Analysis using the Gini ratio, a commonly used measure of inequality, shows that all provinces in Indonesia experienced worsening inequality in 2011 compared to 2009 and 2007. And it is the richer provinces — such as East Kalimantan, Jakarta, Riau and Kepulauan Riau — that have high, if not the highest, income inequality across provinces. They have high per capita income and relatively low poverty, yet inequality has increased. In provinces like Papua and West Papua, which are relatively rich compared to the Indonesian average, the picture is arguably worse: both exhibit poor Gini ratios and very high poverty — a combination that implies a very skewed income distribution.
On the national level, the Gini ratio has increased from 0.35 in 2009 to 0.41 in 2011. While this is slightly better than China (0.44) or Malaysia (0.46), it shows that Indonesia once had a better distribution of income than it does today, although the number of people in poverty has declined from 14.2 per cent of the population in 2009 to 12.5 per cent in 2011. Wealth is unevenly distributed across regions, too: Indonesia’s per capita income rose to US$3,000 in 2010, but in some regions the average is closer to US$10,000.
The other major concern is the long-debated fuel subsidy. Early in 2012 the government failed to cut the large subsidy following a dramatic defeat in parliament. The 2013 budget will see a more than US$6 billion increase in the subsidy to US$20 billion — or 2.1 per cent of GDP. This dwarfs the subsidy allocated for other sectors, such as food and public infrastructure.