a national employment guarantee programme for indonesia … · 2015-02-02 · 4 a national...

1

A National EmploymentGuarantee Programme

for IndonesiaAN APPROACH

National Planning Agency (Bappenas)

and

International Labour Organisation (ILO)

Jakarta, December 2005

2 A National Employment Guarantee Programme for Indonesia - An Approach

Copyright@International Labour Organization 2005

First published 2005

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ILO

International Labour Organization, 2005

“A National Employment Guarantee Programme for Indonesia – An Approach”

ISBN: 92-2-018439-7 (print)92-2-018440-0 (web pdf)

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Foreword

Indonesia has historically faced problems of unemployment and underemployment and lowstandards of living. Rapid economic growth during the 1980s to the mid-1990s helped to makeprogress in diversifying occupations away from low to relatively high value ones and standards ofliving began to rise. But the financial crash of the late-1990s was a major setback. The economy hasrecovered since, though the growth rates in the national income are much lower than what theywere earlier. More important, labour absorption in the mainstream sectors is not high enough tomake a significant impact on employment.Indonesia is committed to the Millennium Development Goals, which require poverty and standards ofliving goals to be met within a defined timeframe. In this context, BAPPENAS (National DevelopmentPlanning Agency) in collaboration with the ILO commissioned a policy paper to address the employmentproblems of the poor in Indonesia, particularly those located in rural areas.The paper presents a blueprint of an action plan aimed at providing unskilled and semi-skilled jobs forthose identified as poor, for limited periods each year. Workers would be deployed on the creation ofeconomically meaningful assets; in turn, which would spontaneously add value and create more jobs inthe local economy. There are options for a social security cover, and capacity building among the beneficiarygroups, as well. The plan recognises the Indonesian ground situation, including the experiences gainedfrom Padat Karya and other anti-poverty programmes; at the same time, it draws upon the rich experienceof similar programmes elsewhere.Dr. Sarthi Acharya, Director at the Institute of Development Studies (Jaipur, India) and ILO consultant,is the author of this paper. He has had long association with labour intensive public works programmesin India where such programmes have been legally enacted. Whilst in Indonesia, he has met with a widecross-section of officials from among the national policy makers and other experts who have shared theirview and thereby helped in the analysis formulation of the recommendations in the paper. BAPPENAS

and ILO are indebted to all those who spared their time for discussions.It is sincerely hoped that this paper will contribute to employment policy formulation in Indonesia and, inparticular, to providing more employment opportunities for the poor.

Bambang Widianto Alan BoultonBappenas ILO Jakarta


Glossary

Bappeda Badan Perencanaan Pembangunan Daerah (Regional Development PlanningBoard)

Bappenas Badan Perencanaan Pembangunan Nasional (National Development PlanningAgency)

BKKBN Badan Koordinasi Keluarga Berencana Nasional (National Coordinating Board forFamily Planning)

BPS Badan Pusat Statistik (Central Bureau of Statistics)Bulog Badan Urusan Logistik (National Logistic Agency)Depnakertrans Depertamen Tenaga Kerja dan Tranmigrasi (Department of Manpower and

Transmigration)DGRA Directorate General of Regional AutonomyDesa VillageEGAI Employment Guarantee Act of IndiaEIU Economist Intelligence UnitGDP Gross Domestic ProductIDT Inpres Desa Tertinggal (Village Improvement Programme)ILO International Labour OrganisationKDP Kecamatan Development ProgrammeKabupaten DistrictKecamatan Sub-districtM&E Monitoring and EvaluationMDG Millennium Development GoalsMEGS Maharashtra Employment Guarantee ProgrammeMIS Management Information SystemNEGP National Employment Guarantee ProgrammeNGO Non-governmental OrganisationPDM-DKE Pemberdayaan Daerah dalam Mengatasi Dampak Krisis Ekonomi (Empowering the

Regions to Overcome on the Impact of the Economic Crisis)PK Padat Karya (Labour Intensive Programme)PKD Padat Karya Desa (Labour Intensive Programme for Village)PPP Purchasing Power ParityProvinsi ProvinceSakernas Survei Tenaga Nasional (National Labour Force Survey) SEWA Self Employed Women’s AssociationSME Small and Medium IndustriesSMERU Social Monitoring and Early Response UnitSusenas Survei Sosial Economi Nasional (National Socio-economic Survey)Takesra/Kukesra Savings and creditUN United NationsUNDP United Nations Development ProgrammeUNSFIR United Nations Support Facility for Indonesia RecoveryUPP Urban Poverty ProgrammeWEC Work Eligibility Card

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Abstract

This report presents the design of an Employment Guarantee Programme for Indonesia aimed to servea dual purpose: helping to alleviate situations of poverty and un/underemployment, and creating productiveassets and services for the economy. Implicit in the design is also empowerment of the poor and economicdecentralisation. The programme aims to create jobs in unskilled activities for (an annually targeted) poorpopulation.Unique features: This a larger, economy-wide programme aimed to overcome limitations faced in earlierschemes, like non-sustainability, inability of workers to grow on the job, and not being able to matchlabour demand and supply. It intends to extend social security and capacity building among the beneficiaries.The programme has plans to build relatively large and broad-spectrum assets, in community and privatesphere.Three pillars on which the programme rests:(1) Employment creation for the poor, particularly in rural areas and the hinterland—a maximum of

three months in a year, at an average monthly wage of Rp. 350,000;(2) Productive (and sectorally harmonised) asset formation (large as well as small) in the local economy,

in turn which could generate more employment as spin-off; and(3) Extension of human development options to the workers and their households.

