Demographic dividend or a ticking time bomb?

Amidst the current national debate about Indonesia becoming a failing state, one important factor that has been completely overlooked is the question of whether or not the world’s fourth most populous nation is dealing with demographic pressures effectively.

The Failed State Index 2012 puts Indonesia in 63^rd place out of the 171 countries surveyed by Foreign Policy and the Fund for Peace. This is dangerously close to the category of failed states in the top 60 of the table. Indonesia scores higher than 7.0 in five of the 12 areas surveyed (the higher score indicates higher failure): group grievance, uneven economic development, security apparatus, the rise of factionalized elites, and demographic pressures.

With around 240 million people, Indonesia brags about its large population. In their speeches, government officials never miss the opportunity to highlight Indonesia as the world’s third-largest democracy, the largest democracy in a Muslim-majority country, the largest economy in Southeast Asia, and a member of the elite G-20 club of the biggest economies in the world.

Yes, size matters in today’s world — but it can also become a huge liability. This is a point with which Indonesia has yet to come to terms, judging by the public indifference to suggestions that the country is falling miserably short when it comes to coping with the challenges posed by changing demographic trends.

The inclusion of demographic pressures in the survey deflates the government’s claims that Indonesia will soon be cashing in on the period of the "demographic dividend," an era when the number of workers relative to the overall population will reach its largest point. It won’t be until 2025 that the trend is reversed and the population starts to age.

This official optimism rests on the assumption that having a large population counts as a source of strength, both in terms of the market it provides, and the pool of workers and entrepreneurs from which the nation can draw. The economic success of China, India, and Indonesia, and particularly their ability to soften the blow of the 2008 global economic recession, underpins the claim that a large population is a plus.

This theory forms the basis of President Susilo Bambang Yudhoyono’s Master Plan for the Acceleration and Expansion of Indonesia’s Economic Development. The plan predicts that, thanks to expected faster growth, Indonesia will join the ranks of the10 largest economies in the world by 2025, and the top five by 2040. This is a valid assumption — provided that every working-age person is employed and can contribute to the gross domestic product.

But what if Indonesia can’t find work for them?

The official optimism conceals some disturbing facts about Indonesia’s demographic trends and the implications for the economy and socio-political stability.

Indonesia is regressing in terms of controlling population growth. This failure is made more glaring when compared to what the country accomplished in this respect in the three decades under President Suharto, when family planning was the centerpiece of economic development policy.

The 2010 census showed that Indonesia’s population grew at a yearly rate of 1.49 percent between 2001 and 2010, barely changed from the preceding decade, but way off the official target of 1.4 percent.

When the census results were announced, the news that the population was growing at a much faster rate than predicted failed to raise an alarm. There was no reaction from politicians or the government. There was not even a discussion about putting family planning back at the top of the nation’s development agenda.

The same indifference was reflected this past week in the way the nation responded to the debate sparked by the Failed State Index. Everyone focused on the economic or human rights aspects as they debated whether Indonesia is a failing state or not. No one paid heed to the demographic issues cited in the survey.

For all his faults, Suharto did one right thing during his tyrannical rule: His push to promote family planning brought population growth down from a yearly rate of 2.31 percent before 1970, to 1.49 percent at the end of his reign.

The family planning program is the one area that separates Soeharto from his four successors. The head of the National Family Planning Board (BKKBN) held a cabinet ministerial position and enjoyed a high media profile as he went around promoting the values of having a small family. There was little coercion, but with the media very much controlled by the state, the family planning message was disseminated quite effectively.

Today, such a message is hardly heard from the government. The head of the BKKBN no longer enjoys ministerial status. Thanks to massive decentralization, the agency has lost access to the regions because most local administrations have removed family planning from their top priority programs. The central government’s policy of apportioning funds to the regions based on their population size is another disincentive for the heads of local administrations to promote family planning in their regions.

At the present growth rate, Indonesia’s population will increase by almost three million each year, demographers estimate. (This figure does not include the two million abortions of unwanted pregnancies that happen each year, according to the Ministry of Health.). This means that the country will have to feed that many more mouths every year. Further down the road, it will have to build schools and universities as well as housing and health care facilities, and the economy will have to grow correspondingly fast to create jobs for them. Even with GDP growth of more than six percent, jobs are not being created fast enough.

Economic pressures due to the large population are already straining the agriculture and natural resources sectors, with dire consequences for the environment. Pressures on the job front mean that many Indonesians may have to look abroad for work. Millions of young women are currently working as domestic servants in countries that offer them little legal protections.

When all these factors are taken into account, it is questionable whether Indonesia can really reap the full benefits of the demographic dividends in the coming decades, even if the economy keeps growing at its present rate of 6 percent a year; its population is growing too rapidly. Even if all the people of working age are employed (and that is a big "if"), it is still doubtful whether the country will have the ability to feed and clothe everyone and provide the basic public services they need.

There is, of course, little likelihood that dire Malthusian predictions will come true. Just because the population is increasing does not meant that all Indonesians will starve. But Indonesia must recognize the presence of these demographic pressures before it can begin to address them. The constant denial — the prevailing official attitude when it comes to demographic challenges — is not helping at all.