 1/3 never attended primary school
•By 2002, 96.1% attended primary
attended school
education
• By 1990, 97% completed
primary education • Strategies:
- Massive investment in primary
• Strategies: education infrastructure based on
- Provision of educational demographics.
- Achieved in 1984
infrastructure to ensure
Challenges
access of the rural poor to -Low education quality and
education outcome
- Unequal distribution of education
facilities
 Achieving MDGs
Success & Challenges
Goal 3 – Promote Gender Equality and Empower Women

Malaysia
• gender gap in education
improved significantly
• now the women
outnumbered the men 2:1 in
public universities
• Establishment of Ministry
of Women, Family and
Community in 2001
Indonesia
• In education, woman
participation ratio is around 100
• Increasing literacy ratio for
woman to man from 97.9% in
1990 to 99.7% in 2004
Strategies & Challenges
-Improving law and regulation
to prevent bias gender
-Unsatisfactory woman
participation in public sector
 Achieving MDGs
Success & Challenges
Goal 4 – Reduce Child Mortality

Malaysia
• Child mortality rate
dropped from 57 per 1000
live births in 1970 to 0.5 in
2005
• Strategies:
- well-developed primary
healthcare system
- infant immunization
- child nutrition
- better education
Indonesia
• Child mortality rate fell from 216 per
1000 in 1960 to 43.5 per 1000 in 2000
Strategies
-Substantial investment in primary
healthcare (Puskesmas) started in
1978
- Campaign on family planning- fertility
rate reduced from 5.6 in 1970 to 2.6 in
1990
-Mass immunization and improving
babies nutrition
Challenges
- Low access of poor people to health
services (cost barrier)
- Low education for healthy life
 Achieving MDGs
Success & Challenges
Goal 5 – Improve Maternal Health
Malaysia Indonesia

• Maternal Mortality Ratio • Maternal Mortality Ratio decreased

declined to 30 per 100,000
live births in 2005 from 141
per 100,000 in 1970
• Strategies:
-Improved access to quality
maternal health services
-Skilled health personnel
from 450 in 1986 to 307 in 2002 per
100,000
Strategies:
- Family Planning campaign
- Improving pre-natal health education
- Increasing skilled midwives
Challenges
- Insufficient budget to provide adequate
health facilities
- Availability of skilled midwives in
remote areas
- Affordability of health care
- Awareness of importance of skilled
midwifery during birth
 Achieving MDGs
Success & Challenges
Goal 6 – Combat HIV/AIDS, Malaria, and Other Diseases
Indonesia
Malaysia HIV/AIDS prevalence below 0.1%
• remarkable strides in Strategies:
controlling infectious - Built clinics, improved nutrition by
diseases such as malaria placing price controls on staple
foods
• Strategies: Challenges
-Safe drinking water - Increasing threat for HIV/AIDS
- child immunization infection
- improved healthcare - Malaria prevalence is still high
services about 850 of 100,000 in 2001
- Inadequate health service
• still not achieve the target personnel
on HIV/AIDS - Prevalence for tuberculoses is still
high about 786 of 100,000 in 1998
 Achieving MDGs
Success & Challenges
Goal 7 – Ensure Environmental Sustainability
Malaysia
• Preserve forest
- retained at 59.5%
• Clean water supply
- 87% to rural population
- 98% to urban population
• Palm oil industry achieved
target of “zero discharge” of
pollutants
Indonesia
• Ratio forest of the land is
63.4% in 2004
Strategies
• Illegal logging eradication
• Import restriction of CFC
• Improving basic sanitation
Challenges
• Deforestation
• Increasing CO2 emission
• Low access to clean water
supply for poor families
• Limited budget & low
participation of private sector
 Achieving MDGs
Success & Challenges
Goal 8 – Develop A Global Partnership For Development

Malaysia
• Continue efforts to develop
a global partnership
• RM343.3 million in 8MP to
ADB, IDB, UN and WTO
• knowledge sharing through
MTCP
• regional cooperation such
as ASEAN, ASEAN+3,
APEC, NAM and OIC
Indonesia
• Continue efforts to develop
global partnership
• Initiating „Debt Swap to MDG
Achievement‟ from MDC to LDC
• „Jakarta Declaration for MDG‟
sounds the importance for
regional partnership and
cooperation
• Actively participated in Non
Alignment Movement
 Malaysia to Become a Developed Nation by 2020