The programme proposes to target about 15 million poor households; however, given the size, therecould be some staggering with a pilot programme first.A National Council, a Provinsi Council, and a Kabupaten Council, each having stakeholder representations,are to be constituted to oversee the programme. The programme would be anchored at the kabupatenwhere a programme officer (under the bupati) is to coordinate a technical, statistical/data, MIS andadministrative team. The programme could reach out to other developmental and promotional programmesin the country to establish (two-way) synergies and also share personnel and infrastructure.The works are to be implemented by technical and line departments (and private entrepreneurs) oninstruction/advice from the programme officer. At any time a number of works are expected to beoperational. Initiation of works is the responsibility of the technical and line departments, which conceiveand implement these in close tandem with their sectoral priorities. A strong dynamic MIS, coordinated atthe kabupaten level is to link the programme officer’s office with desas/kota/local levels—for ascertainingnumbers and availability of workers at each location—on the one hand, and worksites (through technicaland user departments)—to obtain estimates of the demand for workers on sites—on the other.An M&E system would include: keeping accounts of employment, expenditure and completion of projects,working conditions, wages and other problems of deployment at work sites, user-evaluation of completedprojects, expenditure audit, and assessment of overall impact of the programme on living conditions ofworkers. Periodic open-house and other discussions locally for review and grievance redress are alsosuggested.The annual expense of the proposal works out to about Rp. 31.9 trillion (US$ 3.2b, or US$ 2.3 perperson-day), However, given the fact that not all poor households will have able-bodied workers available,and those who have, might not offer themselves for all the three months, the estimate of expense mightnot exceed Rp. 20-24 trillion.

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Contents

Executive summary iv

1 The purpose 1

2 The logic of NEGP 22.1 Deploying surplus labour—The basis 22.2 The proposed approach 32.3 Programme administration and operation 7

3 Targeting populations 83.1 Poverty headcounts based on checklists 83.2 Self targeting 103.3 Small area estimation approaches 11

4 Governance of NEGP 1 24.1 At the national level 124.2 At the provinsi level 134.3 At the kabupaten/municipality (kota) level 134.4 At the desa level 14

5 The spectrum of assets to be created 1 75.1 Large on-going projects 175.2 Up-keep and repair of exiting projects 175.3 Public works projects exclusively designed for NEGP 185.4 Innovative and/or high risk projects 195.5 Small village infrastructure 19

6 The working of NEGP 206.1 Responsibilities and pre-conditions 206.2 Operationalising NEGP 206.3 Eligibility, rights and duties of workers 22

7 The wage rate 247..1 To fix wage closer to the prevailing wage 247.2 To pay time rate ot piece rate? 24

8 Monitoring and evaluation 278.1 The questions 278.2 Data generating process 27

9 Capacity building and social security 289.1 Capacity building 289.2 Social security 30


1 0 Financing 3 110.1 The costs and sequencing 3110.2 Sharing of funds 3210.3 Sources of funds 33

1 1 Conclusion 33

References 34

Appendices 37

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Executive summary

This report presents the design for a National Employment Guarantee Programme for Indonesiaaimed to serve a dual purpose: helping to alleviate situations of poverty and un/underemployment,particularly among youth and in rural areas/hinterland, and creating productive assets and servicesfor the economy. Implicit in the arguments is also the notion of empowerment of the poor (throughwork provision), and economic decentralisation; both pre-requisites for achieving decent workconditions among the larger workers’ community.The programme aims to create jobs in unskilled activities at pre-determined wages for a maximum periodof three months for a targeted (poor) population.

A. THE RATIONALESome questions: Why design and initiate another employment oriented anti-poverty programme whenthe country has experience with many such schemes [typically Padat Karya (PK)] in the past? What is new?Will it succeed?Raison d’être for the new programme: The proposed new approach presents the outline of a larger, economy-wide programme aimed to overcome limitations faced in the PK family of schemes, of not being able tomatch labour demand and supply because of their limited geographical purview and scope, and smallnessof the individual schemes. In this context it is also proposed here to bring together all the disparatePK schemes under one umbrella. Next, this proposal emphasises on a relatively long-termcommitment towards both workers and activities undertaken, in contrast to emergency relief-typeefforts in the earlier schemes. The new programme might thus be termed more appropriatelyas an anti-poverty programme, which as well has built-in components of social security andcapacity building. Third, there is a strong proposition for building relatively large and broad-based assets—mostly of long term infrastructure type, but some of short-term economic valuetoo—which would qualify the programme to be termed as one contributing to direct economicaddition, as well. Lastly, there is a definite proposal here for private sector participation, andtherefore also co-financing at some stage.

B. THE DESIGNThe architecture of the programme rests on three pillars:(1) Employment creation for the poor, particularly youth in rural areas and the hinterland;(2) Productive asset formation in the local economy, in turn which could generate more

employment as spin-off; and(3) Establishment of an active link of workers and their households with other (typically, human

development) programmes.

Each of these would reinforce the other to form synergies.


C. TARGETINGThe programme proposes to target on the poor (and near-poor) who, as per the latest SUSENAS surveysand BPS’s calculations, add up to about 15 million households in the country. For operationalising this(guarantee) programme, it is de rigueur to individually identify the poor households through a censuscount, using relatively simple and robust criteria in the checklist: human capacities, physical assets anddemographic characteristics. The most important variables here are landlessness among farmers and lackof productive assets/education among others. To double check on the list and also bring about greaterlegitimacy, participation from desa/kota/local communities as well could be sought. Some region-specifictargeting—for identifying poorer locales—is also proposed, for which the ‘small area estimating technique’could be of use. More research in this direction, however, is necessary before the method is standardised.Finally, a major issue is also of itinerant populations, and special effort is required to accurately enumerateand target such populations.Implicit in the design is some direct and some self-targeting. Thus, from those listed as poor, onlythose households from where workers volunteer to work on NEGP sites would benefit.Given the size of the populations to be covered it is proposed that there be some staggering of theprogramme. It might be a useful idea to first pilot the programme in one or a few provinces and thengradually expand it to cover the country.

