Abstract

An outbreak the size of the COVID-19 pandemic would surely significantly impact not only the economy but also human capital development. In Indonesia, however, the true size of this pandemic and its human capital impact is unclear since the number of COVID-19 tests has been low. In this chapter we attempt to estimate the true magnitude of the pandemic and outline a conceptual framework to understand channels from which the COVID-19 pandemic will affect human capital development, particularly in health and education, in Indonesia. We find that the number of casualties due to the pandemic could be much larger than those formally announced. The pandemic is expected to increase cases of other morbidities, maternal deaths, and less healthy babies and children. In the long run, there is evidence that a pandemic of this size could increase overall mortality cases.

Introduction

By mid-October 2020, there were around 349,000 formally confirmed cases of COVID-19 in Indonesia and the number of confirmed casualties was approximately 12,000. The pandemic has been spreading to all provinces and the numbers are increasing. Figure 10.1 shows the regional spread of COVID-19 by mid-October 2020. Most confirmed cases are in Java and the Bali Islands. This is understandable since about 58 per cent of Indonesians live in Java and the Bali Islands. Approximately 22 per cent of Indonesians live in Sumatra, but only 15 per cent of cases are on that island. It is predicted, hence, the spread of the pandemic in Sumatra is smaller than the spread of the pandemic in Java and the Bali Islands.

The spread of the pandemic in remote areas of Indonesia, Sulawesi and eastern Indonesia has been relatively equal to the proportion of the population in those areas. However, the number of cases in Sulawesi and eastern Indonesia has increased since July 2020. Hence there are indications that the speed of the pandemic spread in these areas was faster than in other parts of Indonesia between July and October this year. Health facilities and public health programs have been typically weaker outside Java and the Bali Islands, so there is a significant possibility that the pandemic might stay much longer in remote areas of Sulawesi and eastern Indonesia.

INTRODUCTION

Indonesia, comprising over 17,000 islands, is the world's largest archipelago and is blessed with a rich diversity of resource endowments, ecology and population. It extends about 6,000 km along the equator between the Indian and Pacific oceans, linking the continents of Asia and Australia. This fourth most populous nation in the world (about 260 million in 2016) is the largest member state of the Association of Southeast Asian Nations (ASEAN), accounting for nearly 40 per cent of its population and approximately 36 per cent of its gross national product in 2016 (CEIC Database). Considering these diverse characteristics, Indonesia certainly presents a challenging natural resource and environmental policy environment (Resosudarmo 2012; Hill 2014).

For a long time, particularly since the mid-1960s, Indonesia has been able to utilize its natural resources — gas, forest, coal and various types of ore, among others — to push for economic and human development in the country. Since the mid-1990s, the debate over whether the rate of natural resource extraction in Indonesia has been too fast and consequently over-exploitative, began to emerge as a top national issue. At the same time, the growth of economic activities, particularly in urban areas, has resulted in several alarming environmental issues, such as a high level of air pollution and a deterioration in river quality (Resosudarmo 2005; ADB 2013).

By the mid-2000s, the evidence of natural resource over-exploitation and environmental challenges in Indonesia attracted global attention. Among these issues were: the rate of Indonesia's deforestation was among the highest in the world (Resosudarmo et al. 2012b; Margono et al. 2014); several megacities in the country were experiencing alarmingly bad air quality; river water pollution was reaching levels that could seriously affect the health of the general public (Resosudarmo and Napitupulu 2004; Cochrane 2015); Indonesia being one of the top exporters of coal — despite its coal reserve being smaller than several other countries (Burke and Resosudarmo 2012; PwC 2012) and; over-fishing occurring everywhere in the nation's sea water areas (Resosudarmo, Napitupulu and Campbell 2009; Muawanah, Pomeroy and Marlessy 2012). The concern that shocked many Indonesians and people worldwide, however, was that Indonesia is one of the top three carbon dioxide (CO2) emitters in the world, just after China and the United States, due to its deforestation activities (PEACE 2007; Jotzo 2012).

