DEVELOPMENT FOR THE PEOPLE: Equity and Poverty

Lecturer : Prof. Dr. Ginandjar Kartasasmita
jgkar@cbn.net.id, www.ginandjar.com
Assistant : Dr. Dadang Solihin, SE, MA
Professor dadangsol@yahoo.com

CONTENTS

 INTRODUCTION
What is Poverty?
Evolving Strategy for Poverty Reduction
The UN Millennium Development Goals
Poverty Definitions And Measures
 POVERTY IN INDONESIA
Poor Village Development Program
 THE CRISIS
 MAJOR POST‐CRISIS POVERTY REDUCTION
PROGRAMS

GRIPS_2012 www.ginandjar.com 2

CONTENTS

 EQUITY: A Continuous Challenge
The Ever Present Problem of Inequality
Regional Disparity
Attempts at Equitable Development
Persistent Disparity Amidst Economic Growth
Unemployment
Human Development Index
 THE ROLE OF PUBLIC ADMINISTRATION IN POVERTY
REDUCTION AND EQUITABLE DEVELOPMENT
 LESSONS TO BE LEARNED
On Poverty
On Equitable Development


WHAT IS POVERTY?
 POVERTY IS PRONOUNCED DEPRIVATION IN WELL‐BEING.
TO BE POOR IS TO BE HUNGRY, TO LACK SHELTER AND
CLOTHING, TO BE SICK AND NOT CARED FOR, TO BE
ILLITERATE AND NOT SCHOOLED.
 BUT FOR POOR PEOPLE, LIVING IN POVERTY IS MORE
THAN THIS. POOR PEOPLE ARE PARTICULARLY
VULNERABLE TO ADVERSE EVENTS OUTSIDE THEIR
CONTROL.
 THEY ARE OFTEN TREATED BADLY BY THE INSTITUTIONS
OF STATE AND SOCIETY AND EXCLUDED FROM VOICE
AND POWER IN THOSE INSTITUTIONS.

 THE PRESENT VIEW OF POVERTY IS ENCOMPASSING NOT
ONLY MATERIAL DEPRIVATION (MEASURED BY AN
APPROPRIATE CONCEPT OF INCOME OR CONSUMPTION)
BUT ALSO LOW ACHIEVEMENTS IN EDUCATION AND
HEALTH.
 LOW LEVELS OF EDUCATION AND HEALTH ARE OF
CONCERN IN THEIR OWN RIGHT, BUT THEY MERIT
SPECIAL ATTENTION WHEN THEY ACCOMPANY
MATERIAL DEPRIVATION.
 THE NOTION OF POVERTY INCLUDES VULNERABILITY
AND EXPOSURE TO RISK—AND VOICELESSNESS AND
POWERLESSNESS.

 ANOTHER IMPORTANT REASON FOR CONSIDERING A
BROADER RANGE OF DIMENSIONS—AND HENCE A
BROADER RANGE OF POLICIES—IS THAT THE DIFFERENT
ASPECTS OF POVERTY INTERACT AND REINFORCE ONE
ANOTHER IN IMPORTANT WAYS.
 THIS MEANS THAT POLICIES DO MORE THAN SIMPLY
ADD UP. IMPROVING HEALTH OUTCOMES NOT ONLY
IMPROVES WELL‐BEING BUT ALSO INCREASES INCOME‐
EARNING POTENTIAL.


 INCREASING EDUCATION NOT ONLY IMPROVES WELL‐
BEING—IT ALSO LEADS TO BETTER HEALTH OUTCOMES
AND TO HIGHER INCOMES. PROVIDING PROTECTION
FOR POOR PEOPLE (REDUCING VULNERABILITY IN
DEALING WITH RISK) NOT ONLY MAKES THEM FEEL LESS
VULNERABLE—IT ALSO ALLOWS THEM TO TAKE
ADVANTAGE OF HIGHER‐RISK, HIGHER‐RETURN
OPPORTUNITIES.
 INCREASING POOR PEOPLE’S VOICE AND PARTICIPATION
NOT ONLY ADDRESSES THEIR SENSE OF EXCLUSION—IT
ALSO LEADS TO BETTER TARGETING OF HEALTH AND
EDUCATION SERVICES TO THEIR NEEDS.


EVOLVING STRATEGY FOR POVERTY
REDUCTION
 THE APPROACH TO REDUCING POVERTY HAS EVOLVED
OVER THE PAST 50 YEARS IN RESPONSE TO DEEPENING
UNDERSTANDING OF THE COMPLEXITY OF DEVELOPMENT.
 IN THE 1950S AND 1960S MANY VIEWED LARGE
INVESTMENTS IN PHYSICAL CAPITAL AND INFRASTRUCTURE
AS THE PRIMARY MEANS OF DEVELOPMENT. HENCE THE
TRICKLING DOWN EFFECT IDEA.
 IN THE 1970S AWARENESS GREW THAT PHYSICAL CAPITAL
WAS NOT ENOUGH, AND THAT AT LEAST AS IMPORTANT
WERE HEALTH AND EDUCATION.


 THE 1980S SAW ANOTHER SHIFT OF EMPHASIS
FOLLOWING THE DEBT CRISIS AND GLOBAL RECESSION
AND THE CONTRASTING EXPERIENCES OF EAST ASIA
AND LATIN AMERICA, SOUTH ASIA, AND SUB‐SAHARAN
AFRICA.
 IN THE 1990S GOVERNANCE AND INSTITUTIONS MOVED
TOWARD CENTER STAGE—AS DID ISSUES OF
VULNERABILITY AT THE LOCAL AND NATIONAL LEVELS.
 THE 20TH CENTURY SAW GREAT PROGRESS IN
REDUCING POVERTY AND IMPROVING WELL‐BEING.


 IN THE LAST FOUR DECADES OF THE LAST CENTURY LIFE
EXPECTANCY IN THE DEVELOPING WORLD IN‐CREASED
20 YEARS ON AVERAGE, THE INFANT MORTALITY RATE
FELL MORE THAN HALF, AND FERTILITY RATES DECLINED
BY ALMOST HALF IN THE PAST TWO DECADES NET
PRIMARY SCHOOL ENROLLMENT IN DEVELOPING
COUNTRIES INCREASED BY 13 PERCENT.


 HOWEVER THESE BROAD TRENDS CONCEAL
EXTRAORDINARY DIVERSITY IN EXPERIENCE IN
DIFFERENT PARTS OF THE WORLD‐AND LARGE
VARIATIONS AMONG REGIONS, WITH SOME SEEING
ADVANCES, AND OTHERS SETBACKS, IN CRUCIAL NON
INCOME MEASURES OF POVERTY.
 WIDENING GLOBAL DISPARITIES HAVE INCREASED THE
SENSE OF DEPRIVATION AND INJUSTICE FOR MANY. AND
SOCIAL MOBILITY AND EQUAL OPPORTUNITY REMAIN
ALIEN CONCEPTS FOR FAR TOO MANY PEOPLE


THE UN MILLENNIUM
DEVELOPMENT GOALS

MDGs: NEW INTERNATIONAL DEVELOPMENT IDEOLOGY

 “WE WILL SPARE NO EFFORTS TO FREE OUR FELLOW MEN,
WOMAN AND CHILDREN FROM THE OBJECT AND
DEHUMANIZING CONDITIONS OF EXTREME POVERTY, TO
WHICH MORE THAN A BILLION OF THEM ARE CURRENTLY
SUBJECTED. WE ARE COMMITTED TO MAKING THE RIGHT
TO DEVELOPMENT A REALITY FOR EVERYONE AND TO
FREEING THE ENTIRE HUMAN RACE FROM WANT.”
(MILLENIUM DECLARATION, 2000)


 THE MILLENNIUM DEVELOPMENT GOALS (MDG)
WERE DERIVED FROM THE UNITED NATIONS
MILLENNIUM DECLARATION, ADOPTED BY 189
NATIONS IN 2000. MOST OF THE GOALS AND TARGETS
WERE SET TO BE ACHIEVED BY THE YEAR 2015 ON THE
BASIS OF THE GLOBAL SITUATION DURING THE 1990s.


POVERTY DEFINITIONS AND MEASURES

Poverty headcount index (Po): This is the share of the population whose
consumption is below the poverty line. The headcount index, sometimes referred to
as the ‘poverty incidence’, is the most popular poverty measure. However, this
measure fails to differentiate between sub-groups of the poor and does not indicate
the extent of poverty. It remains unchanged even if a poor person becomes poorer or
better off, provided that they remain below the poverty line. Therefore, in order to
develop a comprehensive understanding of poverty, it is important to complement the
headcount index with the other two poverty measures of Foster, Green and
Thorbecke (FGT).
Poverty gap index (P1): The mean aggregate consumption shortfall relative to the
poverty line across the whole population, with a zero value assigned to those above
the poverty line. The poverty gap can provide an indication of how many resources
would be needed to alleviate poverty through cash transfers perfectly targeted to the
poor. This index better describes the depth of the poverty but does not indicate the
severity of poverty. However, it does not change if a transfer is made from a poor
person to someone who is even poorer.


Poverty severity index (P2): This measure gives more weight to the very poor by
taking the square of the distance from poverty line. It is calculated by squaring the
relative shortfall of per capita consumption to the poverty line and then averaging
across population while assigning zero values to those above the poverty line. When
a transfer is made from a poor person to someone who is poorer, this registers a
decrease in aggregate poverty.
US$1 and US$2 PPP per day poverty measures: To compare poverty across
countries, the World Bank uses estimates of consumption converted into US dollars
using purchasing power parity (PPP) rates rather than exchange rates. The PPP
exchange rate shows the numbers of units of a country’s currency needed to buy in
that country the same amount of goods and services that US$1 would buy in the US.
These exchange rates are computed based on prices and quantities for each country
collected in benchmark surveys, which are usually undertaken every five years. Chen
and Ravallion (2001) present an update on world poverty using a US$1-a-day poverty
line. According to their calculations, in 1993 the US$1-a-day PPP poverty line was
equivalent to Rp 20,811-a-month (US$2). The PPP poverty lines are adjusted over
time by relative rates of inflation, using consumer price index (CPI) data. So in 2006,
the US$1 PPP poverty line is equivalent to Rp 97,218 per person per month while the
US$2 PPP poverty line is equivalent to Rp 194,439 per person per month.


 DURING THE PREVIOUS THREE DECADES, THE INCIDENCE
OF POVERTY IN INDONESIA HAD DECLINED SIGNIFICANTLY
AS RESULT OF A RAPID ECONOMIC GROWTH COUPLED
WITH INVESTMENT IN SOCIAL INFRASTRUCTURE SUCH AS
HEALTH AND EDUCATION, PROMOTION OF AGRICULTURAL
DEVELOPMENT, AND RURAL INFRASTRUCTURES.
 IN 1970S, SPECIAL MEASURES TO TARGETING TO THE
ECONOMIC POOR WERE DIFFICULT DUE TO THE VERY HIGH
PROPORTION OF PEOPLE LIVING BELOW THE POVERTY
LINE.
 IN THE ABSENCE OF GOVERNMENT INITIATED SOCIAL
PROTECTION, THE POOR LEAN MOSTLY ON TRADITIONAL
RISK POOLING MECHANISM.


 IN THE YEARS PRIOR TO 1997/98 ASIAN CRISIS,
INDONESIA HAD ADOPTED A LONG‐TERM POVERTY
ALLEVIATION STRATEGY VIA MASSIVE INVESTMENT IN
PUBLIC EDUCATION AND HEALTH, AGRICULTURE AND
PUBLIC INFRASTRUCTURE.
 AMONG OTHERS, THIS APPROACH HAS CONTRIBUTED
TO THE IMPROVEMENT OF HUMAN CAPITAL
ACCUMULATION, CREATION OF NEWLY EDUCATED
MIDDLE‐CLASS AND OPENING ISOLATED AREAS TO
WIDER ECONOMIC OPPORTUNITIES.


 GOVERNMENT PROGRAM SUCH RICE SELF‐SUFFICIENCY
AND FAMILY PLANNING HAD TREMENDOUS EFFECT OF
POVERTY REDUCTION.
 WITH THE CONSTRUCTION OF IRRIGATION, INLAND ROADS,
ELECTRICITY THAT HAD COVERED AROUND 70 TO 80% OF
THE POPULATION, AND NATION WIDE SCHOOLS AND
HEALTH SERVICES, THE RURAL AS WELL THE URBAN AREAS
WERE BOTH AFFECTED BY ECONOMIC DEVELOPMENT.
 THE HIGH ECONOMIC GROWTH WAS ACCOMPANIED BY
IMPROVEMENTS IN VARIOUS SOCIAL INDICATORS.