D. GOVERNANCE OF NEGPIt is proposed that a National Council of NEGP be constituted, with the BAPPENAS as the nodalagency (the chair) and DEPNAKERTRANS, the operational ministry (co-chair). Other members:representatives from line ministries (agriculture, education, health, others—all those who commission oruse civil projects), BPS, provincial governors, and invitees from the private sector, NGOs and the civilsociety. This will be the apex policy and planning authority. Correspondingly, at the provinsi there shouldbe a Provinsi Council, and at the kabupaten a Kabupaten Council, each having stakeholder representations.The main administrative unit where the programme would be anchored is the kabupaten. A programmeofficer is to head a secretariat consisting of technical, statistical/data, MIS and administrative officials. S/he would liaise with kecamatan and desa/kota/local on the one hand, and provinsi and centre on the other.The programme officer is to work under the overall supervision of the bupati and the kabupaten council.A close cooperation between various ministries and departments, between provinsis, and between kabupatenswithin the provinsis, in addition to cooperation between different levels of governance from the desakota/local to the centre, are essential for the success of this programme. Finally, an organic linkwith different stakeholders is paramount.The country has a number of other anti-poverty and development/promotional programmes and effortcould be made to reach out to them to establish (two-way) synergies. Additionally, personnel andinfrastructure sharing are distinct possibilities.

E. ASSETS TO BE CREATED THROUGH LABOUR DEPLOYMENTThe programme expects to create durable assets and tangible services through deployment of surpluslabour. The assets need not be small and localised at a village level only; instead, labour could be deployedon any activity that is demand-led and adds value to the local or larger economy. A bouquet of categoriesof projects wherein this labour could be deployed is presented below:

(1) Unskilled labour component in large development projects;(2) Unskilled labour component in the services required for up-keep of select infrastructure projects

and activities;

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(3) Medium/small sized (labour intensive, demand-led) assets useful to the local settings in ruralor semi-urban areas;

(4) High risk projects in the private sector with a large labour component (in which wages paid from theprogramme for unskilled labour would be a subsidy);

(5) Village-based small projects, as in Padat Karya of the yesteryears.

It is believed that initially projects in the first two categories would engage up to 15 per cent of theworkers only, the fourth category about five per cent, while categories (3) and (5) are expected to employthe rest 80 per cent. These proportions would change overtime particularly with category (4) assuminggreater importance.The assets are to be closely matched with the economy’s sectoral priorities. Additionally, as stated earlierin Section E, projects created/operated here could complement those built/operated in other programmes.

F. THE WORKING OF NEGPThe programme officer, in close co-ordination with the technical/line departments, is to prepare andmaintain a dynamic shelf of projects along with their costing at the kabupaten level.The works are to be implemented by technical and line departments (and also private entrepreneurs whoparticipate in the programme) on instruction and advice from the programme officer (NEGP). At anytime a number of works are expected to be operational [capacity: about 10 per cent higher more than theestimated demand—at least in categories (3)-(5) of Section E (above)]. Initiation of works is the soleresponsibility of the technical and line departments, which conceive and implement these in close tandemwith their sectoral priorities. Some projects [typically category (5), Section E above] could be initiated onbehest of village communities as well.There is to be a strong dynamic (i.e. regularly up-dated) MIS coordinated at the kabupaten level linkingdesas/kota/local level for ascertaining numbers and availability of workers at each location, from time totime on the one hand, and worksites (through technical and user departments) to obtain estimates of thedemand for workers at the sites, on the other.Workers normally aged 17 years and above (and 60 years), belonging to poor households (as perthe list—Section C above), must register with the kabupaten (programme officer) and obtain a WorkEligibility Card. A card-holder household will be eligible for a maximum of three person-monthsof work in a year at a pre-determined wage rate. More than one worker from a household couldparticipate in the programme within the annual three person-month work quota.Those wanting to work would be expected to approach the desa/kota/local head, who in turn would directthe workers to nearby sites where work is available, preferably within the kabupaten, based on the dynamicinformation system (see above) linking the kabupaten with the technical and line departments, whose dataare to be shared with the desa/kota/local heads. Workers must offer to work for a minimum period of, saya month at a stretch. The programme officer will have the right to sequence the labour supply in such amanner as to ensure a smooth flow of workers round the year. At the same time, effort is to be made tokeep the intensity of work high during lean agricultural times, and the vice versa.The step-wise process of initiation of work is expected to be somewhat like this:

(1) The kabupaten programme officer, on receipt of the lists of on-going and proposed works alongwith cost statements from technical and line departments, is to prepare a kabupaten level financialestimate on a prescribed format to send it to the centre (Ministry of Planning/Labour) through theprovinsi. This exercise is to be repeated every quarter.

(2) Based on this estimate the central authorities are to release funds to the kabupaten on a quarterlybasis. A separate bank account is to be maintained for this programme at the kabupaten level. Fundsare to be received in four instalments on pre-determined dates.

(3) The programme officer is to ask the technical and line departments to initiate at least 30 per


cent of the identified projects in categories (3) and (5) immediately upon receipt of funds,under the assumption that at least this much demand for work will always be there. Thefunds are to be fully transferred to the technical and line departments for further disbursal inaccordance with the estimate as in (1) above.

(4) The programme officer is to make a detailed assessment of the further labour demand [beyond30 per cent: point (3), above] with the help of data received from the desas/kotas/local levels.Based on this assessment, more works could be initiated, for which the programme officerwould transfer more financial resources to the technical departments.

G. WAGESWages would be paid piece rate: i.e. in proportion to the work done. A comprehensive Wage Manual willrequire to be prepared for this purpose. The wage rate is to be so fixed that it does not destabilise thelabour market; nevertheless it would set a floor wage, and also aim to bring some gender parity (suggestednational average across jobs and locations: Rp. 350,000 per month—this is to be indexed at each provincein accordance with the standard of living and/or prevailing wage for unskilled casual work). Other on-sitefacilities such as crèches, first aid, drinking water etc. will form a part of the package.

H. MONITORING AND EVALUATIONA strong monitoring and evaluation system will serve the programme to protect the interests of workers,projects and taxpayers. The M&E system would include: keeping accounts of employment, expenditureand completion of projects, inspection of working conditions, wages and other problems of deploymentat work sites, user-evaluation of completed projects, expenditure audit, and assessment of overall impactof the programme on the living conditions of workers and their households. Periodic open-housediscussions at desa/kota/local levels to review the programme’s priorities and local actions necessary tobring about improvement are also suggested. Finally, there is a proposal for redressing grievances.

I. CAPACITY BUILDING AND SOCIAL SECURITYThe programme aims to establish a long-term association with the workers and their households in sucha manner that it is possible to target other human development programmes like education, health andsocial security on them in a participative manner.(1) For capacity building, there are three aspects put forward:

a. Select capacity building of the participating workers through skill impartation;b. Sustained schooling of the young in the targeted households;c. Very select health intervention.

