Moving capital city will lessen income inequality: minister

Moving capital city will lessen income inequality: minister

Minister of National Development Planning / Head of Bappenas Bambang Brodjonegoro explained the reason for the need to move the Indonesian capital in Jakarta to outside Java at the National Dialogue II: Towards the Future Capital, Smart, Green and Beautiful in Jakarta on Wednesday (6/26/2019). (Antara / Katriana)

Jakarta (ANTARA) - Minister of National Development Planning and Head of Bappenas Bambang Brodjonegoro believes that relocating the capital away from the main island of Java will lessen income inequality among groups.

"Moving the capital to alternative provinces will make the economy more labor-intensive," Brodjonegoro remarked during the National Dialogue II: Towards the Future Capital, Smart, Green and Beautiful in Jakarta on Wednesday.

The minister opined that promoting a more labor-intensive economy can reduce the income gap across groups, both at the regional and national levels.

A reduction in the level of income inequality is apparent from the 0.23 percent rise in capital prices and a hike in labor prices by 1.37 percent.

The rise in labor prices will be accompanied by an increase in the marginal product of labor.

The sole indication that might be viewed as having a negative impact is the transfer of capital that can cause additional inflation.

However, the activity of building the new capital would only add little inflation to 3.30 percent, from the 3.12 percent base inflation last year.

He noted that the increase is still within limit that can be tolerated, and the impact is relatively minimal.  

 

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