 DURING THE PERIOD, LIFE EXPECTANCY INCREASED,
INFANT MORTALITY RATES FELL, AND SCHOOL
ENROLLMENT RATES ROSE.
 IN ADDITION, THE PROVISION OF BASIC
INFRASTRUCTURE – WATER SUPPLIES, ROADS,
ELECTRICITY, SCHOOLS, AND HEALTH FACILITIES ‐ ALSO
ROSE SUBSTANTIALLY.


 HOWEVER ALTHOUGH ALL STRATA OF INDONESIA’S
SOCIETY ENJOYED THE BENEFIT OF DEVELOPMENT,
THOSE AT THE TOP DISPROPORTIONABLY ENJOYED THE
MOST, THEREBY WIDENING THE SOCIAL AND ECONOMIC
GAP BETWEEN THE RICH AND THE POOR.
 BY 1990’S AT THE HEIGHT OF INDONESIA’S ECONOMIC
RISE—BEING ONE OF THE ASIAN ECONOMIC TIGERS—
THERE WAS A GROWING CONCERNED AMONG
DEVELOPMENT PLANNERS THAT A MORE TARGETED
AND SPECIAL POLICIES SHOULD BE ADOPTED TO
ACCELERATE POVERTY ERADICATION.


 IT SHOULD BE NOTED THAT DURING THE PRE‐CRISIS HIGH
GROWTH PERIOD, THE GOVERNMENT OF INDONESIA (GOI)
UNDER SUHARTO HAD ACTUALLY CARRIED ON A NUMBER OF
POVERTY REDUCTION PROGRAMS.
 IN THE EARLY NEW ORDER ERA FOR EXAMPLE, SEVERAL
DEPARTMENTS INCLUDING THE DEPARTMENT OF HOME
AFFAIRS RUN AN EXPERIMENTAL SAVINGS AND LOANS
PROJECTS; THE DEPARTMENT OF SOCIAL AFFAIRS
CONDUCTED PROJECTS FOCUSED ON INCREASING THE
WELFARE OF THE POOR AND NEEDY; AND THE DEPARTMENT
OF AGRICULTURE MANAGED PROGRAMS AIMING TO
INCREASE THE INCOME LEVEL OF SMALL FARMERS (LEITH
ET.AL, 2003).


 BESIDES THERE WERE ALSO A MULTITUDE OF
PRESIDENTIAL INSTRUCTIONS (INPRES) ALLOCATING
FUNDS FOR EDUCATION, HEALTH, AND BLOCK
GRANTS TO THE PROVINCES AND DISTRICS.
 THEY ALL CONTRIBUTED TO THE FAST DROP IN
POVERTY ALL OVER THE COUNTRY.


 PRIOR TO THE 1997/1998 CRISIS, THE GOVERNMENT TOOK
IMPORTANT STEPS ON WHAT LATER WAS THE INSPIRATION OF
POST‐CRISIS POVERTY REDUCTION PROGRAM.
 THE POVERTY REDUCTION INITIATIVES IN THE LATE NEW
ORDER ERA INCLUDES:
I. PRESIDENTIAL INSTRUCTION ON DISADVANTAGED VILLAGES (IDT);
II. DISADVANTAGED VILLAGE INFRASTRUCTURE DEVELOPMENT
PROGRAM (P3DT);
III. URBAN POVERTY REDUCTION PROGRAMME (P2KP);
IV. MICRO CREDIT (TAKESRA/KUKESRA);
V. SMALL FARMERS/FISHERMAN INCOME EXPANSION PROJECT (P4K);
AND
VI. SUB‐DISTRICT DEVELOPMENT PROGRAM (PPK/KDP).
(LEITH ET.AL, 2003)


 DESPITE THE FACT THAT POVERTY ALLEVIATION IN
INDONESIA ACHIEVED A GREAT SUCCESS IN THE PERIOD OF
1970S UNTIL MID 1990S, THE TERM 'POVERTY' HAD NOT
PLACED IN THE TOP PRIORITY OF THE COUNTRY'S
DEVELOPMENT AGENDA UNTIL THE EARLY 1990S.
 THERE WAS NO SPECIFIC CHAPTER ON POVERTY
ALLEVIATION IN THE FIRST FIVE OF FIVE YEARS
DEVELOPMENT PLAN (REPELITA), THE NATIONAL MEDIUM‐
TERM DEVELOPMENT PLAN IN THE NEW ORDER ERA.
 THE DEVELOPMENT IDEOLOGY AT THAT TIME FOLLOWING
THE ADVICE OF EXPERTS FROM THE WORLD BANK AN
WESTERN COUNTRIES WERE GROWTH DRIVEN
DEVELOPMENT COUNTING ON THE TRICKLE DOWN BENEFIT
OF GROWTH TO THE POOR POPULATION.


 THE SIXTH REPELITA 1994/1995 ‐ 1998/1999 WAS THE
FIRST DOCUMENT THAT MENTIONED POVERTY
ALLEVIATION AND EQUITY OF DEVELOPMENT. THESE
TWO ISSUES WERE ALSO INTEGRATED IN OTHER
CHAPTERS OF THE PLAN.
 A NEW APPROACH ON POVERTY ERADICATION WAS
LAUNCHED IN 1993, UNDER THE SIXTH FIVE YEARS
DEVELOPMENT PLAN (REPELITA VI).
 THE IDT (INPRES DESA TERTINGGAL, OR PROGRAM FOR
ASSISTANCE TO BACKWARD VILLAGES). EVEN THEN THE
USA OF THE WORD “POOR” WAS STILL AVOIDED.


 IDT HAD THREE GOALS:
1) TO GALVANIZE A NATIONAL MOVEMENT FOR
POVERTY ERADICATION AND ENSURE THAT IT
BECOMES A MASS (PEOPLE’S) MOVEMENT;
2) TO ACCELERATE REDUCTION IN INEQUALITIES OF
INCOME AND WEALTH; AND
3) TO DEVELOP THE PEOPLE’S ECONOMY.
 THE BASIC IDEA WAS EMPOWERING PEOPLE TO
MAKE THEM CAPABLE TO LIFT THEMSELVES OUT OF
POVERTY.


 POOR GROUPS ARE IDENTIFIED ACCORDING TO
CATEGORIES REFLECTIVE OF LOCAL VILLAGE STANDARDS.
EACH VILLAGES WAS PROVIDED FUNDS RP.20 MILLION PER
VILLAGE (ABOUT US$10.000). IT WAS A GRANT, BUT WAS
EXPECTED TO REVOLVE AMONG THE LOCAL COMMUNITY
AS A SEED. THE USES OF THE FUNDS WERE ENTIRELY AT
DISCRETION OF THE COMMUNITY THEMSELVES.
 IN ONE VILLAGE THERE COULD BE MORE THAN ONE
GROUP.


 WOMEN’S PARTICIPATION WAS SIGNIFICANT AND IN
MANY PLACES POKMAS MEMBERS WERE
PREDOMINANTLY OR ALL WOMEN. MOST OF THEM DREW
ON IDT FUNDS FOR INCOME‐GENERATING ACTIVITIES
SUCH AS SMALL TRADING ACTIVITIES, ANIMAL
HUSBANDRY SUCH AS RAISING GOATS, CHICKENS AND
DUCKS, FISH FARMS, HOME INDUSTRIES, OR IN ONE CASE
OPERATING A NEWLY PURCHASED FISHING BOAT WITH
THEIR HUSBAND.


 BY 1996, THE PROGRAM HAD COVERED 28,000 OF THE
LEAST‐DEVELOPED VILLAGES, OR 43 PERCENT OF ALL
VILLAGES IN THE COUNTRY. BENEFICIARIES WERE 136,000
SELF‐HELP GROUPS (KELOMPOK MASYARAKAT OR
POKMAS), COMPRISING OF 3.4 MILLION POOR
HOUSEHOLDS.
 SUPPORTING THE IDT, IN 1996 A RURAL INFRASTRUCTURE
PROGRAM WAS LAUCHED.


 OTHER PROGRAMS RELATED TO POVERTY REDUCTION
HAD ALSO BEEN UNDERTAKEN, FOCUSING ON
VULNERABLE GROUPS: THE POOREST, ISOLATED
INDIGENOUS COMMUNITIES, THE DISABLED, ELDERLY,
DESTITUTE CHILDREN, POOR WOMEN, AND SLUM
DWELLERS. STILL OTHERS INVOLVE SUPPLEMENTARY
FEEDING FOR ELEMENTARY SCHOOL CHILDREN AND
INCOME GENERATING PROGRAMS.
 THE RESULT WAS AN ACCELERATED REDUCTION IN
POVERTY BETWEEN 1993‐1996.


PRE‐CRISIS POVERTY INCIDENCE AND NUMBER OF POOR
Percent 50,0%
Millions 60

54,2
45,0%

47,2 50
40,0%
40,1%
42,3
40,6
35,0%
40
33,3% 35
30,0%

28,6% 30
25,0% 26,9% 27,2 30
25,9

20,0% 22,5
21,6%
20
15,0% 17,4%
15,1%
13,7%
10,0%
11,3%
10

5,0%

0,0% 0
Source: BAPPENAS, 1999 1976 1978 1980 1981 1984 1987 1990 1993 1996


 NOTE: THE POVERTY LINES EQUAL TO 2100 CALORIE PER
CAPITA PER DAY FOR THE FOOD COMPONENT (52
COMMODITIES) PLUS BASIC NON FOOD CONSUMPTION
I.E. HOUSING, APPAREL, HEALTH, EDUCATION, UTILITIES
AND TRANSPORTATION (47‐51 COMMODITIES).
 THE AVERAGE COMPOSITION IS 74% FOR FOOD
CONSUMPTION AND 26% FOR NON‐FOOD
CONSUMPTION;
 IN URBAN AREA 70% VS. 30% AND IN RURAL AREA 80%
VS. 20%.


 IN JULY 1997 INDONESIA WAS STRUCK BY A
CURRENCY CRISIS, WHICH BY THE FIRST HALF OF
1998 HAD ALREADY DEVELOPED INTO A FULL
BLOWN ECONOMIC AND POLITICAL CRISIS,
EXACERBATED BY A NATURAL DISASTER (EL NINO
DROUGHT).


 DURING THIS CRISIS PERIOD, THE INDONESIAN PEOPLE
SAW:
 THE FALL OF THE VALUE OF RUPIAH TO AS LOW AS 15
PERCENT OF ITS PRE‐CRISIS VALUE IN LESS THAN ONE YEAR,
 ECONOMIC CONTRACTION BY AN UNPRECEDENTED
MAGNITUDE OF 13.7 PERCENT IN 1998,
 SKYROCKETING DOMESTIC PRICES (THE GENERAL INFLATION
RATE WAS 78 PERCENT IN 1998) AND PARTICULARLY THOSE OF
FOOD (INFLATION RATE OF FOOD WAS 118 PERCENT IN 1998),
 MASS RIOTING IN THE CAPITAL JAKARTA AND A FEW OTHER
CITIES,
 CULMINATING IN THE FALL OF THE NEW ORDER
GOVERNMENT ‐ WHICH HAD BEEN IN POWER SINCE MID
1960S TO MAY 1998.


 THE SOCIAL IMPACT OF THE CRISIS, IN PARTICULAR ON
POVERTY, WAS SUBSTANTIAL.
 DURING THE PERIOD, THE NUMBER OF URBAN POOR
DOUBLED, WHILE THE RURAL POOR INCREASED BY 75
PERCENT.
 A STUDY (BY SURYAHADI, SUMARTO, AND PRITCHETT,
2003) WHICH TRACKS DOWN POVERTY RATE OVER THE
COURSE OF THE CRISIS SHOWS THAT THE POVERTY RATE
INCREASED BY 164 PERCENT FROM THE ONSET OF THE
CRISIS IN MID 1997 TO THE PEAK OF THE CRISIS AROUND
THE END OF 1998.