For (a), the programme will identify areas of training and selectively pay for the time and cost, whilefor (b) and (c) a village-based monitoring system is proposed.

(2) For social security, a participatory health insurance scheme is suggested in which workers will payRp. 50,000 and the programme will pay a matching Rp. 50,000 annually, for each participatinghousehold. The money is expected to be expended on selective ailments and family planning.

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J. FINANCINGThe annual expense of the proposal works out to about Rp. 31.9 trillion (US$ 3.2b, or US$ 2.3 perperson-day), minus the indirect i.e. fixed cost expenses—expected to not exceed five per cent of the total,and absorbed departmentally. The cost is worked out based on: (a) A monthly wage of Rp. 350,000(national average) for three months for 15 million workers; (b) Apportioning of up to 20 per cent workerson larger (or private) sites where the programme only pays the wages; (c) Keeping the wages to materialexpense ratio at 45 (wages):55 (material), on aggregate for projects exclusively designed for the programmeand adding up both wage and material cost; and (d) A token contribution for health insurance.However, given the fact that not all poor households will have able-bodied workers available,and those who have, might not offer themselves for all the three months, the estimate ofexpense might not exceed Rp. 20-24 trillion.The expense is proposed to be shared by the government at different levels of its governance apparatus,though the major expense will be borne by the central government. Additionally, some earmarked taxesare proposed.

L. SEQUENCINGOne way is that the near-poor might be dropped from the list initially and the programme concentrateson actual poor, i.e. 9.7 million households rather than 15 million at the first instance, reducing thegross expense from Rp. 31.9 million to Rp. 20.7 trillion, and the actual to not more than Rp.15 trillion.Next, as is stated in Section C above, a programme of this size might be difficult to launch in one stroke.Thus, stagger the programme: areas to be first covered could be directly proportionate to the extantpoverty there. Staggering the programme, perhaps beginning with a relatively poorer province—say inEast Java—could be one approach.

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A National Employment GuaranteeProgramme for Indonesia – An Approach

1 Website http://www.ilo.org/jakarta; ILO (2004)2 This proposition has high coinage in both, the national the international development schemas. See, The Millennium Declaration,

and the MDGs (UN 2001; UNDP 2003). Indonesia endorses the MDGs.

1. INTRODUCTION

1.1 RationaleThis paper aims to make a case for and present the design of a possible national employment guaranteeprogramme (NEGP) for Indonesia. Jobs are to be created for the poor, in unskilled activities for fixedperiods each year at a pre-determined wage on projects designed across the country for this purpose. Thetwin purposes of undertaking this exercise are: to help mitigate the poverty and un/underemploymentsituation, particularly in rural areas and among the youth; and to create productive assets and provideservices useful to the economy. The basic premise of the paper is that those workers willing to work musthave opportunities and access to remunerative and productive employment with dignity; a stance articulatedin the Indonesian Constitution [Article 27(2)], and as well finds roots in ILO’s quest to promote decentwork.1 An implicit agenda of this essay is also to promote empowerment of the poor and strengthen their‘rights’ through work provision.2

Question: Indonesia has had a series of anti-poverty programmes including labour intensiveprogrammes in the past: a brief anthology is presented in Box 2. For example, the PadatKarya (PK) has been operated by 16 different ministries and departments in the recentpast. Some small schemes are still being operated. How is this proposal going to bedifferent from what has been proposed and implemented in the past—remnants of whichare still in place? What are the chances that it would succeed?

Answer: The important and unique features of this proposed programme are:

1. It presents the outline of a larger, economy-wide programme which aims to overcome the limitationsfaced in the PK variety of schemes of not being able to match labour demand and supply becauseof limited geographic purview, scope and smallness of each PK scheme. This proposal alsorecommends integrating the entire disparate PK schemes under a nationally sponsoredprogramme, having uniform standards and purpose.

2. The emphasis here is on relatively long-term commitment to both workers and activities undertaken,unlike any employment scheme in Indonesia or elsewhere. In this regard, this might betermed more as an anti-poverty programme with (a limited) intervention in the labourmarket, rather than be an emergency relief-type programme.

3. The anti-poverty emphasis is further underscored by the fact that there are social security aswell as capacity building components, built into the programme.

4. Since the programme is not expected to be localised at a village level alone, there is astrong component of relatively large and broad-based asset creation—mostly of long terminfrastructure type, but some of short-term economic value as well. The assets created areexpected to have spin-offs for further downstream job creation.

