Indonesia's Richest One Percent Controls Nearly Half of Nation's Wealth: Report

Jakarta Globe, Tabita Diela, December 01, 2016

A housewife in the slum area of Kapuk Teko in Jakarta drying her laundry in
 the sun. Many people in living in Indonesia capital live in poverty. (Antara
Photo/Rivan Awal Lingga)

Jakarta. A recent report on global wealth distribution showed that the top 1 percent of Indonesians remain in control of half of the country's wealth despite a dent from weak global commodity prices, reflecting a wide wealth disparity that is unlikely to narrow anytime soon.

The seventh Global Wealth Report by Credit Suisse Research Institute shows that the richest 1 percent of Indonesia's adult population of 164 million own 49.3 percent of the country's $1.8 trillion wealth by June this year, a drop from last year's 53.5 percent.

Indonesia is also the world's fourth most unequal country, according to the study. Russia's wealthiest 1 percent owns 74.5 percent assets in the country while in India 58.4 percent and in Thailand 58 percent.

"These numbers showed that social justice in Indonesia is yet to be seen," Eric Alexander Sugandi, an economist with the Jakarta-based think tank Kenta Institute, said. The report found Indonesia is also home to 30 million of the so-called bottom billion, who own less than $248 worth of assets.

Despite the drop this year, the share of the top 1 percent wealth to the overall population is still trending upward, as they keep accumulating wealth through inheritance and investments, Eric said.

"Indonesia does not have inheritance tax like Japan. So the one percent's wealth would be multiplied and unlikely to be caught up by the rest of the population," he said.

Lana Soelistianingsih, an economist from Samuel Assets Management said, the top one percent could have suffered from weak prices of global commodities, mainly coal and palm oil, which made up most of the country's billionaire's assets.

Indonesian coal benchmark price was $51.8 per metric ton in June this year, down 13 percent from $59.6 in June last year. Malaysia Palm Oil Futures was up just 2 percent to $618 per metric ton over the period.

Rupiah depreciation against the US dollar — which the report noted totaling 46 percent drop since 2011 — has also caused wealth decline per adult, the report said.

Still, the report also showed that the remaining of Indonesian population saw some increase in their wealth, which serves as a "source of finance for future consumption, particularly for retirement, and for reducing vulnerability to shocks such as unemployment, ill health, or natural disasters."

The median for wealth in Indonesia is $1,966 for every adult, up 22 percent from last year, the report shows. Indonesia's total household wealth grew by 6.4 percent in 2016 to reach $1.8 trillion this year with 88 percent of it in form of real assets like property and land, and the remainder was in financial assets like time deposits, bonds and stocks.

The number is projected to increase about 44 percent to $2.6 trillion over the next five years.

Indonesia added 13,000 new dollar millionaires in a year, which added up to 112,000 millionaires who owned a total wealth of $500 billion by mid-year 2016. The report defined wealth as the value of financial assets and housing minus the debts owed by households.

The report estimates that the number of dollar millionaires in the country will increase by 55 percent to 173,000 over the next five years.

About 84 percent of the adult population in the country owns less than $10,000, falling into the "frontier wealth" category — in which an adult's wealth is ranging from $5,000 to $25,000 — along with other countries like Ecuador, Egypt, Malaysia, Thailand and Tunisia, the report says.

Overall, the global wealth increased by 1.4 percent to $256 trillion, with Japan in the lead with a 19 percent wealth increase due to rate appreciation.