 TO REDUCE THE ADVERSE SOCIAL IMPACT OF THE CRISIS, IN
1998 THE GOVERNMENT INTRODUCED A SOCIAL SAFETY NET
(JARING PENGAMAN SOSIAL OR JPS) PROGRAM AIMING TO
PREVENT THE POOR FROM FALLING MORE DEEPLY INTO
POVERTY AND REDUCING THE EXPOSURE OF VULNERABLE
HOUSEHOLDS TO RISK.


 THE SOCIAL SAFETY NET (SSN) INVOLVED FOUR STRATEGIES:
I. ENSURING THE AVAILABILITY OF AFFORDABLE FOOD,
II. IMPROVING HOUSEHOLD PURCHASING POWER THROUGH
EMPLOYMENT CREATION,
III. PRESERVING ACCESS TO CRITICAL SOCIAL SERVICES,
PARTICULARLY HEALTH AND EDUCATION, INCLUDING
SUPPLEMENTARY FOOD PROGRAM FOR SCHOOL CHILDREN
AND LACTATING WOMAN IN POOR VILLAGES, AND
IV. SUSTAINING LOCAL ECONOMIC ACTIVITY THROUGH REGIONAL
BLOCK GRANTS AND THE EXTENSION OF SMALL‐SCALE
CREDITS.
 THE IMPLEMENTATION OF THE SSN PROGRAMS HAD
SIGNIFICANTLY REDUCED THE WORST EFFECTS OF THE CRISIS
(SUMARTO, SURYAHADI, AND WIDYANTI, 2002).

 TO PROTECT FOOD SECURITY, EDUCATION, HEALTH AND
EMPLOYMENT OF THE POOR HOUSEHOLDS IN THE POOR
AREAS, IN JULY 1998, THE GOVERNMENT OF INDONESIA
INITIATED THE FIRST NATION WIDE SOCIAL PROTECTION
SCHEME ON HEALTH AND EDUCATIONAL, IN ADDITION TO
SUBSIDIZED RICE AND CASH‐ FOR‐WORK PROGRAM FOR
POOR HOUSEHOLDS AND AREAS (SPARROW, 2006, 2007;
WORLD BANK, 2006).
 WITH SOME MODIFICATIONS, MANY OF THESE INITIATED
SOCIAL SAFETY NETS ARE STILL PRACTICED – SEVERAL OF
WHICH ARE DISCUSSED IN THE CONTEXT OF THE POVERTY
ALLEVIATION STRATEGY IN THE POST‐CRISIS INDONESIA.


FOOD SECURITY

 THE 1997/98 CRISIS WAS SIGNIFIED BY SKYROCKETING PRICE
OF RICE, THE STAPLE FOOD FOR MOST INDONESIANS.
 AMONG OTHERS DUE TO CROP FAILURE CAUSED BY SEVERE
DRAUGHT (EL NIÑO) THE POOR, WHOSE RICE CONSUMPTION
MADE UP TO A QUARTER OF TOTAL EXPENDITURES, WERE
THE MOST NEGATIVELY AFFECTED.
 THE DROP IN RICE CONSUMPTION WAS ACCOMPANIED BY
AMONG OTHERS DIMINISHING HEALTH STATUS OF UNDER
FIVE‐YEAR CHILDREN (WORLD BANK, 2006), INDICATING BAD
COPING STRATEGY.


 DURING THE CRISIS, PER‐CAPITA LEVELS OF HOUSEHOLD
EXPENDITURE, DECLINED SUBSTANTIALLY AND POVERTY RATES
HAVE RISEN BY AT LEAST 25 PERCENT.
 IT APPEARED THAT TO SMOOTH CONSUMPTION, HOUSEHOLDS
REDUCED THEIR INVESTMENT IN CHILDREN EDUCATION AND
PUSH EARLY ENTRANCE TO LABOR MARKET.


 IN MITIGATING THE HYPERINFLATION, HOUSEHOLDS TRIED
TO MAINTAIN THEIR PHYSICAL AMOUNT OF STAPLE FOOD
CONSUMPTION BY INCREASING THE VALUE AND
PROPORTION OF THEIR FOOD CONSUMPTION AT THE COST
OF HEALTH AND EDUCATIONAL EXPENDITURES, HAMPERING
THE SUSTAINABILITY OF LONG‐TERM POVERTY ALLEVIATION
STRATEGY THROUGH HUMAN CAPITAL ACCUMULATION.
 THIS IS TRUE ESPECIALLY AMONG THE POOREST
HOUSEHOLDS (FRANKENBERG, THOMAS, AND BEEGLE,1999).


 THE MOST IMPORTANT BASIC COMMODITY WAS RICE. A
PROGRAM WAS INITIATED IN JULY 1998 TO PROVIDE 10
KG OF RICE AT ABOUT ONE‐HALF OF THE MARKET PRICE
TO LOW‐INCOME FAMILIES FIRST IN THE JAKARTA AREA
AND IN SEPTEMBER EXTENDED TO COVER 7½ MILLION
VERY POOR FAMILIES THROUGHOUT THE COUNTRY.
 IN DECEMBER THE MONTHLY ALLOCATIONS UNDER THE
SCHEME WAS INCREASED FROM 10 KILOGRAMS TO 20
KILOGRAMS PER FAMILY COVERING 17 MILLION POOR
FAMILIES


IMPROVING PURCHASING POWER

 TO IMPROVE PURCHASING POWER IN RURAL AND
URBAN AREAS, THE GOVERNMENT HAD SET UP
PUBLIC WORKS PROJECTS THROUGHOUT THE
COUNTRY TO BOOST INCOMES OF THE POOR FOR
THE UNEMPLOYED AND THE UNDEREMPLOYED.
 TO SUPPLEMENT THESE EFFORTS, CASH‐FOR‐WORK
PROGRAMS ARE BEING IMPLEMENTED IN
DROUGHT‐STRICKEN AREAS OF THE COUNTRY.


SOCIAL SERVICES

 PRESERVING ACCESS TO CRITICAL SOCIAL SERVICES
FOR THE POOR CONSTITUTED AN IMPORTANT
ASPECT OF THE SOCIAL SAFETY NET.
 IN WHAT WAS CONSIDERED BY THE WORLD BANK
AS THE MOST SUCCESSFUL INTERVENTION, AMONG
THE SOCIAL SAFETY NETS HAD BEEN THE
SCHOLARSHIP AND GRANT PROGRAM DESIGNED TO
MAINTAIN ENROLMENTS AND QUALITY OF
SCHOOLING AT PRE‐CRISIS LEVEL AND THE
INTENSIFIED HEALTH CARE SERVICES.


EDUCATION

 AMONG THE IMMEDIATE IMPACT OF THE ASIAN CRISIS WAS
AN INCREASE IN DROP OUT RATES ESPECIALLY AMONG THE
SCHOOL AGED GIRLS FROM POOR RURAL AREA, POTENTIALLY
TRANSMITTING POVERTY TO NEXT GENERATION.
 IN 1998, THE FIRST PRO‐POOR TARGETED SSN ON
EDUCATIONAL WAS INTRODUCED TOGETHER WITH THE SSNON
HEALTH.
 THE SSN COMPOSED OF TWO PARTS: SCHOLARSHIP AND
SCHOOL SUBSIDY PROGRAM.
 BY FEBRUARY 1999, 5 PERCENT OF CHILDREN AGES 10 TO 18
(APPROXIMATELY 2.1 MILLION CHILDREN) HAD RECEIVED A
SCHOLARSHIP (SPARROW, 2006).

 FROM 1999‐2002 DATA, SPARROW FOUND THAT
PARTICIPATION IN THE SCHOLARSHIPS INCREASED THE
PROBABLY OF ATTENDING SCHOOL IN THE PREVIOUS WEEK
FOR 1.5 PERCENTAGE POINTS HIGHER THAN THE NON‐
PARTICIPANTS.
 AT THE SAME TIME, THE SCHOLARSHIPS REDUCED THE
INCIDENCE OF CHILD TO WORK FROM 14.0% TO 10.2%. THE
EFFECT ON LABOR WAS HIGHER FOR STUDENTS FROM POOR
HOUSEHOLDS IN RURAL AREAS, AND FOR THE BOYS.
 THE CASH TRANSFER THROUGH THE SCHOLARSHIPS HAD
HELPED THE POOR HOUSEHOLDS, TO CERTAIN EXTENT, TO
PROTECT THEIR CHILDREN ENROLMENT IN ELEMENTARY AND
JUNIOR HIGH SCHOOL AND AT THE SAME TIME PREVENT
PREMATURE ENTRANCE TO LABOR MARKET.

 THE PROGRAM EXTENDED TO THE POOREST 6 PERCENT
OF STUDENTS ENROLLED IN PRIMARY SCHOOLS, 17
PERCENT IN JUNIOR SECONDARY AND 10 PERCENT IN
SENIOR SECONDARY SCHOOLS.
 IT ALSO PROVIDED GRANTS TO THE 60 PERCENT OF THE
POOREST IN EACH CATEGORY (SEE WORLD BANK, 1999).
 THE PROGRAM HAD REACHED 4 MILLION STUDENTS.


HEALTH

 IN HEALTH SERVICES, THE PRIORITY WAS GIVEN TO THE
POOR TO HAVE ACCESS TO BASIC HEALTH SERVICES AND
ESSENTIAL MEDICINES, AND PREVENTED
MALNUTRITION AND MICRONUTRIENT DEFICIENCIES.
 THE GOVERNMENT MADE AVAILABLE SUPPLEMENTARY
FOOD FOR YOUNG CHILDREN THROUGH THE SCHOOL
SYSTEM AND PREGNANT AND LACTATING WOMEN IN
POOR VILLAGES. THIS PROGRAM HAD REACHED 8.1
MILLION PUPILS IN 52.5 THOUSAND SCHOOLS
NATIONWIDE.


 AMONG THE FIRST SOCIAL HEALTH PROGRAM TARGETED TO
POOR HOUSEHOLDS WAS STARTED IN 1994 WITH THE
PROGRAM HEALTH CARD (KARTU SEHAT) AND FULLY
NSTITUTIONALIZED IN 1998 THROUGH HEALTH SOCIAL
SAFETY NET (JARING PENGAMAN SOSIAL JPS ‐ KESEHATAN).
 IT WAS FUNDED BY ASIAN DEVELOPMENT BANK AND RUN
FROM 1998 TO 2001.
 THE SSN WAS LATER REPLACED BY A FUEL PRICE
COMPENSATION SCHEME WHICH USED THE SSN PROGRAM
MANAGEMENT (PKPS‐BBM 2001‐2005).


 IN SSN SCHEME, ELIGIBLE HOUSEHOLD CAN APPLY
FOR A HEALTH CARD (KARTU SEHAT) WHICH CAN BE
USED TO WAIVE MEDICAL EXPENSES FOR OUTPATIENT
AND INPATIENT CARE AT SUB‐DISTRICT HEALTH
CENTERS AND THIRD CLASS PUBLIC HOSPITAL WARDS.
 BY FEBRUARY 1999, 11 PERCENT OF INDONESIANS OR
APPROXIMATELY 22 MILLION PEOPLE LIVED IN A
HOUSEHOLD WITH A HEALTH CARD.


MAJOR POST‐CRISIS POVERTY REDUCTION
PROGRAMS

 SINCE THE ASIAN ECONOMIC CRISIS IN 1997‐98, EFFORTS ON
PROTECTING THE POOR THROUGH TARGETED SOCIAL SAFETY
NET ON HEALTH, EDUCATION AND RICE CONSUMPTION AS
WELL AS THE NEWLY INTRODUCED COMMUNITY
EMPOWERMENT PROGRAMS AND MICRO‐ENTERPRISE
EMPOWERMENT PROGRAMS HAVE SIGNIFIED INDONESIA'S
DEVELOPMENT POLICY AGENDA.


 FROM 1998 TO 2010, THE GOVERNMENT HAS SHIFTED ITS
DEVELOPMENT AGENDA, NOT ONLY RELYING HEAVILY ON
ECONOMIC GROWTH BUT ALSO CREATING POVERTY
REDUCTION EFFORTS TO ENSURE THE ACHIEVEMENT OF
DEVELOPMENT GOALS.
 SSN, THAT WAS COMMENCED AS AN EFFORT TO MITIGATE
THE IMPACT OF FINANCIAL CRISIS THAT SEVERELY HIT THE
POOR A DECADE AGO, HAS NOW EVOLVED INTO WIDER
POVERTY REDUCTION EFFORTS. TODAY, POVERTY
REDUCTION HAS BECOME ONE SPECIFIC OBJECTIVE THAT
IS FORMALLY STATED IN THE NATIONAL DEVELOPMENT
PLANNING DOCUMENTS.


