TEMPO.CO, Jakarta - Lead economist of World Bank Indonesia, Vivi Alatas, said the government must encourage the middle class to boost economic development in a bid to shun the middle-income trap.
“It is fundamental to encourage the development of the middle class to escape the middle-income trap, and encourage Indonesia to be a high-income country,” said Vivi on Monday, November 12, in the Economy and Business Faculty of the University of Indonesia in Depok, West Java.
According to Vivi, Indonesia was currently dealing with the middle-income trap since its income per capita was recorded in the neighborhood of US$3.400, while to escape the trap the figure must reach some US$12.000.
Vivi opined Indonesia's potential to be a high-income country was evident in the rate of household consumption, which contributed up to 19 percent of the total consumption rate.
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“The middle class is the main consumer with its consumption rate at 22 percent, but the total impact of household consumption of the middle class since 2002 has grown by 19 percent each year, and that means the middle class can increase the multiplier effect from the consumption hike,” Vivi explained.
The middle class, Vivi continued, could potentially become a growth machine because of its high quantity and capacity to invest in education, either to himself or family. “So, the middle class has an intergenerational impact,” she added.
Vivi assessed the government must stimulate the rate of economic growth by tapping the middle class. For example, by providing equal opportunities to the public to achieve the middle class or higher as well as social security.
MUHAMMAD HENDARTYO