5. There is a distinct proposal for private sector participation, and therefore, also co-financing.


3 Perdana and Maxwell (2004) and Setiawan (n.d.)4 Indonesia Report of the Economist Intelligence Unit (EIU 2005)

1.2 The case for an employment programmeThe Indonesian economy performed rather well for more than a decade preceding the 1997-8 Asian financial crisis. The poverty and un/underemployment situation, which was fairly grimin the early 1970s [poverty: 60 per cent of the population, 70 million persons], improvedconsiderably—the poverty proportions came down in 1996 to 11.3 per cent of the population(23 million).3 After the financial crash, however, there was considerable deterioration in incomes,employment and standards of living. While some significant recovery has been made nowwith economic growth in 2005 being in the range 5.5 per cent—it has been sustained at 4-5per cent in the last 3-4 years4—there has been little or no labour absorption, particularly in theformal sectors in the past few years. The openly unemployed constitute more than 10 per centof the active labour force.The government is making every effort to create an enabling environment for domestic as wellas foreign investment to grow; but keeping the current trends in view, it is unlikely that at leastin the foreseeable future the surplus person-power would be effectively absorbed in mainstreamindustries and services. The country thus still grapples to reduce its unemployment andunderemployment rates and raise the standards of living of its populace.Conventional wisdom suggests that in the ultimate analysis economic growth alone can providea lasting solution to structural un/underemployment and poverty. However, growth per semight not be sufficient to provide jobs and incomes to all; the pattern of growth, sources ofgrowth and the manner in which its benefits are distributed, equally as well matter in determiningwho gets to gain from the growth process. It now accepted that the welfare of a nation is thehighest if its productive assets—mainly skilled/semi-skilled/unskilled labour in labour surplusdeveloping countries—are put to use most abundantly and efficiently: the so called ‘pro-poorgrowth’. In the short to medium term, however, particularly in an open economy in a globalisedworld, it might not be very realistic to expect that mainstream economic activities wouldquickly become pro-poor.There is, therefore, a strong case for introducing direct intervention programmes that wouldincrease job growth, particularly among those sections of the population which could sink intopoverty in the absence of work and a remunerative wage. If these (job creation) programmesare so designed that they effectively integrate sectorally and mainstream their activities in theeconomy, they would as well tangibly contribute to economic growth; hence, constitute acomponent of ‘pro-poor growth’. These programmes could then provide the much neededincomes to the poor through provision of work for at least a minimum specified period eachyear in addition to establishing a floor wage. At the same time, they would create jobs inlocales where there are few options at present. Additionally, there is need to create somesafety nets to protect the poor against market fluctuations and financial shocks.Seen from a macroeconomic point of view, a national level employment programme—likeany other proposition involving large expenditures—is likely to cost an amount that mightstrain the budget and create deficits, and also fuel inflation. On the flip side, however, thiscould induce a demand-led boost to the economy. A modest income distribution impact couldalso be a positive outcome of the programme. There is therefore reason to launch the programmewith some caution on these points.The above arguments underscore the logic of writing this paper.

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1.3 The layoutThis section introduces the paper. The layout of rest of the text of the paper is as follows:Section 2 describes the broad logic of the employment programme;Section 3 outlines out a possible approach to identifying the poor, on whom the programme

will be targeted;Section 4 elaborates the governance and organisational set up of a possible national

employment guarantee programme (NEGP);Section 5 provides the span of different projects proposed to be invoked to engage the

workers;Section 6 details the working of NEGP and job creation;Section 7 explains how wages could be fixed;Section 8 presents a monitoring and evaluation system for the NEGP;Section 9 briefly sketches possible social security and capacity building links of this programme

(human security);Section 10 estimates the cost of the programme puts forth approaches to financing it; andSection 11 concludes the paper.

The paper is interspersed with a few textboxes which portray experiences of Indonesia andother developing countries in administering anti-poverty programmes, or they plainly presentthe logic of an argument. For a quick reading these could be glossed over without losing muchof the flow in the text. Finally, there are two appendices attached: one detailing the experienceof MEGS and the other on the outline of EGAI.

2. THE LOGIC OF NEGP

2.1. Deploying surplus labour—the basisIndonesia has all along experienced relatively high un/under-employment (particularly Java),and the poverty proportions have been never been too low. Next, their regional dimensionstoo have been significant (Box 1). There were economic gains accrued during the 1980s and1990s, but a great deal got withered away by the financial crisis.5 Subsequent governmentshave implemented various schemes aimed at poverty alleviation, employment creation andextending social security to the weaker sections of the society, though the success has beensomewhat narrow (Box 2).Current data suggest that there are economically deprived persons in both rural and urbanareas—more in rural areas than urban, and quite significantly in the hinterland—who are inperpetual need of employment or better employment to eke out livelihood for themselves. Forthese (poor and economically vulnerable) people, if somewhat better quality employment,more secure/certain employment, employment when they do not have any work, a little moreremunerative employment, or any combination of these is available, their socio-economicstatus would surely be higher. An improved utilisation of this human power in conjunctionwith mobilisation and use of local resources or resources from elsewhere is thus a majorchallenge. Finally, an approach to income generation for the poor, in a regionally dispersedfashion, will synchronise with the new political decentralisation initiatives.6

5 There is a contrary view, though; that much more has been read into the development process in the 1980s and 1990s than what it wasin reality. See Sudjana and Mishra (2004).

6 For a larger debate on this, see BAPPENAS-UNDP (2004)


7 This approach has been referred to as ‘human development approach’ to livelihoods; see, Acharya, Basak and Iyer (2005).8 See for details, Daley and Fane (2002); Develeux and Solomon (2005); and Acharya (2005)9 KDP-type programmes have had many variations across different countries. None of them is a direct job creation programme.

2.2 The proposed approachThe primary aim is to start a large number of economically meaningful labour intensive projectsacross the country and employ the poor (in productive engagement) on these. The model foran employment guarantee programme proposed here rests on three pillars—employmentcreation (in unskilled activities at a pre-determined wage); productive asset formation in thelocal economy, in turn which would further strengthen employment generation as spin-off;and establishment of an active link of workers with other (particularly human development)programmes.7

While the differences of this approach have been spelt out earlier in Section 1.1, what is theassurance that this approach would work?Anti-poverty programmes in Indonesia have generally not been credited to have had a lastingimpact on poverty (Boxes 1 and 2). The reason: They were not too successful because theyhave been assessed to be ad hoc and short-lived, inaccurately targeted with weak designs,inadequately participative, having no tangible asset building or having activities explicitlywoven into any of the (sectoral) development programmes, and fairly small-scale in theiroperation.These problems, however, are not insurmountable and efforts will be made here to improveupon most or all of them.The one factor that has helped in poverty reduction is the increased availability of basic andsocial infrastructure—schools, health centres, roads, irrigation, and transport and communication,among others. To an extent, assets formed under employment schemes other anti-povertyprogrammes have contributed to augmenting the stock of these. Fighting poverty through theasset-creation route—particularly when the effort has been long term and sustained—hasyielded positive dividends.These are the very points of departure of this programme from other employment schemes: asstated earlier, this is a systematic effort to fight poverty.

(1) The emphasis here is on relatively long-term commitment for stable job creation for aspecified period each year. This approach is somewhat dissimilar from the emergencyresponses in practice, here and elsewhere (e.g. Argentina, India, South Africa), whereinthe activity in similar employment programmes centres on ad hoc and immediate jobcreation.8

(2) The programme is not expected to be localised at a village level or limited to creating anarrow spectrum of assets. This is again different from, or is perhaps an up-scaled,integrated and enlarged version of, the small village-based asset-creation programmeslike the Padat Karya which are currently functioning or had earlier functioned in Indonesia(see Box 2), or MEGS.

