Monday, 25 March 2019 | 23:48 WIB

Village Fund Disbursement Expected to Get Indonesia out of Middle Income Trap

Illustration: Village Fund

MANADO, NNC – Disbursement of village funds must be able to make a real contribution to the development of superior products in rural areas (Prukades) in an area. If various Prukades can become export commodities, it will push Indonesia out of the middle income trap.

At present Indonesia is categorized as a country trapped in middle income.

One indicator is the per capita income of the Indonesian population which stands at USD3,900 per year. It needs hard work so that the per capita income of the population increases, one of which is by raising the value of exports.

"The threat of middle income trap can be prevented by contribution from the village and district levels to driving exports," said Advisor to the Village Minister, Development of Disadvantaged Areas and Transmigration Aviliani when she became a resource person at the Forum Group Discussion entitled Building an Empowering Village Financial Management System, in Manado.

She explained one of the factors that made Indonesia threatened in the trap of middle-income countries is due to the current account deficit.

In order for a current account surplus to occur, the export value must be increased so as to contribute to the increase in economic growth which currently only stands at 5 percent.

"Various superior products from the agricultural and plantation sectors in villages can become export products if managed properly," she said.

This senior economist said the agricultural sector is currently still one of the main buffers of Indonesia's gross domestic product (GDP). It's just that it needs a new approach so that the governance of the agricultural sector in Indonesia is able to contribute to increasing economic growth in the country.

The new approach among others is clustering of superior product areas to increase the economies of scale of these products.

"So far, agricultural products have not been looked at by businesses because they have small economic of scale, if there is a clustering of products by region, they will certainly increase the economies of scale of the products so they can invite investors to disburse capital," she said.

Aviliani assessed that currently there is a need for cooperation between stake holders to increase the scale of product economies from the village. Cooperation between the government, farmers and businesses will potentially make superior products in rural areas an export commodity.

"The existence of village funds must be utilized by the community, one of them is by using it to enlarge the economies of scale of their superior agricultural products. If there is good collaboration between the government, the community, and the business community in pushing products from the village into export commodities, we are confident that Indonesia will be able to get out of this Middle Income Trap," she said.