Productivity Becomes a Challenge in Encouraging Economic Growth

Increasing domestic productivity is the key as well as a challenge for Indonesia to move up from a middle-income country to a developed country.

To achieve this, the government will use all the necessary instruments, both fiscal and non-fiscal. Since the past until now, Indonesia's domestic productivity is relatively low. One of them is reflected in Indonesia's Total Factor Productivity (TFP) index which is lower than other Southeast Asian countries. In fact, since the 1997-1998 financial crisis, Indonesia's TFP index has continued to decline. The TFP index is one indicator to see the level of productivity of an economy. The value is obtained from the ratio of total output to total input of factors of production. This TFP describes the economic impact of the accumulation of capital and technology. Indonesia's TFP index in 2019 was 0.7 points. "This is one of the problems. If we want to grow higher in the future, TFP is the key for long-term growth, to escape the trap of middle-income countries," said Deputy for Economics at the National Development Planning Agency (Bappenas) Amalia Adininggar Widyasanti in an international webinar initiated by the SDGs Center University Padjadjaran, Tuesday (11/1/2022). The Covid-19 pandemic caused a decline in the demand for industrial products and services, which in turn triggered a reduction in the formal workforce. As a result, many workers have turned to the informal sector during the pandemic. To increase domestic productivity, Bappenas has an economic diversification program including industrialization, increasing the productivity of MSMEs, and modernizing the agricultural sector. To achieve this goal, the government will rely on incentives, both fiscal in the form of tax relaxation and non-fiscal, such as the implementation of the Job Creation Act.

|•SOURCE•| Articles :KOMPAS | Image :KAJIAN PUSTAKA |

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