(3) There is direct employment creation here; a departure from KDP-type programmes.9

19

The per capita income of Indonesia in 2003 was US$ 810 (PPP$ 3,500). The economy has been growingsteadily at 4-5.5 per cent annually through 2000-2005 and incomes have fully or more than recovered tothe pre-1997 levels, albeit that the economy is not growing at 7-8 per cent annually as earlier. Thecountry is a net importer of petroleum products despite being an oil producer, and is now a net importerof rice although having achieved self sufficiency in it in the past.

There is large regional variation in the resource base and development spread: The share of Java/Bali inthe GDP (without counting petroleum resources) is 64 per cent. The rice yield in Java is 5.2 tonnes perhectare while the same in Sumatra is 3.9, in Kalimantan 2.9, and in Sulawasi 4.4 (2003 figures). Javaenjoys some substantive occupational diversification, but the economy is principally agricultural elsewhere.

The proportion of persons below the poverty line is down to 16 per cent of the population (2004 data)from about 24 per cent in 1999, but the numbers near to the poverty line are significantly large: another12 per cent of the population, according to BPS. The extent of vulnerability of the populations appearsto be more in rural areas than urban, more in agriculture than non-agriculture [agriculture engages about45 per cent of the labour force but 68 per cent of all the poor are engaged in agriculture], more in theinformal sectors than formal, more among the lesser/minimally educated than others, and so on.Additionally, there are higher proportions of the population living in poverty in the outer islands comparedto Java.

The size of the labour force as per estimates available from SAKERNAS was 106 million as in 2004-5. Outof this, 95 million were employed and 11 million (i.e. 11.5 per cent— female: 12.9 per cent; male: 10.6per cent) were unemployed. Full time employment was reported by about 67 million while 28 millionwere reportedly working for much less than the stipulated period (i.e. <30 hours a week): of these, 13million were involuntarily under-employed. Youth are particularly worse off as they are unable to findentry into an already slack labour force: unemployment among them is placed at about 24 per cent. Therural-urban migration is driven more by the prospect to getting larger numbers of working days at thedestination, rather than higher wages per se.

The structure of the labour force suggests that until 1996 there was a rapid movement of workers awayfrom agriculture: In 1990, agriculture employed 55.9 per cent of all the workers while in 1997 thisproportion reduced to 40.7 per cent. In 1998, however, it again rose to 45 per cent, and the latest data(for 2003) suggest that it further rose to 46.3 per cent. This (reverse flow) of labour into agriculture is aclear sign of the pattern of jobless growth in the non-agricultural and modern sectors in the recent years.

Formal sector jobs have ceased to grow after the financial crash. Employment in the manufacturingsector has exhibited a virtual standstill in the 2000s, while the same in mining, construction and financialservices has actually fallen. In this sense, the general assumption within official circles about job growth—that a one per cent growth in GDP generates a little less than half a million jobs (350,000-450,000)—isnot holding true anymore. It did not hold true even in the decade preceding 1997: for example, during1985-95, the annual rate of employment growth was 2.3 per cent, while according to the said belief itshould have grown at 3-4 per cent annually. Growth in employment reduced from an annual 2.8 percent during 1985-90 to 1.8 per cent per annum during 1990-5 [elasticity of labour use: 0.30, as per ILOestimates]. There were about 4.4 million people were unemployed in 1996.

Finally, the macroeconomics: Imports and exports are well balanced—in fact, there is trade surplus—and the budget deficit is minimal; thus the macro economic parameters in Indonesia are in a fairlyhealthy condition. Investments, though, are not picking up as fast as they could, due to not too positivepolitical perceptions of investors, some administrative uncertainties, and infrastructure bottlenecks. Inshort: there is some limited scope to incur deficits in the budget for financing employment programmes.

Sources: BPS (2004); Lindenthal (2005); Tjiptoherijanto (1997), Pradhan et al (2002); Perdana and Maxwell (2004); ILO (1999); EIU (2005); BAPPENAS-UNDP (2004); Widarti (2002); Economist, Oct. 13, 2005, pg 27-28

Box 1:The economy, labour and poverty situation


Inpres Kabupaten (1970s and 1980s): Among the first of the programmes meant to (indirectly) addressunemployment was this, meant to construct rural roads using surplus labour. The scheme as such wasrudimentary, though it served the purpose of road-building.

Transmigration (1970s and 1980s/part-1990s): Its purpose was to shift out populations from Java/Bali to outerislands, where they were settled in colonies and provided a small piece of land (and/or other assets and inputs)for subsistence. This programme ran into problems due to insufficient institutional framework, poor qualitydesign of the programmes, lack of assimilation of the migrants with locals, poor quality lands, problems ofhealth and disease, unrealistic estimates of the expense involved, etc. Some people still transmigrate, thoughthe programme has been wound up.

The Village Improvement Programme (1994-7): The Inpres Desa Tertinggal—IDT, identified 31 per cent of thevillages (20,622 in numbers) to be backward based on 27 (deprivation) indicators for rural areas and 25 forurban. Non-returnable grants were given to these villages. Within the villages, there was considerable autonomyto identify who the poor were, and they were extended loans for small business, which were to be rolled overto other poorer groups once the first batch began to repay. Results: One, the areas were fairly targeted,though by definition this left out the poor in the non-targeted villages. Two, entrusting the decision to identifypoor to the village heads and councils was an important step towards strengthening local initiative andgovernance process. Three, (on the negative side) there were frequent changes in priority, which somewhatundermined the programme.

The Padat Karya: In 1987, the first incarnation of PK was meant to create jobs through workers’ engagement inpublic works; it continued until 1994. In 1998 PK was re-introduced to provide succour to workers affectedby the financial crisis. Initially, there were as many as 16 (labour intensive) schemes operated by such disparateauthorities as the ministries of forestry, religious affairs and public works, each having its own rules andregulations (often with no specific planning and/or design), and each scheme being of very limited duration—a few months. In 1999-00, a more consolidated version with just two programmes, which were better fundedand widespread (300 districts), was introduced. PK was self-targeting. Formally, PK has now shut down, butas a philosophy it continues and many departments have small versions of it still operating. Problems: Lack ofcommunity consultation, no transparent mechanisms of operation, gender opaqueness, poor asset creation,no capacity building and weak self-targeting.