INTRODUCTION

Southeast Asia is a significant part of the world. It accounts for approximately 3 per cent of the world's land mass and in 2013, the population was approximately 600 million. In these two respects it is similar to Latin America. In 2003, Latin America's gross domestic product (GDP) per capita was approximately three times that of Southeast Asia. However, Southeast Asia's economy has been growing much faster than Latin America's. In real terms, the GDP of Southeast Asia grew at an average annual rate of approximately 5.5 per cent in the four decades up to 2014, while over the same period the Latin American economy grew at an annual rate of 3.1 per cent. In fact, the only other parts of the world of comparable size and population that have grown faster than Southeast Asia are China since the late 1970s and India since the early 1990s (World Bank 2014).

At this rate of growth, Southeast Asia's economy has almost doubled every ten years. Southeast Asia has also become much wealthier. Its average GDP per capita has increased from approximately US$500 in the early 1980s to approximately US$3,500 in the mid-2010s. The level of poverty has also declined. For example, based on the country poverty line, the percentage of poor people in Thailand declined from approximately 58.1 per cent in 1990 to approximately 12.6 per cent in 2012; in Indonesia, from approximately 23.4 per cent in 1999 to approximately 11.4 per cent in 2013; and in the Philippines, from approximately 26.6 per cent in 2006 to approximately 25.2 per cent in 2012 (World Bank 2014). Southeast Asia has definitely been one of the most dynamic regions in the world with plenty of development success stories. In general, it has demonstrated the merits of more open economic policies à la the Washington consensus (Hill 2013; Coxhead 2015).

Despite this growth, levels of development between and within these countries vary greatly. With respect to inter-country differences, for example, Malaysia's GDP per capita in 2013 was approximately US$10,000, which is more than four times that of Vietnam. Within countries, for example in Indonesia, the percentage of poor people in Papua in 2012 was 31 per cent, while it was only 4 per cent in Bali (BPS 2014).

This volume is a tribute to Hal Hill, one of the most distinguished and internationally renowned Australian development economists and a stimulating, considerate, and compassionate colleague and friend. Over a highly productive career spanning almost four decades, Hal has greatly advanced our understanding of the process of economic development and policy challenges, using Southeast Asia as his laboratory. The enthu-siastic response to our invitation to contribute to this volume from such a distinguished group of scholars who are at the forefront of their own chosen subject areas is a reflection of the high regard and esteem in which Hal is held in our profession. The span of nationalities of the contributors testifies to the international dimension of his research interests. We feel privileged to have the opportunity to compile and introduce this volume in honour of Hal Hill, ‘the economist and the man'.

Hal Hill was born in Melbourne in 1948. He grew up in three cities (Melbourne, Ballarat, and Bendigo) as his family moved with the postings of his father, a school headmaster in the Victorian public school system. Hal's original career ambition was to become a schoolteacher, following in the footsteps of his father.

After delaying sitting for the Higher School Certificate by one year to captain Bendigo High School's tennis team, Hal entered Monash University in 1967 under a Secondary Teachers Scholarship offered by the Victoria Department of Education. He graduated from Monash in 1970 and obtained a Diploma in Education from La Trobe University the following year.

Following a career experiment combining secondary school teaching with winemaking, Hal returned to Monash in 1973 as a Master's student. During the final year of this program, he was captivated by a seminar on the Indonesian economy given at Monash by Professor Heinz Arndt, the then Head of the Division of Economics (later renamed the Arndt-Corden Department of Economics) in the Research School of Pacific Studies (RSPS) of the Australian National University (ANU). In 1976 Hal moved to the ANU under a Commonwealth Postgraduate Research Award to undertake doctoral research under the joint supervision of Heinz Arndt and Peter McCawley.

After completing his PhD in 1980, Hal spent two years as a visiting scholar in the School of Economics at the University of Philippines, one of Southeast Asia's leading universities, under the International Devel-opment Program of Australian Universities and Colleges.