 IN POST‐CRISIS ERA, WHAT WAS STARTED AS A RESPONSE TO
THE ASIAN ECONOMIC CRISIS THAT SWEPT THE COUNTRY A
DECADE AGO, A SET OF SOCIAL SAFETY NET (JARING
PENGAMAN SOSIAL, JPS) PROGRAMS HAVE NOW BECOME
INSTITUTIONALIZED IN THE POVERTY REDUCTION
PROGRAMS IN INDONESIA.
 FROM THE ONSET OF THE CRISIS, THE GOVERNMENT
EMPLOYED A SOCIAL PROTECTION SYSTEM THAT WAS A
MIXTURE OF UNIVERSAL SUBSIDIES AND TARGETED SAFETY
NET PROGRAMS.
 THE AIM OF THIS INITIATIVE IS TO PREVENT THE CHRONIC
POOR FROM FALLING MORE DEEPLY INTO POVERTY AND
REDUCING THE EXPOSURE OF VULNERABLE HOUSEHOLDS TO
RISKS.

 IN THE FOLLOWING YEARS, SUCCESSIVE
ADMINISTRATIONS HAS TAKEN A POLITICALLY
DIFFICULT BUT ECONOMICALLY RATIONAL AND PRO‐
POOR STEP IN ALLOCATING RESOURCES MORE
EFFECTIVELY IN SECTORS THAT MATTER TO THE
SOCIAL WELFARE.


 THE LATEST DEVELOPMENT, ON FEBRUARY 2010
THE GOVERNMENT ISSUED THE PERPRES NO. 15/2010AB
OUT POVERTY REDUCTION ACCELERATION. BASED
ON THIS PERPRES, THE POVERTY REDUCTION BODY CHANGE
ITS NAME BECOMES THE NATIONAL TEAM FOR POVERTY
REDUCTION ACCELERATION (TNP2K).
 TNP2K HAS THREE MAIN TASKS, I.E. FORMULATE THE
POVERTY REDUCTION POLICY AND PROGRAM, MAKE THE
POVERTY REDUCTION ACTIVITIES MORE SYNERGIC BETWEEN
MINISTRIES AND INSTITUTIONS, AND PERFORM THE
MONITORING AND EVALUATION FUNCTION.
 THIS NEW REGULATION ALSO HIGHLIGHTS A CHANGE IN
ORGANIZATION AS THE VICE PRESIDENT WAS DESIGNATED
TO LEAD THIS TEAM.


NATIONAL TEAM FOR POVERTY REDUCTION ACCELERATION

The Organization Chart based on Perpres No. 15/2010

DEVELOPMENT STRATEGY
(Four‐Track Strategy)
• Pro‐Growth: Strategy to increase and accelerate economic growth through promoting
investment, exports, and businesses including the improvement of investment
climate.
• Pro‐Job: Strategy to create employment opportunities including the establishment of
a flexible labor market and creation of conducive industrial relations.
• Pro‐Poor: Strategy to reduce poverty and to revitalize agriculture sector, forestry,
maritime, rural economy. In the medium and long‐term period the poverty alleviation
strategy is also aimed at increasing the participation (including the capacity and
quality of the people at community level) to local development and providing access
for the poor to basic services including education, health, sanitation/clean water, as
well as rural infrastructure.
• Pro‐Environment: Strategy to protect and maintain the environment through
sustainable development. Resources are optimally used while preserving the
environment to meet present human needs and generations to come.


SOCIAL PROTECTION IN INDONESIA

Social Welfare Development (Indicators)

Improvement on
Social Welfare
• Growth: 6,3‐6,8%
• Inflation: 4‐6%
• Open Unemply : 5‐6% (2014)
• Poverty Rate: 8‐10% (2014)

Pro Poor Pro Job
• Social development • Decent work
• Cluster 1,2, dan 3 • Social Security
Programs (Social • Labor Competency
Assistance Programs) Pro Growth • Migrant Workers
• Social Protection
• Macro strategy
• Sector strategy
• Micro strategy (SME)


DEVELOPMENT STRATEGY ON SOCIAL WELFARE
• Fiscal and Moneter
Policy Job
• Accelerate Opportunity
infrastructure Creation
development (PRO‐JOB)
• Improvement of
Investment climate
• Policy on Energy Growth &
Social  Welfare
sector Economics
• Policy on small and stabilization Improvement
medium enterprises (PRO‐POOR (GROWTH with
• Policy  on Industrial GROWTH) EQUITY)
sector
• Policy on Trade
Poverty
• Price stabilization
basic needs Reduction
• National Social
(PRO‐POOR)
Security System

Family Based Small and Medium
Community
Social Enterprises
Empowerment
Assistance Empowerment
Programs
Programs Programs

Conditional Cash Transfer (Program Keluarga Harapan/PKH), PNPM Mandiri Credits for the poor, Access to
Subsidized Rice for Poor Families (RASKIN), Scholarship for Core and productive  Resources, Training
student from poor family, Health assistance Support
64

POVERTY ALLEVIATION STRATEGY
Quality growth (pro‐poor and pro‐job),
Inflation control, Price stabilization for
basic needs, Subsidy policy, Social Availability of Health
assistance services, Education, Clean
Empowerment of poor
water, Legal protection,
community, Improvement
and other types of
of community
infrastructure
participation
Improvement in
Purchasing Power

Productivity/ Improvement in
Capacity Access to Basic
Reduction in the
Improvement Services
Number of Poor and
Poverty Rate

Market information
availability, Access to
Family Planning productive resources
programs (capital, credit),
Improvement in Empowerment of micro
Population Control
Access to Market & small scale enterprises


FOUR CLUSTERS PRO‐PEOPLE PROGRAM

MACRO‐ECONOMIC POLICY
1ST CLUSTER 2nd CLUSTER 3rd CLUSTER
NEAR
POOR
1. RICE SUBSIDY, 1. Block grants for • Improved Welfare
1. Micro credits
2. CASH 6,408 sub‐districts • Expansion and
provision (< Rp 5
TRANSFERS, (rural, urban, dis‐
million) through
POOR
3. HEALTH advantaged regions,
banks,
Increasing
INSURANCE, regional & village
4. SCHOLARSHIPS infrastructures) 2. Other types of Employment
2. PNPM Mandiri financial assistance Opportunities
VERY
POOR

NEAR
4th CLUSTER
POOR 1. VERY CHEAP HOUSE PROGRAM
2. CHEAP PUBLIC TRANSPORT VEHICLE PROGRAM Poverty
3. CLEAN WATER PROGRAM FOR PEOPLE Reduction
POOR *) 4. CHEAP & SAVE ELECTRICITY PROGRAM
5. Fishermen's Life Improvement Program*)
6. Urban Poor Community Life Improvement Program*)
VERY
POOR *)
*) Fishermen's Life Improvement Program and Urban Poor Community Life Improvement Program are targeted for
60% poorest

Clusters of Poverty Alleviation Programs

3rd CLUSTER
[Assist to have fish‐rod & boat]
2nd CLUSTER
[Facilitate with fish rod] Micro‐ & Small‐scale Enterprise
1ST CLUSTER Empowerment
[Provide fish] Community
Empowerment Programs Micro credits provision (< Rp
Assistance & 5 million) through banks, &
Social Protection Programs Block grants for 6,408 sub‐ other types of financial
Target: 17.5 mil. poor HH: districts (rural, urban, dis‐ assistance
advantaged regions, regional &
rice subsidy, cash transfers, village infrastructures) PNPM
health insurance, & Mandiri
scholarships Target: SMEs
Target: poor communities of
subdistricts
Target: the poorest, poor & 4th Cluster
near poor Households
6 Pro‐Poor Programs
and 3 additional
programs


SOCIAL PROTECTION AND ASSISTANCE PROGRAMS
(CLUSTER I)

 GOVERNMENT SOCIAL ASSISTANCE IN PROTECTING RICE
CONSUMPTION, EDUCATION AND HEALTH OF POOR
HOUSEHOLDS.
 THERE ARE FIVE PROGRAMS I.E. RASKIN SUBSIDIZED RICE,
SOCIAL HEALTH INSURANCE (JAMKESMAS), POOR
STUDENT SCHOLARSHIP (BKM/BSM) , SCHOOL
OPERATIONAL SUPPORT FUND (BOS), CONDITIONAL CASH
TRANSFER FOR HOUSEHOLDS (PKH).


 IN ADDITION TO THESE FIVE PROGRAMS, THE PNPM
GENERASI CONDITIONAL CASH TRANSFER FOR COMMUNITY
IS INCLUDED SINCE, ALTHOUGH IT IS CATEGORIZED AS PART
OF CLUSTER 2 ON COMMUNITY EMPOWERMENT, IN
PRACTICE IT PROVIDED DIRECT PROVISION OF TRANSPORT
INCENTIVES, BOOKS, UMBRELLAS, AND SHOES FOR POOR
STUDENTS AS WELL AS TRANSPORT INCENTIVES FOR
PREGNANT‐MOTHER TO VISIT THE MIDWIVES AT POSYANDU
(FEBRIANY, TOYAMAH AND SODO, 2010).


CURRENT GOVERNMENT SCHEME ON PROTECTING RICE
CONSUMPTION, EDUCATION, AND HEALTH OF POOR HOUSEHOLDS


COMMUNITY EMPOWERMENT (CLUSTER 2)

 THE GOVERNMENT DECIDES TO INTEGRATE
EMPOWERMENT PROGRAMS SCATTERED IN DIFFERENT
MINISTRIES AND INSTITUTIONS UNDER THE UMBRELLA OF
THE PROGRAM NASIONAL PEMBERDAYAAN MASRYARAKAT
(PNPM) , A NATIONAL PROGRAM FOR COMMUNITY
EMPOWERMENT (NPCE) IN POOR DISTRICTS AND SUB‐
DISTRICTS.


 PREVIOUSLY THE IMPLEMENTATION OF SUCH PROGRAMS
HAD RESULTED IN INEFFICIENCY AND INEFFECTIVENESS,
THERE IS AN OVERLAPPING PROGRAMS IN VARIOUS
SECTOR IN DIFFERENT REGIONS AS WELL AS EXCLUDED
PROGRAMS IN OTHER SECTORS AND OTHER REGIONS.
 IN 2006 A NEW POLICY WAS LAUNCHED TO ACCELERATE
THE POVERTY ALLEVIATION EFFORTS AND TO EXTEND
EMPLOYMENT OPPORTUNITIES FOR THE POOR BY
CONSOLIDATING VARIOUS EMPOWERMENT PROGRAMS
UNDER THE PNPM (NPCE).


 AS MENTIONED, THE COMMUNITY EMPOWERMENT
PROGRAM IS NOT A NEW APPROACH IN THE DEVELOPMENT
APPROACH IN INDONESIA. THERE WERE INPRES DESA
TERTINGGAL (IDT) AND VILLAGE INFRASTRUCTURES
PROGRAM (P3DT) BEFORE CRISIS.
 AFTER THE CRISIS, THIS KIND OF EMPOWERMENT PROGRAM
HAS EXTENDED INTO VARIOUS PROGRAMS, SUCH AS
EMPOWERMENT OF THE REGIONS TO OVERCOME THE
IMPACT OF THE ECONOMIC CRISIS (PDM‐DKE), KECAMATAN
DEVELOPMENT PROGRAM (PPK), URBAN POVERTY
PROGRAM (P2KP), FARMER AND FISHER'S INCREASING
INCOME PROJECT (P4K), AND ECONOMIC EMPOWERMENT
FOR COASTAL COMMUNITY (PEMP).


 THE PNPM ITSELF ADOPTS THE SCHEME AND
MECHANISM OF THE PPK. THE PPK ACTUALLY IS
INITIATED BEFORE THE CRISIS AS A REVISION FROM IDT
AND P3DT. THE FIRST PHASE OF PPK (PPK I) STARTED IN
FINANCIAL YEAR 1998/1999 UNTIL 2002, PPK II HAD
BEEN IMPLEMENTED IN THE PERIOD 2003‐2006, WHILE
PPK III HAD BEEN EMPLOYED IN 2006‐2007.


 COMMUNITY EMPOWERMENT AIMS AT CREATING AND
ENHANCING COMMUNITY CAPACITY TO EFFECTIVELY
OVERCOME VARIOUS DEVELOPMENT PROBLEMS
FACED BY THE COMMUNITIES.