The Padat Karya Desa (1998-9): PKD was introduced in 2,000 villages in the eastern provinces to mitigate droughtconditions. Unlike other top-down programmes this programme solicited more community participationand with greater success. A better coordination between BAPPEDA, NGOs and local engineering firmsensured the completion of projects. Effective training and socialisation further ensured better implementation.

Kecamatan Development Programme (KDP) (1997-ongoing): This programme aims to create rural infrastructureusing local initiative and resources. While its contribution to community empowerment is well established,its contribution to poverty alleviation is yet to be established. Its equivalent in urban areas is the UPP.

Others: There have been a number of other ad hoc programmes meant to ease the employment and livelihoodssituation [e.g. P4K (income generation for the landless); Takesra/Kukesra (savings and credit scheme for thepoor), and the PDM-DKE (empower regions to overcome the impact of economic crisis); to name a fewprominent ones]. Most are now shut. There have been yet other, non-employment schemes of: cash transfers(initiation: 2000); subsidised rice (initiation: 1997); health and nutrition (initiation: 1997); and educationalscholarships (initiation: 1997). The education, health and rice programmes still continue. Targeting in thenon-employment programmes has been better.

Sources: Devereux and Solomon (2005); Perdana and Maxwell (2004); Sumarto, Suryahadi and Widyanti (2001); Setiawan (n.d.); Papanek (1980); Daley andFane (2002); Guggenheim, Wiranto, Prasta and Wong (2004); World Bank (2005); Pritchett, Sumarto and Suryahadi (2002); Sumodiningrat (1999).

Box 2:Select experiences of anti-poverty programmes in Indonesia

21

10 Note that the reference here is only to variable costs. The fixed costs, not accounted here, will have to be borne by theimplementing agencies separately.

11 There is no proposal to charge individual farmers for projects like digging wells on their farms, as most farmers have limitedmeans.

Note: Anti-poverty programmes have until so far generally been stereotyped into either those whichcreate local or small assets and provide options for self-employment; or ones of emergency job-creationcreation on demand at wages lower than those prevailing in the market. While the former expect theassets to yield incomes and do not create many jobs per se, the latter create short-term ad hoc andseasonal employment at wages that do not permit workers to climb out of poverty, particularly in lowincome and wage countries. The departure here is distinct, in the sense that there is both job and assetcreation, and more, like social security and capacity building, as stated in Section 1.1 above.

2.2.1. The workersThe programme proposes to employ workers for relatively long term periods—when seen in thecontext of casual workers’ engagement on public works which is presently of the order of 1-7days—from one to three months.This not being an emergency response programme, there is neither a compulsion to deploy aworker as soon as s/he demands it, nor should there be an automatic exit of the employedworker(s) from work sites without prior notice. It is proposed that a beneficiary householdcould be asked to provide labour (single workers, or by substitution more than one, from thesame household) for a stipulated period, and a rotation worked out in a village/group ofvillages, such that there is a reasonably regular labour supply from this lot of workers roundthe year. This also staggers payments received by the workers, to their advantage.Workers must belong to poor households.

2.2.2. The projectsThe programme envisages employment of poor workers in the following fashion:(1) Deployment of workers in relatively large, on-going as well as to be initiated rural

infrastructure projects; e.g. water management, irrigation, drainage, roads, ruralelectrification, sanitation, large scale construction, and the like; they would largely becommunity controlled, but a few might also be private. Workers would be deployed inthose segments where unskilled (at best some semi-skilled) labour is required.

(2) Deployment of workers in the up-keep, maintenance and repair of already existinginfrastructure projects stated in point (1) above (and more), again in the unskilled laboursegments;

(3) Deployment of workers in the construction of newly conceived projects (mainly in themedium and small scales) in rural areas, which have a considerably large component ofun/semi-skilled labour (mostly community owned, but some private owned as well);

(4) Deployment of workers in innovative and high risk projects, both under community-ownership and private sector, as un/semi-skilled labour—they would be paid by theprogramme, which in turn would help cover part of the risk;

(5) Deployment of workers in small, village-based infrastructure projects (e.g. as in PK),including small private projects like digging wells on farmers’ lands.

The programme will bear the cost of wages for workers engaged through it in projects (1), (2)and (4), while it will bear the full cost (wage plus material) for (3) and (5).10,11

Note 1: Projects listed in (1) and (2) by their very conception are demand-led and those in (4) arealso assessed by its promoters to be demand-led. The programme will make special efforts forprojects listed in (3) and (5) to be demand-led.


12 See, Aspinall and Fealy (2003) on the extent and depth of political decentralisation.

Note 2: All projects listed above must find a plug in with the sectoral priorities of the economy to ensuretheir most optimal utilisation.Note 3: As far as possible, a truck with other development programmes must be established, fortwo-way programme strengthening (synergies), and also sharing personnel and other infrastructure;thereby economising on overall expenditures.

2.2.3. Capacities and social securityA long term association with poor and disadvantaged workers (and their households) provides aunique opportunity for targeting other human development programmes on them. Two typicalones that would help them in a sustained manner are, capacity building and social insurance.(1) Capacity building/human capital formation: This could have two components—capacity

building of workers engaged on jobs through on-job training; and human capital formationof workers’ family members (mainly young off-spring) through uninterrupted educationand better health. Under the first, there is possibility of initiating training lessons forselect, relatively younger workers which might take, say Y per cent of their total engagementunder the programme, the cost of which could be borne by the programme. For thesecond, there could be conditionalities and yardsticks linked to work provision, built intothe programme.

(2) Social insurance: More specifically, health insurance is proposed here as health servicesare becoming increasingly expensive. Yet, there are specific health needs of the poor thatcannot be ignored.

