Finance Minister Sri Mulyani Indrawati spoke on Tuesday (25/07) about the urgency of investing in human capital. (Reuters Photo/James Lawler Duggan)

Investing in Human Capital Is Key to Build Indonesia: Finance Minister


JULY 27, 2017

Jakarta. Investment in human capital and fairer wealth distribution through state budget is prerequisite to Indonesia's development, Finance Minister Sri Mulyani Indrawati said on Tuesday (25/07).

"Investing in human capital cannot wait ... It's not about how much money, but how it is spent," Sri Mulyani said during the 20th Supermentor event hosted by the Foreign Policy Community of Indonesia at Djakarta Theater, Central Jakarta.

In her speech, Sri Mulyani highlighted the importance of investing in the younger generation and guiding the youth in becoming productive members of the society – those below 15 make up about 25 percent of the country's population.

Indonesia has been spending a fifth of its annual state budget on education, but in terms of reading, science and mathematics, the country's youth lag behind their peers in the region.

The minister said the challenge is to effectively apportion the budget for education to engender a new generation that not only excels in studies, but understands science and possess diverse skills.

By 2014, Indonesia is likely to become the world's fifth largest economy. However, to achieve this, it must properly allocate its resources and distribute them fairly.

Sri Mulyani, who is famous for her role in Indonesia's flagship tax amnesty program, said successful tax collection is essential to confront income inequality and other social gaps.

In 2017, only 32.3 percent of 36 million registered taxpayers paid their taxes. Low tax compliance is one of the factors that add to the soaring inequality in the country.

Indonesia's tax-to-GDP ratio was 10.8 percent, quite low compared with Malaysia or Thailand where it stands at 15.6 percent and 16.0 percent respectively.

Sri Mulyani also touched on the necessity of investing in infrastructure, noting that Indonesia is behind other countries, also due to various challenges it faced upon independence. Infrastructure development, according to her, is also important for better integration of the country.

"Investment in infrastructure is a necessity, not a luxury," she said.