COMMUNITY EMPOWERMENT
A BASE FOR NATION BUILDING
Building community capacity
as social capital

Providing economic capital Enhancing social
through community block entrepreneurship at community
grants level through facilitators/
community leaders


POVERTY REDUCTION THROUGH COMMUNITY
EMPOWERMENT
RESPONSIVE GOVERNMENT/EMPOWERED
COMMUNITIES
 Strengthening bottom‐up planning and budgeting;
 Improving local government representation and
responsiveness;
 Improving social service delivery to the poor;
 Pro‐poor planning and budgeting

Market linkages Social Protection
 Non-bank and  Women’s participation
microfinance  Justice for the poor
 SADI (smallholder dvpt)  Helping marginal groups
 Information technology  Budget transparency
 Renewable energy BLOCK GRANT  Community trust funds
TRANSFER TO  Sustainability
THE POOR


MAIN ACTIVITIES
 TRAIN THE COMMUNITIES IN IDENTIFICATION, ANALYSIS AND
DECISION MAKING PROCESS TO TACKLE THEIR POVERTY
PROBLEMS
 CREATE/EXPAND SMALL SCALE INFRASTRUCTURES AND
COMMUNITY ECONOMIC PRODUCTIVITIES.
 INCREASE COMMUNITY CAPABILITY AND SELF‐HELP TO
ACHIEVE BETTER STANDARD OF LIVING


EMPOWERMENT PROCESS


WHY NPCE?

 THERE HAVE BEEN DIFFERENT KINDS OF POVERTY
ERADICATION ACTIVITIES WITHIN
MINISTRIES/INSTITUTIONS CREATING INEFFICIENCY AND
OVERLAPPING ACTIVITIES, MECHANISMS, COMMUNITY'S
INSTITUTIONS NEED HARMONIZATION.
 IMPERFECT MARKET, ESPECIALLY IN MEETING PEOPLE’S
NEEDS IN REMOTE AND ISOLATED AREAS.
 DIFFICULTIES TO REACH THE POOR.


HOW IT WORKS?
PNCE‐SECTORAL PROGRAMS
• CONSIST OF SECTORAL
EMPOWERMENT PROGRAMS
• COMPONENTS:
• SECTORAL BLOCK GRANTS (RURAL
ROADS, IRRIGATION, ETC)
• EXTENSION SERVICES

PNCE‐CORE PROGRAMS (IN 2008)
• CONSIST OF:
• KDP: RURAL‐BASED COMMUNITY
EMPOWERMENT
• UPP: URBAN‐BASED COMMUNITY
EMPOWERMENT
• RISE: FAST‐GROWTH AREAS
COMMUNITY EMPOWERMENT
• COMPONENTS:
• COMMUNITY BLOCK GRANTS
• FACILITATION, TECHNICAL
ASSISTANCE, TRAINING, LOCAL
GOVERNMENT CAPACITY


PREVIOUS CONDITION
PROGRAM PROGRAM PROGRAM PROGRAM
PROGRAM
PROGRAM OVERNUMBER IN
MANAGEMENT
MANAGEMENT MEDIATORS
STRUCTURE
STRUCTURE

FIELD COORDINATION

?
MISDELIVERED
PROGRAM

??
FIELD COORDINATION
OVERLAPPING
WITH OTHER ??
PROGRAMS ?? ??

IGNORED


UNDER NPCE
Program
Program Program

Program
Program
The aid is directly delivered
to the hand of community
so that they could receive
bigger and integrated aid

All empowering supports
rest under and managed by
“participative community
body” which is formed by
public itself, in each village
All programs
run similar
norms/criter
ia, standard,
process,
procedure
and
Community through guidance
empowering groups conduct Data collection and targeting
NPCE, supported by Sectoral on the poor accurately
Empowering Packages (BLM,
facilitator, training etc)


MICRO‐ENTERPRISE EMPOWERMENT (CLUSTER 3)

 THIS CLUSTER IS INTENDED TO EMPOWER THE POOR AND
NEAR POOR WHO HAS AN OCCUPATION OR BUSINESS TO
FULFILL THEIR BASIC NEEDS BUT THEY STILL NEED TO
IMPROVE THE WELLBEING.
 ALBEIT THE ROLE OF MICRO‐ENTERPRISE IN ERADICATING
POVERTY HAS BEEN WIDELY KNOWN SINCE FEW DECADES
AGO, THE CRISIS 1997/1998 SHOWED HOW SIGNIFICANT THE
EXISTENCE OF MICRO‐ENTERPRISE HELPS THE POOR TO GET
SURVIVED AND RECOVERED FROM THE CRISIS.
 IT IS ALSO BEEN KNOWN THAT MOST POOR WORK IN
INFORMAL SECTOR CONSISTS OF SMALL SCALE AND MICRO‐
ENTERPRISE THAT PRODUCING OR DISTRIBUTING GOODS
AND SERVICES.


 THESE ENTERPRISES ARE GENERALLY INDEPENDENT, LARGELY
FAMILY OWNED, EMPLOY LOW LEVELS OF SKILLS AND
TECHNOLOGY, AND ARE HIGHLY LABOR INTENSIVE. INDEED,
MICRO‐ENTERPRISES PROVIDE INCOME AND EMPLOYMENT FOR
SIGNIFICANT PROPORTIONS OF WORKERS IN RURAL AND URBAN
AREAS (HARVIE, 2003).
 FOR INDONESIA, MICRO‐ENTERPRISES NOW HAS REACHED 43
MILLION UNITS AND SHARED MORE THAN 50% OF NATIONAL GDP.
 THE DATA ALSO SHOWS THAT ONE UNIT
MICRO‐ENTERPRISE CAN ABSORB ON AVERAGE 1‐5 WORKERS
(TKPK, 2009).


 HARVIE (2003) ALSO POINTS OUT THAT MICRO‐ENTERPRISE
DEVELOPMENT‐COMPLEMENTED WITH PROPER MICRO‐FINANCE
SUPPORT‐CAN PLAY PART IN THE ACHIEVEMENT OF MAIN SOCIAL
AND ECONOMIC DEVELOPMENT OBJECTIVES, NAMELY POVERTY
REDUCTION, WOMEN EMPOWERMENT, EMPLOYMENT CREATION,
AND PRIVATE SECTOR ENTERPRISE DEVELOPMENT.
 THOUGH THESE FOUR OBJECTIVES CANNOT BE FULLY SEPARATED,
WE WILL FOCUS ON THE ROLE OF MICRO‐ENTERPRISE
EMPOWERMENT TO REACH THE OBJECTIVES ON POVERTY
ALLEVIATION.


 THE PROGRAM OBJECTIVE IS TO INCREASE ACCESS OF
THE POOR TO A CHEAP CAPITAL. FURTHERMORE, THE
SNPK HAS ALSO ELABORATED THE RELATIONSHIP
BETWEEN MICRO‐ENTERPRISES, MICRO FINANCE, AND
MICRO CREDIT IN THE AGENDA OF POVERTY
ALLEVIATION.
 THIS PROGRAM IS A CONTINUATION AND INTEGRATION
OF VARIOUS MICRO‐CREDIT PROGRAMS INITIATED BY
PREVIOUS GOVERNMENT.


MICRO CREDIT (KUR) SCHEME
CLUSTER 3

Source: TKPK, 2009

 THE GOVERNMENT PROVIDES A SUBSIDIZED GUARANTEE
SCHEME AT AMOUNT 70% IN WHICH THE GOVERNMENT
PAYS THE PREMIUM.
 THE TARGET OF THIS MICROCREDIT PROGRAM IS THE
MICRO‐ENTERPRISES AND COOPERATIVES WHICH HAVE
FEASIBLE BUSINESS BUT ARE NOT BANKABLE BECAUSE OF
LACK OF COLLATERAL.
 MOREOVER, THIS MICROCREDIT ALSO PROVIDES ACCESS TO
COMMUNITY GROUPS WHICH HAVE BEEN EMPOWERED IN
THE PREVIOUS PROGRAM.


TARGET AND REALIZATION
2007‐ DECEMBER 2011

29.003
26.474
(Rp Billion) 22.236
24.404

20.459
20.000
20.000
18.000 17.229 17.467
18.300
16.000 14.578 16.600
14.000 15.000
12.000 11.475 11.216 13.300

10.000 8.771
11.600
10.000
8.000
6.469
8.300
6.000 4.733
3.828 6.600
4.000
1.856 5.000
2.000 982
3.400
0 1.600
2007 2008 2009 2010 Jan-11 Feb-11 Mar-11 Apr-11 Mei-11 Jun-11 Jul-11 Agust-11 Sep-11 Okt-11 Nop-11 Des-11

Realisasi
Realized Target
Source: Office of the Economic Coordinating Minister

SOCIAL PROTECTION COVERAGE

Social Security Social Assistance
Q5

•Pension.
Cluster 3
Q4 • Credit
•Old Age Security. Facility to
SMEs
•Health. Cluster 2
• Skill
training for
Q3 Indonesia’s
•Work Injury. Cluster 1 National migrant
Program on Worker
• Scholarship.
Community • Other
Q2
•Death. • Subsidized Rice.
Empowerment
• CCT.* Schemes
• Social Health Assistance (PNPM)
• UCT (if needed)
• Disabled.
• Neglected Children.
Q1
• Neglected Seniors.*

* Pilot for the poorest households


Clusters of Poverty Alleviation Programs
Fourth Cluster
The fourth cluster is planned to start in 2012
(complement to the three clusters)

4th CLUSTER
Access for the poor to buy very low price
‘basic needs’
‐ subsidized by government ‐

EXAMPLES:
• Housing
• Clean water services
• Electricity
• Vehicle for public transportation

Three Clusters Poverty Alleviation and Social
Welfare Improvement


GOALS: ALIGNMENT OF KEY GOVERNMENT
PRIORITIES WITH MDGs
INDICATORS/TARGET (%) 2002 2009 MDGs 2015
ACTUAL TARGETS TARGETS

Poverty
Population below US$ 1 a day 7.2 10.3
Poverty head‐count ratio 18.2 8.2 7.5
Health
Under 5 mortality rate (per 1,000 live births) 60 26 33
Maternal mortality ratio (per 100,000 live births) 307 226 105
Education
Net enrollment rate in primary education 92.7 99.6 100
Gross and net enrollment rate at junior level 79.7 98 ‐
Literacy rate of 15‐24 y.o 98.7 100
Water & Sanitation
% of population that has access to improved water 78 80
Rural Development
Agricultural sector growth 35


POVERTY


POOR ↔ NON POOR MOVEMENT

POVERTY STATUS UNIT POVERTY STATUS 2009
POOR NON‐POOR
POOR % 45.6 54.4
NON‐POOR % 7.6 92.4

POVERTY STATUS UNIT POVERTY STATUS 2010
POOR NON‐POOR
POOR % 46.4 53.6
NON‐POOR % 7.3 92.7


IMPORTANT NOTE:
 NON‐INCOME POVERTY IS A MORE SERIOUS PROBLEM THAN
INCOME POVERTY. WHEN ONE ACKNOWLEDGES ALL
DIMENSIONS OF HUMAN WELL‐BEING—ADEQUATE
CONSUMPTION, REDUCED VULNERABILITY, EDUCATION, HEALTH
AND ACCESS TO BASIC INFRASTRUCTURE—THEN ALMOST HALF
OF ALL INDONESIANS WOULD BE CONSIDERED TO HAVE
EXPERIENCED AT LEAST ONE TYPE OF POVERTY.


POVERTY INCIDENCES USING DIFFERENT
MEASUREMENT (%)


THE EVER PRESENT PROBLEM OF INEQUALITY

 WHILE, AS MENTIONED ABOVE INDONESIA’S
DEVELOPMENT HAD A WIDESPREAD EFFECT ON THE
POPULATION IN GENERAL AS INDICATED BY DECLINING
POVERTY INCIDENCES AND VARIOUS SOCIAL
INDICATORS, THERE WAS GROWING AWARENESS OF THE
WIDENING GAP BETWEEN INCOME GROUPS, BETWEEN
REGIONS, AND BETWEEN ETHNICS.


