Analysis of Middle Income Trap in Indonesia Era President Joko Widodo

Abstract

This study aims to analyze the Middle Income Trap (MIT) in Indonesia under President JokoWidodo (2014-2020). GNI per capita is the main indicator used in determining whether a country is included in the MIT category or not. Factors suspected of influencing GNI per capita are Domestic Direct Investment, Foreign Direct Investment, Exports, Imports and the Infrastructure Budget. Data is sourced from the World Bank, BPS and other media. The year 2020 is the minimum time to establish as a Middle Income Country.

The results of the study show that Indonesia has entered the MIT trap starting in 2020. From the results of the partial test and the simultaneous test, it can be concluded that Domestic Direct Investment, Foreign Direct Investment, Exports, Imports and the Infrastructure Budget have no significant effect on GNI per capita. The challenge faced by Indonesia in order not to be trapped in MIT is that Indonesia must increase its economic growth >6% per year.

In order to get out of the MIT trap, it is necessary to map out investment priorities in order to optimize added value and at the same time absorb labor. The impression is liberating on investors, as a result investors prefer to service sectors that are capital intensive, not labor intensive.