Knowledge-
MSC based
Knowledge-driven
High-tech
manufacturing &
services Productivity-driven
Medium-tech
manufacturing &
services Investment-driven
Assembly-type
manufacturing
Primary
Commodities Labor-driven

Labor-driven

1960 1970 1980 1995 2000 & Beyond

 Sum of Indonesia Development
increase welfare,
maintain security
big bang & peace, equality
decentralizatio & democracy
n
refor 2004-beyond
1989-1996 m era
2001
transport and
communications 1998
1984-1988
basic
industries
1979-1983
development
of
agriculture-
related and
1974-1978 other
agriculture,industry
employment,
and regionally
equitable
development

increase
production of
staple food &
infrastructure
development
1969-1973
 Asian Financial Crisis
Indonesia Indonesia
Pre-Crisis During Crisis
• High annual growth (7%-8%) • negative growth of 13.1 percent in
1998
• 1.1 million individuals were • plunging 25 percent of Indonesia‟s
escaping poverty every year non-poor population back into
poverty
• Currency rate US$ 1 = Rp. • Currency rate US$ 1 = Rp.
2,400.-
18,000.-
 Asian Financial Crisis
Malaysia Malaysia
Pre-Crisis During Crisis

• Top investment • Growth in all sectors

destination
• High growth rate – Vision
2020
• KLSE Composite Index
was above 1,200
• The ringgit trading at
US$2.50
• Overnight rate below 7%
declined
• GDP fell to -6.2%
• KLSE fell below 270
points
• ringgit value decreased to
below 3.80 to dollar
• Overnight rate jumped to
over 40%
 Asian Financial Crisis
Indonesia
Measures Taken
Macroeconomic & Socio-cultural
• Free float exchange rate regime
• Banking restructuring &
recapitalization
• Supra-structure & Political
infrastructure reformation
• Big-bang decentralization
• Repositioning of military function
For the Poor's
• Social safety net
• Subsidies focused on staple food
for the poor
• Intensify microfinance programs
for agricultural sector
Malaysia
Measures Taken
• Fixed exchange rate regime
• Capital controls
• CDRC dealt with corporate
loans
• Danaharta discounted and
bought bad loans from banks
• Danamodal recapitalized banks
• Merging banks
• After reaching pre-Crisis level
in 2005 removed peg
 GDP Growth (%)
Indonesia and Malaysia
(%)
15

10
9.3%
6.1%
5.8%
5 6.9%
6.0%

0 0.8%
88-97 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

-5

-10
-7.4%

-15 -13.1%
Indonesia Malaysia
 Challenges Today & Ahead
Indonesia Malaysia
Today • Remain Competitive
• Effectiveness of • Urban poverty
Institution • New Sources of Growth
• High level of corruption • Brain Drain
• Low total productivity • Retain peace and
factors compare to harmony among ethnics
neighboring countries
Ahead
• Preserve harmony and
peace among ethnics &
regions
• Remain competitive
 Which Model is better?
There is no single model would fitly apply in every countries
Some elements as lessons:
• Good governance is crucial factor in economic
development
• Sustainable growth needs strong institutions as much
as clear rules and regulations
• Sense of social cohesion and sense of ownership play
important roles
• Peace and stability as key elements
• Creative and entrepreneurial spirit is essential
• Most important, Human Development as fundamental
roles.
 Thank You

Terima
Kasih
References:
Bappenas (2005). Laporan Perkembangan Pencapaian Tujuan Millenium Indonesia .
Jakarta Indonesia
Bappenas (2007). Rancangan Pembangunan Jangka Panjang Nasional. Jakarta
Indonesia.
Hill, H. (1996). The Indonesian Economy Since 1966. Cambridge University Press.
Australia
Millenium Development Goals Indicators, United Nations (2006)
Prawiro, R. (1998). Indonesia’s Struggle for Economic Development: Pragmatism in
Action. Oxford University Press. USA
Todaro, M. & Smith, S. (2006). Economic Development. 9th Edition. Pearson Addison
Weasley. USA.
United Nations (2005). Malaysia Achieving The Millennium Development Goals. Kuala
Lumpur, Malaysia
Wood, R.S. (2005). Strategies of Development: Indonesia and Malaysia 1960 – Present.
SAIS I-DEV Integrating Seminar. Professor Frank & Douglas
World Bank (2006). Making the New Indonesia Work for the Poor. Washington USA.