 AT THE HEIGHT OF THE PRAISE FOR THE NEW ORDER
ACHIEVEMENT, MANY INDONESIAN SCHOLARS AND
CRITICS NOTED THE LACK OF DISTRIBUTIVE JUSTICE AS ONE
OF THE MAJOR CRITICISM OF THE NEW ORDER.
 THEY ARGUED THAT THE INDONESIAN ECONOMIC SUCCESS
HAD BENEFITED THE URBAN AND INDUSTRIAL SECTOR
WHILE (RELATIVELY) MARGINALIZING THE RURAL AND
TRADITIONAL SECTORS.


 DESPITE THE LIBERALIZATION MEASURES UNDERTAKEN IN
RESPONSE TO THE WAVE OF GLOBALIZATION IN THE MID‐
1980S, CONTROL OF THE ECONOMY CONTINUED TO BE
DIRECT, THROUGH MONOPOLIES IN KEY INDUSTRIES
(ENERGY, PAPER, STEEL, COMMODITIES, TRANSPORT AND
COMMUNICATIONS), OR THROUGH THE CREDIT‐
ALLOCATION POWERS OF FINANCIAL AGENCIES THAT WERE
CONTROLLED BY OR PREJUDICED IN FAVOR OF PRIVILEGED
AND POLITICALLY CONNECTED BUSINESS GROUPS.


 PRIVATIZATION IN THE 1980s OFTEN MEANT THE TRANSFER
OF INDUSTRIES FROM DIRECT STATE MONOPOLY TO HANDS
THAT WERE ONLY NOMINALLY PRIVATE BUT REALLY HIGHLY
DIVERSIFIED CONGLOMERATES WHO ENJOYED
PROTECTION FROM OPEN COMPETITION AND
GUARANTEED ACCESS TO STATE FUNDS AND FACILITIES.


 AT THE HEIGHT OF THE PRAISE FOR THE NEW ORDER
ACHIEVEMENT, A SCHOLAR (PABOTINGGI) NOTED THE
LACK OF DISTRIBUTIVE JUSTICE AS ONE OF THE MAJOR
CRITICISM OF THE NEW ORDER. HE ARGUED THAT THE
INDONESIAN ECONOMIC SUCCESS HAD BENEFITED THE
URBAN AND INDUSTRIAL SECTOR WHILE (RELATIVELY)
MARGINALIZING THE RURAL AND TRADITIONAL
SECTORS.


 HE ALSO BELIEVED THAT THE STATE OF THE INDONESIAN
ECONOMY WAS FAR FROM BRIGHT. RAMPANT
MONOPOLY, OLIGOPOLY, AND NEPOTISM INCREASED
INEFFICIENCY AND HOBBLE THE ECONOMY. IN
PARTICULAR, REPRESENTING MANY VIEWS AMONG
OBSERVERS OF INDONESIAN AFFAIRS, HE SAW PROBLEM
IN THE DICHOTOMY BETWEEN THE INDIGENOUS AND
NON‐INDIGENOUS ECONOMIC PLAYERS.


 POLARIZATION OF THE INCOME DISTRIBUTION OCCURRED
IN INDONESIA AS THE ECONOMY GREW AND THAT THIS
CONTRIBUTED TO THE PERSISTENT FEELING IN INDONESIA
THAT THE MANY ECONOMIC REFORMS LED NOT TO AN
IMPROVEMENT IN GENERAL WELFARE, BUT ONLY AN
IMPROVEMENT IN THE WELFARE OF THE RICH.


 ANOTHER ARGUMENT RAISED AGAINST THE APPARENT
SUCCESS OF INDONESIA’S DEVELOPMENT STRATEGY TURNS
THE SPOTLIGHT ON THE ISSUE OF INCOME DISTRIBUTION.
SOME CRITICS OF THE ECONOMIC REFORMS ARGUED THAT
INCOME DISTRIBUTION WORSENED THROUGHOUT THE
PERIOD OF RAPID GROWTH.
 THERE IS IN FACT SOME EVIDENCE FOR THIS.


 THE GINI COEFFICIENT, CALCULATED FROM
EXPENDITURE DATA, SHOW THAT INCOME DISTRIBUTION
IMPROVED WITH THE GINI‐COEFFICIENT FALLING FROM
0.35 IN 1970 TO 0.32 IN 1990.
 BUT THEREAFTER THE DATA SUGGEST SOME
WORSENING IN THE DISTRIBUTION WITH THE GINI
COEFFICIENT RISING TO 0.34 IN 1993 AND TO 0.36 IN
1996, A RISE THAT OCCURRED IN BOTH RURAL AND
URBAN AREAS ALTHOUGH THE INCREASE IN THE RURAL
GINI‐COEFFICIENT WAS SMALL.


 HOWEVER, INDONESIA’S INCOME DISTRIBUTION
COMPARES FAVORABLY TO THAT FOUND IN
NEIGHBORING COUNTRIES.
 OVER THE PERIOD 1993‐98, THE GINI INDEX WAS 36.5
FOR INDONESIA, 41.3 FOR THAILAND, 46.2 FOR THE
PHILIPPINES AND 48.5 FOR MALAYSIA (WORLD BANK.
WORLD DEVELOPMENT INDICATORS 2000).


REGIONAL DISPARITY

 CENTRALIZED POWER AND UNEVEN DISTRIBUTION OF
WEALTH CREATED DISSATISFACTION AMONG PEOPLE IN
THE OUTLYING REGIONS. WITH ECONOMIC GROWTH AND
INDUSTRIALIZATION, JAVA AND SOME PROVINCES
PROGRESSED FASTER THAN THE REST OF THE REGIONS,
ESPECIALLY THE EASTERN PART THE COUNTRY.


 THESE PROVINCES, RICH IN NATURAL RESOURCES, WERE
RESENTFUL OF THE RETURNS THAT THEY RECEIVED FROM
THEIR REGIONS’ CONTRIBUTION TO THE NATIONAL
ECONOMY. THE WIDENING DISPARITY BETWEEN REGIONS
WAS ANOTHER SOURCE OF CRITICISM AGAINST THE NEW
ORDER.
 TO A SIGNIFICANT EXTENT THIS PROBLEM STILL PERSISTS
TODAY, AND IS ONE FACTOR DRIVING THE SOVEREIGNTY
CONFLICTS IN ACEH AND PAPUA.


ATTEMPTS AT EQUITABLE DEVELOPMENT

 DURING THE NEW ORDER PERIOD VARIOUS MEASURES WERE
UNDERTAKEN TO ADDRESS THE IMBALANCES.
 THROUGH VARIOUS SCHEMES: GRANTS, MICRO CREDIT IS,
SUBSIDIES, USING VARIOUS MECHANISMS THROUGH THE
BANKING SECTOR AND THROUGH  FISCAL  POLICIES, THERE
WERE ATTEMPTS TO RIGHT THE BALANCE.
 THE PRESIDENTIAL INSTRUCTION (INPRES) MECHANISM WAS
AMONG THE MOST EFFECTIVE MECHANISM PROVIDING
GRANTS TO THE REGIONS AS WELL AS TO SECTORS  SUCH
EDUCATION AND HEALTH AND TARGETED TO THE POOR SUCH
AS IDT.

 THOSE MEASURES WERE EFFECTIVE IN REDUCING POVERTY
BUT NOT SUFFICIENT IN OVERCOMING THE IMBALANCES.
 IN THE 1980’S THROUGH THE PROMOTION OF DOMESTIC
PRODUCTS CAMPAIGN, THE GOVERNMENT LAUNCHED
AFFIRMATIVE ACTION TO PROMOTE AND PROTECT LOCAL
PRODUCTS. IN PARTICULAR COMING FROM SMALL AND
MEDIUM INDUSTRIES (PRESIDENTIAL DECREE 10/1980).


 THE PROGRAM WAS EXPANDED TO GIVE ASSISTANCE TO THE
INDIGENOUS (PRIBUMI) BUSINESSMEN. THE RESULT WAS
VISIBLE, NOW MANY OF THOSE INDIGENOUS BUSINESSMEN
PROMOTED AT THAT TIME HAD RISEN TO BECOME BIG
BUSINESSMEN AND EVEN CONGLOMERATES.
 IN THE 1990’S THE INPRESES WERE ENLARGED BOTH IN
COVERAGE AND AMOUNT TO ASSIST THE REGIONS WITH
MORE GRANTS.
 BUT ALL THOSE EFFORTS WERE NOT SUFFICIENT TO ARREST
THE WIDENING GAP BETWEEN THE RICH AND THE POOR,
BOTH INCOME GROUPS AS WELL AS REGIONS.


 FOR THE COMMON PEOPLE, PEOPLE WHO ONLY HAVE
MEAGER INCOMES, PEOPLE IN THE RURAL AREAS AND IN
THE OUTER REGIONS ESPECIALLY IN THE EASTERN PART OF
INDONESIA, THERE IS THE PREVAILING SENSE OF INJUSTICE.
ONE OF THE CRITICISMS DIRECTED AT THE GOVERNMENT IS
THE WAY POVERTY IS MEASURED. INDONESIA'S POVERTY
LINE CORRESPONDS TO PURCHASING POWER PARITY (PPP)
US$ 1.25, WHILE THE WORLD BANK USES PPP US$ 2 AS THE
PROPERTY THRESHOLD.


 IF ONE APPLIES THE WORLD BANK STANDARDS TO
INDONESIA’S STATISTICS (US$2 PPP), THEN PEOPLE LIVING
UNDER POVERTY LINE WILL BE 23.78%. IT CORRESPONDS TO
51 MILLION PEOPLE IN 1993 PPP US$. IF ONE APPLIES 2005
PPP US$, IT WILL BE 49.91% OR 120 MILLION IN 2011.
 IN ITS 2006 REPORT, THE WORLD BANK UNDERLINES THAT
THE NUMBER OF PEOPLE LIVING BELOW US$2‐A‐DAY IN
INDONESIA COMES CLOSE TO EQUALING ALL THOSE LIVING
ON OR BELOW US$2‐A‐DAY IN ALL THE REST OF EAST ASIA
OUTSIDE CHINA.


 IF PEOPLE LIVING ABOVE INDONESIA'S POVERTY LINE BUT
BELLOW INTERNATIONAL (WORLD BANK) POVERTY LINE IS
CATEGORIZED TO BE NEAR POOR, THEN THERE ARE 11.42%
OR 27.3 MILLION NEAR‐POOR.
 THE DIFFERENCE BETWEEN THE POOR AND NEAR‐POOR IS
ACTUALLY ONLY IN STATISTICS. IN REAL LIFE THERE IS LITTLE
THAT DISTINGUISHES THE POOR AND THE NEAR‐POOR,
SUGGESTING THAT POVERTY REDUCTION STRATEGIES
SHOULD FOCUS ON EMPOWERING AND IMPROVING THE
WELFARE OF AT LEAST A QUARTER OF THE POPULATION
(STILL USING THE 1993 PPP US$ INSTEAD OF 2005).


 DISPARITY IS A REAL PROBLEM.
 FIRST BETWEEN RURAL AND URBAN AREA. 15.72% OF RURAL
POPULATION ARE POOR COMPARED TO 9.23% IN THE URBAN
AREA. MOST OF THE POOR PEOPLE IN THE RURAL AREAS
WORK IN AGRICULTURE. AND MANY WORK ON SMALL PLOTS
OF LAND OR AS LABOR FARMERS.
 REGIONALLY, THE HIGHEST POVERTY INCIDENCES ARE FOUND
IN EASTERN PART OF INDONESIA, NOTABLY PAPUA’S 32%,
WEST PAPUA’S 31.9%, MALUKU’S 23%, EAST
NUSATENGGARA’S 21.2%, AND WEST NUSATENGGARA’S
19.7%. ACEH, A RICH PROVINCE BUT RAVAGED BY YEARS OF
HOSTILITY, WAS SIXTH AT 19.6%.


 INDONESIA IS LOSING ITS INVESTMENT [DURING THE NEW
ORDER] ON IRRIGATION BECAUSE IRRIGATED LAND HAS
TURNED INTO CONCRETE OR ASPHALT. AND AS A RESULT, WE
ARE NOW AGAIN BECOMING THE BIGGEST RICE IMPORTER
AS WE WERE, BEFORE WE ATTAINED RICE SELF‐SUFFICIENCY
BACK IN THE1980’S.
 THE MEAGER LAND AVAILABLE FOR THE FARMERS TO TOIL IS
SHRINKING. AS IT IS NOW 17.17% OF FARMER HOUSEHOLDS
OWN LESS THAN 0.10 HA WHILE 39.24% OWN BETWEEN
0.10 TO 0.50 HA. THIS SITUATION CONTRIBUTES TO THE
ABJECT POVERTY OF FARMING FAMILIES. AGRARIAN REFORM
IS A MUST, AND URGENTLY NEEDED TO GET TO THE CORE OF
RURAL POVERTY.


