Reviving dead capital key to Indonesian prosperity

October 22, 2024

JAKARTA – The “emerald of the equator”, a popular tagline for Indonesia, conjures the vision a nation rich in natural beauty and abundant resources. Yet data from Statistics Indonesia (BPS) reveals a long-standing decline in the middle class and a persistent drop in formal employment opportunities.

These issues are even more critical as concerns about the middle-income trap grow, a situation where economic growth is too slow for the country to reach high-income status before its workforce ages. Therefore, it’s crucial for Indonesia to recalibrate its approach to avoid this trap. Moreover, data from the Finance Ministry shows that the peak of debt maturities will occur in the next few years, making it even more important to implement strategic measures that spur economic growth without burdening the national budget.

Whether the emerald of the equator shines in its golden era in 2045 depends on today’s choices.

One feasible solution lies in unlocking the potential of “dead capital” and transforming it into “live or active capital” by further developing the real estate sector. By creating an inclusive and dynamic property market, this sector has the capacity to significantly boost economic growth.

Data from Statista shows that in developed countries, the real estate sector makes a substantial contribution to GDP. For example, in Singapore, real estate contributes around 3 percent to GDP, even though the country’s land area is just 0.04 percent of Indonesia’s.

In the United States, with a land area of about 9 million square kilometers, the sector contributes about 20 percent to GDP. In contrast, Indonesia, with 1.9 million sq km, sees its real estate sector contribute only around 1.9 percent. This highlights the