‘Dangerous’ inequality: Four men in Indonesia wealthier than 100 million people

A recently demolished "kampung" or informal village in North Jakarta. The former residents say they were given one week's notice. In the background, new high-rises are under construction. (Credit: Chris Bentley / Flickr)

Indonesia’s President Joko Widodo vowed to fight inequality as his top priority for 2017. But Widodo has a massive gap to close, according to a new report by Oxfam today: Just four men own more wealth than the poorest 40 percent of the country – about 100 million people.

Those four men, with a collective $25 billion in 2016, are led by cigarette tycoons Budi and Michael Hartono and Susilo Wonowidjojo. The Hartono brothers have topped the list of Indonesia’s richest for eight years in a row, and according to Oxfam, the interest earned in one year on just one of the brothers’ wealth would be enough to lift 2.8 million people out of extreme poverty.

The country has experienced rapid growth over the last two decades, with the proportion of people living in extreme poverty dropping from 40 percent to 8 percent. However, the report points out most of those people have just barely been lifted above the extreme poverty line of $1.90 a day. If the World Bank’s $3.10 a day “moderate” poverty line is used, 36 percent of the population – 93 million Indonesians – are living in poverty.

Meanwhile, the gap between the rich and poor has widened faster than any other Southeast Asian country: In 2002, Indonesia had just one billionaire; in 2016, there were 20. Further illustrating the disparity, the amount of interest one of the Hartono brothers earns in a single day is over 1,000 times more than what the poorest Indonesians spend on basic needs in an entire year.

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The report shows a microcosm of extreme inequality that is being experienced globally. In January, another Oxfam report announced that just eight men hold as much wealth as half of humanity.

Based on the Gini coefficient measurement of inequality, Indonesia is the sixth most unequal country in the world. With the richest 1 percent of the population holding nearly half – 49.3 percent – of the country’s total wealth, other recent reports have placed Indonesia as high as fourth most unequal.

Widodo and other leaders have described the level of inequality as “dangerous,” and 88 percent of Indonesians agree that the government needs to take immediate action to reduce it.

The government’s new “Economic Justice Policy” package is a step in the right direction, with land and agricultural distribution reforms, increased access to credit for micro-, small- and medium-sized businesses and opportunities to increase the skills of the workforce.

“This policy is an effort to increase low-income earners equity so they can have an opportunity to improve their quality of life,” Coordinating Minister for Economic Affairs Darmin Nasution said, according to the Jakarta Globe.

However, the report posited that the government “can and must go further,” especially to ensure fair work and wages and reform taxes, which would go a long way in funding public services that reduce inequality.

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The International Monetary Fund estimated in 2011 that Indonesia has a potential tax capacity of 21.5 percent of GDP. According to the report, Indonesia could increase the health budget “nine times over” if it were to reach that ratio. Indonesia also loses a significant amount of revenue to tax havens.

For all the gains that Indonesia has made in recent years, Widodo and other leaders seem to recognize that inequality is the biggest threat. Future prosperity, the report warned, will be jeopardized if measures are not taken immediately to tackle inequality.

“Conversely, taking action to narrow the gap could lift millions of people out of poverty, lead to a more cohesive society, contribute to sustainable and equitable growth and help Indonesia to meet its Sustainable Development Goal (SDG) targets,” the report said.

This story has been corrected to reflect a change of information from Oxfam.

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Joanne Lu

Joanne Lu is a South Carolina-based writer and editor dedicated to global development, poverty alleviation and social justice. After a year in Rwanda, she now covers the Asia-Pacific and economics. Find her on Twitter @joannelu or email joanne@humanosphere.com.