 WITH ALL THOSE PROGRAMS INDONESIA'S BUDGETARY
ALLOCATIONS TO SOCIAL AND HUMAN DEVELOPMENT
PRIORITIES AS A PROPORTION OF GROSS DOMESTIC
PRODUCT (GDP) STILL REMAIN AMONG THE LOWEST IN
SOUTHEAST ASIA.
 OBVIOUSLY THE POLICY MAKERS FACE A CRITICAL
TRADE‐OFF BETWEEN BALANCING THE STATE BUDGET
AND MAKING NECESSARY SOCIAL INVESTMENTS
(SUMARTO, SURYAHADI, AND BAZZI, 2008).
 THERE IS INSUFFICIENT MEASURES TO CLOSE THE GAP
BETWEEN RICH AND POOR.

 THE SITUATION IS ILLUSTRATED BY A REPUTABLE
BUSINESS MAGAZINE, FORBES ASIA. IN ITS DECEMBER
2011 ISSUE, THE MAGAZINE PUBLISHED 40
WEALTHIEST PEOPLE IN INDONESIA.
 THE MINIMUM WEALTH TO GAIN ENTRY, MEANING
THE “POOREST” AMONG THE RICH, IS $630 MILLION.
 TOGETHER THEIR WEALTH IS $85 BILLION, AN
INCREASE OF 18% FROM LAST YEAR, COMPARE TO
INDONESIA’S GDP GROWTH WHICH WAS “ONLY” 6.5%.
AND $85 BILLION IS EQUAL TO 10% OF INDONESIA’S
GDP.


 THOSE ARE THE VERY FEW PEOPLE THAT GET THEIR
RICHES FROM INDONESIA’S LAND, MINERALS, TREES
AND PLANTATIONS, WATER, AND PEOPLE’S SAVINGS.
IN THE MEANTIME, INDONESIA HAS 57.2 MILLION
POOR AND NEAR‐POOR PEOPLE, AND TWICE THAT
NUMBER IF ONE APPLIES 2005 US$ PPP. MILLIONS OF
PEOPLE NEED TO HAVE SUBSIDY EVEN FOR THE VERY
BASIC NECESSITIES OF LIFE.


 IN STATISTICAL TERM, THE DISPARITY SHOWN BY THE
Q5/Q1 RATIO (THE HIGHEST/LOWEST QUINTILE RATIO)
WHICH ACCORDING TO OUR STATISTICAL BUREAU
[BPS] IN 2010 WAS 6.28, WHILE IN 2006 IT WAS 4.81
INDICATING THAT THE GAP IS WIDENING IN THE LAST
FIVE YEARS.


AVERAGE EXPENDITURES BY DECIL

Growing disparity: lower growth in lower income group


RISING GINI RATIO


UNEMPLOYMENT AND POVERTY

SOURCE: BPS


EMPLOYMENT 1988‐2011

7,24% 7,82%
6,50%
7,0 6,06% 6,10% 7%
5,78% 4,92% 5,50%
6.46% 4,78% 6,50%
4,70% 3,64%
4,0 4,30% 4%

1,0 0,79% 1%
Million

1988
1989
1990
1991
1992
1993
1994
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
‐2,0 ‐2%

‐5,0 ‐5%

‐8,0 ‐8%
Changes in labor force
Changes in employment
‐11,0 Economic growth
‐11%
‐13,13%
‐14,0 ‐14%

 BETWEEN 2002‐2005, NEW ENTRANTS TO THE LABOUR FORCE WAS LARGER THAN
EMPLOYMENT OPPORTUNITY.
 2006‐2010: EMPLOYMENT OPPORTUNITY WAS LARGER THAN NEW ENTRANTS TO THE
LABOUR FORCE, REDUCING UNEMPLOYMENT.
 IN 2011 THERE WAS AN INCREASE IN LABOUR FORCE OF 800 THOUSANDS, WHILE
EMPLOYMENT OPPORTUNITY ROSE BY1.46 MILLION.

RISE IN FORMAL EMPLOYMENT

80,00 80%
69,27%
70,00 66,93% 70%
62,17%

 2010‐2011, THERE WAS AN 60,00 60%
INCREASED IN FORMAL

MILIION OF WORKERS
50,00 50%

Jumlah pekerja
EMPLOYMENT BY 5.71

Persentase
37,83%

PERCENTAGE
MILLION, RISING FROM 40,00 33,07% 40%
30,73%
33.07% TO 37.83% 30,00 30%

 THE NUMBER OF INFORMAL 20,00 20%
WORKER DECLINED BY 4.24 10,00 10%
MILLION, OR FROM 66.93%
0,00 0%
TO 62.17%.
2005 2010 2011

Formal (dalam juta)
FORMAL (MILLION) Informal (dalam juta)
INFORMAL (MILLION)

% Formal % Informal

OPEN UNEMPLOYMENT AND UNDER‐EMPLOYMENT (2005 ‐ 2010)

2005 2010
OPEN EMPLOYMENT (NOT WORKING) 11,9 MILLION (11,2%) 8,3 MILLION (7.1%)

UNDER‐EMPLOYMENT (WORKING LESS THAN 35 HOURS/WEEK) 28,9 MILLION (30,8%) 33,3 MILLION (30.7%)

OPEN UNEMPLOYMENT AND UNDER
2001 ‐ 2010
UNDER‐EMPLOYMENT (MILLION)

11,9 33,3
33,5 12

OPEN EMPLOYMENT (MILLION)
10,9
32,2 31,6 11
10,3
9,9 10,0 31,1
30,9 30,4 10
9,4
9,1 9,0
29,6 28,9
29,2
28,9 29,1 9
8,3
8,0
28,3 27,7 27,9 8
27 7
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
UNDER‐EMPLOYMENT OPEN EMPLOYMENT


UNEMPLOYMENT BY AGE

3.500.000

AGE 15‐24 %
3.000.000 YEARS
2007 (Ø) 35
2.500.000 2008 (Ø) 29
31% 2009 (Ø) 28
2.000.000
29%
UNEMPLOYED

2010 (Ø) 29

15 ‐ 19
1.500.000
20 ‐ 24 Ø = AVERAGE FEBRUARY
25 ‐ 29 AND AUGUST
1.000.000 30 ‐ 34
35 ‐ 39
40 ‐ 44
500.000 45 ‐ 49
50 ‐ 54
55 +
‐
2007 2008 2009 2010 2011 *)

134

IMBALANCE ECONOMIC AND EMPLOYMENT STRUCTURE

ECONOMIC STRUCTURE EMPLOYMENT STRUCTURE
2010 February 2011
Services (10,19%) Agriculture (15,34%)
Social Services (15,30%)
Finance (7,21%)
Finance (1,85%)
Agriculture (38,17%)
Transportation (6,50%) Mining (11,15%) Transportation (5,02%)

Trading (13,72%) Trading (20,88%)
Mining (1,22%)
Manufacturing (24,82%) Construction (5,02%)
Construction(10,29%) Manufacturing (12,31%)
Electricity, gas, water (0,23%)
Electricity(0,78%)

Unemployed
7%

Others
Manufacturing/ 15%
Industry
6%

Agriculture
72%

135
POOR HOUSEHOLD

TRADABLES AND NON TRADABLES IN GDP 2001‐2010 (%)

10,00
8,96
9,00 8,55
8,19
7,81
8,00 7,43
7,13
7,00 6,30
6,02
6,00 5,28
4,89
5,00 3.81 3.85
3.86 3.85
4,00 3.51 3.23 3.72 3.47 3.05

3,00 6,35 6,01 6,10
2.64 5,69 5,50
4,50 4,78 5,03 4,58
2,00 3,64
1,00
0,00
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
PDB
GDP Sektor non tradable
Non Tradable Tradable tradable
Sektor
Sektor tradable: (1) Agriculture, Animal Husbandry, Forest and Fishery, (2) Mining (3) Manufacturing Industry.
Sektor non‐tradable: 1. Electricity, Gas, Clean Water, 2. Construction, Trading, Hotel, and Restaurant, 3.
Transportation and Communication, 4.Finance, Real Estate and Corporate Service, 5. Social Services.

REGIONAL DISPARITY

35
31.9 32.0

30
Jakarta = 3,75%, Papua =
25 31,98%, Indonesia = 23.0
21.2
20
12.49% 18.8
19.6 19.7
16.9 17.5
15.8 15.8 16.1
15 13.9 14.214.2 14.6
12.5 10.3 10.7
11.3

10 8.5 8.5 8.6 8.7 9.0 9.2
7.4
6.6 6.8
5.3 5.8 6.3
5 3.7 4.2

0

P.Barat
Keppri

Gorontalo

Papua
Sumut

Maluku
Jambi
Jakarta

Yogya
Sumbar

Sumsel
Babel

Kaltim

Aceh
Jatim

Sultra
Banten

NTT
Lampung
Sulut

Bengkulu
Malut
Kalbar
Kalteng

Jateng

NTB
Kalsel

Sulbar

Sulteng
Jabar
Bali

Sulsel
Riau

Poverty incidence by provice (2011)

WESTERN VS EASTERN INDONESIA

% RGDP 1980 1990 2000 2010

WI 80 84 83 82

EI 20 16 17 18

%
1980 1990 2000 2010
Population
WI 83 82 81 80

EI 17 18 19 20

Gini
2007 2008 2009 2010
Coefficient
WI 0.33 0.31 0.32 0.35

EI 0.34 0.33 0.34 0.38
Western Indonesia: Aceh, Sumut, Sumbar, Riau, Kepri, Jambi, Sumsel, Babel, Bengkulu, Lampung, DKI, Jabar, Banten,
Jateng, DIY, Jatim, Bali
Eastern Indonesia: Kalbar, Kalteng, Kalsel, Kaltim, Sulut, Gorontalo, Sulteng, Sulsel, Sultra, Sulbar, NTB, NTT, Maluku,
Malut, Papua, Papua Barat


 THE HUMAN DEVELOPMENT INDEX IS A SUMMARY
MEASURE OF HUMAN DEVELOPMENT. IT MEASURES
THE AVERAGE ACHIEVEMENTS IN A COUNTRY IN THREE
BASIC DIMENSIONS OF HUMAN DEVELOPMENT:
1. A LONG AND HEALTHY LIFE, AS MEASURED CY LIFE
EXPECTANCY AT BIRTH.
2. KNOWLEDGE, AS MEASURED BY THE ADULT (OVER 25)
POPULATION MEANS YEARS OF SCHOOLS AND EXPECTED
YEARS OF SCHOOLING.
3. A DECENT STANDARD OF LIVING, AS MEASURED BY GDP PER
CAPITA IN PURCHASING POWER PARITY (PPP) TERMS IN US
DOLLAR.


HDI ASEAN 2010

2010
COUNTRY
LEVEL INDEX
SINGAPORE 27 0.846
BRUNEI 37 0.805
MALAYSIA 57 0.774
THAILAND 92 0.654
PHILLIPINES 97 0.638
INDONESIA 108 0.600
VIET NAM 113 0.572
CAMBODIA 124 0.490
MYANMAR 132 0.451
169
In 2009 Indonesia’s HDI was 111
Source: HDR 2010: The Real Wealth of Nations (UNDP)

HDI BY COMPONENTS
(Selected Countries, 2011)

LIFE EXPECTANCY MEANS YEARS OF EXPECTED YEARS
SCHOOLING OF SCHOOLING
Philippines 68.7 8.9 11.9
China 73.5 7.5 11.6
Thailand 74.1 6.6 12.3
Malaysia 74.2 9.5 12.6
Indonesia 69.4 5.8 13.2
Viet Nam 75.2 5.5 10.4
Source: HDR 2010: The Real Wealth of Nations (UNDP)


HDI BY PROVINCE, 2004 ‐ 2010

*Using BPS incides
Source: BPS

HUMAN DEVELOPMENT INDEX
INDONESIA, 1980‐2011

Source: Human Development Report – UNDP, 2011


INDONESIA’S HDI TRENDS
(By Components)

LIFE EXPECTED MEANS YEARS GNI PER HDI VALUE
EXPECTANCY YEARS OF OF CAPITA
AT BIRTH SCHOOLING SCHOOLING (2005 PPP$)
1980 57.6 8.7 3.1 1.318 0.423
1985 60.0 10.1 3.5 1.539 0.460
1990 62.1 10.4 3.3 2.007 0.481
1995 64.0 10.5 4.2 2.751 0.527
2000 65.7 11.1 4.8 2.478 0.543
2005 67.1 11.8 5.3 2.840 0.572
2010 68.9 13.2 5.8 3.644 0.613
2011 69.4 13.2 5.8 3.716 0.617
Based on consistent time series data, new component indicators and methodology
Source: Human Development Report – UNDP, 2011


 IN MOST DEVELOPING COUNTRIES POOR PEOPLE HAVE
TROUBLE GETTING PROMPT, EFFICIENT SERVICE FROM THE
PUBLIC ADMINISTRATION.
 TO CHANGE THIS, THE FIRST STEP IS BUILDING THE CAPACITY OF
PUBLIC ADMINISTRATION.
 OFFICIALS NEED TRACTABLE REGULATORY FRAMEWORKS, WITH
PROPER PERFORMANCE INCENTIVES AND MECHANISMS TO
ENSURE ACCOUNTABILITY AND RESPONSIVENESS TO CLIENTS,
INCLUDING POUR PEOPLE.
 POOR ORGANIZATIONAL DESIGN ENGENDERS INEFFICIENCY
AND CORRUPTION, TYPICALLY HURTING POOR PEOPLE THE
MOST.
(World Development Report 2000/2001: Attacking Poverty, World Bank)


 DURING THE PAST TWO DECADES, AS SOCIETIES AND THEIR
GOVERNMENTS HAVE BECOME AWARE OF THE NEED OF
PUBLIC SECTOR REFORMS TO FOCUS PUBLIC ACTION AND
PROGRAMS ON SOCIAL PRIORITIES AND INCREASE THE
CAPACITY OF THE STATE TO REDUCE POVERTY.
 PUBLIC SECTOR REFORM AND MODERNIZATION HAVE GREAT
POTENTIAL TO REDUCE POVERTY, IF THEY ARE AT THE CORE
OF A DEVELOPMENT STRATEGY THAT ESTABLISHES CLEAR
PRIORITIES FOR PUBLIC ACTION.


 THE FUNCTIONAL AND ORGANIZATIONAL STRUCTURE
OF THE PUBLIC SECTOR NEEDS TO BE RATIONALIZED TO
IMPROVE RESOURCE ALLOCATION FOR PROGRAMS
THAT ARE SOCIAL PRIORITIES AND HAVE GREATER
CAPACITY TO REDUCE POVERTY.
 MOST IMPORTANT IS TO STREAMLINE AND "RIGHTSIZE"
PUBLIC ADMINISTRATIVE ENTITIES AND PRIVATIZE
PUBLIC ENTERPRISES AND OTHER OPERATIONAL PUBLIC
PROGRAMS.


 BEYOND RATIONALIZING THE STRUCTURE OF THE PUBLIC
SECTOR THERE IS A NEED TO IMPROVE PUBLIC
MANAGEMENT SYSTEMS TO MAKE PUBLIC PROGRAMS
MORE EFFICIENT AND ACCOUNTABLE.
 INVOLVING CIVIL SOCIETY IN PLANNING, MONITORING, AND
EVALUATING PUBLIC PROGRAMS AND POLICIES IS ALSO
CRUCIAL TO ENSURE STEADY PROGRESS TOWARD A FULLY
RESPONSIVE AND ACCOUNTABLE STATE.


 LEGISLATIVE OVERSIGHT OF THE EXECUTIVE, CARRIED
OUT ACCORDING TO TRANSPARENT PROCEDURES, IS AN
IMPORTANT PART OF MONITORING AND IMPROVING
PERFORMANCE. PUBLIC ADMINISTRATIONS ALSO NEED
TO BE SUPPORTED AND ACTIVELY MONITORED BY
POLITICAL LEADERS.
 BUT SOMETIMES THIS PROCESS BECOMES SUBJECT TO
POLITICAL PARTY’S INTEREST OR THE PERSONAL GOALS
OR WHIMS OF INDIVIDUAL POLITICIAN, RESULTING IN
EXCESSIVE POLITICAL INTERFERENCE. THE QUALITY OF
PUBLIC SERVICE IS REDUCED WHEN PUBLIC OFFICIALS
ARE HELD ACCOUNTABLE MORE TO THEIR
HIERARCHICAL SUPERIORS THAN TO THE PEOPLE 'THEY
SERVE.

ON POVERTY
 POVERTY IN INDONESIA HAS THREE SALIENT FEATURES.
 FIRST, MANY HOUSEHOLDS ARE CLUSTERED AROUND THE NATIONAL
INCOME POVERTY LINE OF ABOUT PPP US$1.25‐A‐DAY, MAKING EVEN
MANY OF THE NON‐POOR VULNERABLE TO POVERTY.
 SECOND, THE INCOME POVERTY MEASURE DOES NOT CAPTURE THE
TRUE EXTENT OF POVERTY IN INDONESIA; MANY WHO MAY NOT BE
‘INCOME POOR’ COULD BE CLASSIFIED AS POOR ON THE BASIS OF
THEIR LACK OF ACCESS TO BASIC SERVICES AND POOR HUMAN
DEVELOPMENT OUTCOMES.
 THIRD, GIVEN THE VAST SIZE OF AND VARYING CONDITIONS IN THE
INDONESIAN ARCHIPELAGO, REGIONAL DISPARITIES ARE A
FUNDAMENTAL FEATURE OF POVERTY IN THE COUNTRY.


 THREE IMPORTANT ELEMENTS FOR EFFECTIVE POVERTY
REDUCTION.
 FIRST, ALL PROGRAMS SHOULD INTEGRATE EQUITY OBJECTIVES. IT
WAS A CORRECTION FOR THE PAST APPROACH EMPHASIZING ONLY
EFFICIENCY.
 SECOND, THE POOR, WHO ARE THE FOCUS OF THE PROGRAMS,
MUST PARTICIPATE FULLY IN THEIR DESIGN, IMPLEMENTATION, AND
MONITORING.
 THIRD, MORE SPECIFICALLY, THEY MUST BE EMPOWERED TO RUN
THE PROGRAMS THEMSELVES.
 THE KEY IS EMPOWERMENT, NOT CHARITY.


ON EQUITABLE DEVELOPMENT
 INCOME DISPARITY IS A PROBLEM IN INDONESIA AS IT IS
IN MOST OF THE DEVELOPING WORLD.
 DESPITE THE POSITIVE TRENDS IN POVERTY REDUCTION
AND ECONOMIC GROWTH, THE GAP IS NOT
NARROWING, IT IS WIDENING.
 GROWTH IS ESSENTIAL, THROUGH GROWTH NEW JOBS
WILL BE CREATED, THE COUNTRY’S DEBT WOULD BE
BETTER SERVICED, MACROECONOMIC STABILITY WOULD
BE STRENGTHENED AND MOST IMPORTANTLY, POVERTY
WOULD DECLINE.


 BUT GROWTH IS NOT AN END IN ITSELF. IT IS OF
UTMOST IMPORTANT TO ENSURE THAT GROWTH
WILL NOT RESULT IN INCREASES IN INEQUALITY, AS
OFTEN OCCURS IN MOST DEVELOPING ECONOMIES
INCLUDING IN INDONESIA. HIGH GROWTH IS MOST
DESIRABLE, BUT IT ALSO HAS TO BE BALANCED AND
INCLUSIVE, AND ALSO SUSTAINABLE.


 THE PATTERN OF GROWTH IS JUST AS IMPORTANT AS THE
RATE GROWTH. THE RIGHT KIND OF GROWTH IS NOT THE
VERTICAL FLOWS ALLOWING FOR THE TRICKLE DOWN OF
BENEFIT TO THE POOR, BUT THE KIND THAT ALLOWS
HORIZONTAL FLOWS, BROADLY BASED, EMPLOYMENT
INTENSIVE AND NOT COMPARTMENTALIZED (KENDRA AND
SILK, 1995 AND RANIS, 1995)
 THERE IS NO SUCH THING AS A TRICKLE DOWN EFFECT OF
GROWTH TO EQUILIZE BENEFIT OF DEVELOPMENT. IT MAY
TRICKLE DOWN BUT ONLY IN TRICKLES, THE MAIN STREAM
GOES INTO OTHER DIRECTION, THE HAVES.


 INDONESIA’S RELATIVELY HIGH GROWTH SO FAR HAS
BEEN AT THE EXPENSE OF ITS ENVIRONMENT. ITS
FOREST HAS BEEN OVER EXPLOITED, RIVERS POLLUTED,
CITIES LITTERED WITH WASTE.
 THE SAD STORY OFTEN TOLD IN INDONESIA ABOUT ITS
WEATHER WHEN IT IS DRY THERE IS SHORTAGE OF
WATER WHICH AFFECTS THE CROPS. BUT WHEN IT IS
WET THE RICE FIELDS AND THE VILLAGES ARE FLOODED.
SO THE CARE OF ENVIRONMENT SHOULD BE SPELLED IN
THE SAME BREATH AS THE NEED FOR GROWTH.


 PUTTING A CURB ON INDIVIDUAL INITIATIVE,
INVENTIVENESS AND COMPETITIVENESS, IS NOT AN
OPTION. ON THE CONTRARY IT SHOULD CONTINUE TO
BE ENCOURAGED.
 BUT THE WEALTH OF THE INDIVIDUALS SHOULD BE
SHARED BY OTHERS, IN A FAIR AND JUST WAY.
 NOT ONLY FOR THE RICH TO GET RICHER, BUT ALSO TO
GET THEIR BUSINESS SUCCESSES DIRECTLY BENEFIT THE
PEOPLE.
 SOME COUNTRIES, INCLUDING INDONESIA ADOPTED.
CORPORATE SOCIAL RESPONSIBILITY (CSR). IT IS FINE
BUT NOT ENOUGH.


 ONE OPTION IS PROGRESSIVE INCOME TAX SYSTEM. TAX
SYSTEM NOW FAVOURS THE RICH. INDONESIA SHOULD
ADOPT PROGRESSIVE TAXATION, A RISING TAX RATES AS
INCOME RISES. IT CAN GO TO AS HIGH AS 50% FOR THE
HIGHEST INCOME BRACKET, AND FOR INHERITANCE.
 JAPAN, SCANDINAVIAN AND OTHER EUROPEAN
COUNTRIES HAVE DOING SO FOR DECADES.
 IF THE RICH WANT TO AVOID THE HIGH INCOME TAX, THEY
CAN ALWAYS REINVEST AGAIN, SO THE TAXABLE INCOMES
WILL NOT GROW THAT MUCH AND BY DOING SO THEY
WILL CREATE MORE JOBS, AND STILL CONTINUE TO
BECOME RICHER.


 THERE IS A NEED TO RECALIBERATE INDONESIA’S
ECONOMIC DEVELOPMENT STRATEGY.
 MORE ACTIVE ROLE OF THE GOVERNMENT TO MAKE SURE
THAT THE IDEALS OF ECONOMIC DEMOCRACY AND SOCIAL
JUSTICE EMBODIED IN THE CONSTITUTION, ARE
ACHIEVABLE.
 MORE ACTIVE REDISTRIBUTION EFFORT FROM THE
GOVERNMENT IS A MUST.


 IN CONCLUSION, THE GOVERNMENT SHOULD NOT BECOME
A SPECTATOR IN THE ECONOMIC GAME, BELIEVING THAT THE
LESS GOVERNMENT IS THE BETTER GOVERNMENT AND THE
LEAST GOVERNMENT IS THE BEST GOVERNMENT.
 THE GOVERNMENT NOT ONLY HAS TO SET THE RULES OF THE
GAME AND MAKE SURE THE RULES ARE FOLLOWED, BUT THE
GOVERNMENT SHOULD TAKE PART IN THE GAME AS A PACE
MAKER.
 AFFIRMATIVE ACTION AND SMART INTERVENTION ON THE
PART OF PUBLIC ADMINISTRATION ARE IMPORTANT
ELEMENTS IN POVERTY ERADICATION AND EQUITABLE
DEVELOMENT.


どうもありがとうございました

DEVELOPMENT FOR THE PEOPLE: Equity and Poverty

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DEVELOPMENT FOR THE PEOPLE: Equity and Poverty