2.3. Programme administration and operationA programme such as this is expected to be large, serving about 15 million households acrossthe country. It is envisaged that its administration would require a close cooperation betweenvarious ministries and departments, as infrastructure projects are managed by more than oneagency. This in itself is a challenge of sorts.Next, there is cooperation to be sought between different provinsi (province), and betweenkabupatens (districts) within the provinsi, which is a somewhat recent proposition for thecountry. Here, mechanisms of dialogue, joint planning of projects and execution will have tobe arrived at, for which, on the one hand forums of dialogue and jurisdiction will have to beestablished, and on the other information sharing and capacity building at the decentralisedlevel will have to be up-scaled.Finally, there is cooperation to be sought between the central government, provinsi authoritiesand kabupaten representatives, as both projects and finances would cut across their jurisdictions.A lot of cooperation with the desa (village)/kota (town)/local and kecamatan (sub-districts)authorities as well, would be essential.The approach put forth here pivots the programme primarily at the kabupaten level. Reason:Kabupaten is the smallest administrative unit (100-140 villages) which has an administrative andtechnical bureaucracy in addition to an elected local house of representatives. Also, ingeographical terms it is large enough to independently accommodate medium sized projects; yet itis small enough to spur economic decentralisation.The programme envisages that jobs would be created through activation of works listed aboveaccording to the demand for work, to be gauged by the NEGP administration through itsoutlets at the village and kabupaten levels. The actual initiation of work on individual projectsis to be the responsibility of technical departments on instruction from the NEGP administration.Backdrop: Following the new political decentralisation law, there have been corresponding localgovernments and elected bodies set up.12 The provinsis and kabupatens have now a major responsibility

23

13 According to Mr. Rizal Ramli, Coordinating Minister of Economy in 2001, up to 40 per cent of the population is either poor orvulnerable to becoming poor. BPS, in 2005, estimates this to be about 62 million persons (about 15 million households).

14 A similar method has been practiced in India in its anti-poverty programmes as well, using a 50-point checklist. If a householddisqualifies on 25 or more it is declared as poor.

15 For details on the Cash Transfer programme, see Sumarto (2005).16 Rural Maharashtra (India) showed poverty proportions based on nutritional measure to be 22 per cent in 1999, but the checklist

showed this to be in the range 28-30 per cent.

to translate this mandate for ushering economic prosperity at the localised, particularly far flung places.An employment programme, albeit small when seen in the national context, is an important meansthrough which they could demonstrate their capacity and resolve to do it.Note 1: This programme model strongly advocates that there should be as little relocation ofpopulations as possible. The programme also must be widely spread across provinsis,kabupatens and islands, and have a strong rural bias.Note 2: There are poor households in which there is none available for wage work. All poor,however, cannot be covered in one programme (one size does not fit all!)—social assistanceprogrammes for those who are too old or too young to work will have to be separatelydefined.The rest of the paper discusses operationalisation of the three elements of the approach andthe implementation process.

3. TARGETING POPULATIONSAt the outset it is important to remember that the poor in real life are not to be defined by asingle poverty line: those who fall within a band—a few per cent points above the povertyline—are also susceptible to becoming poor any time there is a slight downturn in the economy.Hence, it might not be too erroneous if some so called non-poor also gain from a programme,particularly if the poor are ‘near-poor’.13

3.1 Poverty headcount based on checklistsThe most robust method, albeit expensive, is to conduct a census of households, asking(simple) questions like whether or not households possess or not possess; critical minimums.Being simple, this method permits a quick enumeration of full villages/urban conglomerateswith the help of local volunteers and communities.The National Coordinating Board for Family Planning (BKKBN) has counted each householdfor whether or not, it: was able to practice its religious obligations; ate at least twice a day;possessed a different set of clothing for work, school and visits; had the largest part of housefloor not made of earth; and had access to modern medicine.14 Many, though, question thischecklist as well as the capacity of BKKBN enumerators.The Badan Pusat Statistik (BPS) has now begun to use a 14 point checklist since 2005 toconduct a poverty census, to be used for the ‘Cash Transfer’ programme.15 These are listed inBox 3.Of course, the main advantage of BPS conducting the survey compared to any other is its wellqualified investigators and better supervision, because of which the data collected are expectedto be of superior quality.There are at least two issues that first attract attention here:(1) Any listing of the poor based on a checklist will not match with those likely to be poor

identified on a nutritional measure. Such a comparison has not been done in Indonesia,but elsewhere the gap has been found to be quite large.16 It is first recommended thatstatistical exercises be undertaken to assess the extent of convergence between the twoapproaches.


17 This targeting is of a household while jobs are to be provided to individuals willing to work within the household. Hence, thereshould be no confusion between the task of identifying the poor and targeting the poor with work proposals—this aspect isdiscussed later in Section 5.

(2) Any checklist must have a relatively small number of items—the longer is the number of items,the more will be the expectation of error. At the same time, a very short list might not suffice.Hence an acceptable balance must be sought.

Box 3:Checklist of items for determining whether a household is poor used by BPS

(1) Size of house;(2) Type of tile;(3) Type of wall;(4) Sanitary facility;(5) Drinking water sources;(6) Source of lighting;(7) Source of fuel for cooking;(8) Frequency of buying meat, chicken and milk per week;(9) Frequency of eating per day (breakfast, lunch and dinner);(10) Number of new clothes purchased per annum;(11) Access to public small hospital/ polyclinic;(12) Type of work/ job;(13) Education attainment of household head; and(14) Ownership of assets.

Recommendations

(A) There is no escape from the fact that a census listing must be prepared at least once (with aperiodic updating). At present, the BPS has taken up the responsibility to draw up a list of thepoor. It is, however, not certain whether it would be possible for one agency to cost-effectivelycarryout annual poverty censuses. One way out is to involve local functionaries, as in the caseof BKKBN surveys, with a proviso that the BPS personnel will provide strong supervision.Additionally, if the desa/kota/local leadership is involved in vetting the list, preferably in openpublic meetings so as to maintain transparency, the whole exercise might assume greaterlegitimacy and acceptance.

(B) While preparing a list, the criteria of being in rural and urban areas should be different.While in rural areas, people might not have livelihood options in villages or their vicinity,in urban areas poor quality housing, low wages or even transportation expense could bemajor problems.

(C) The checklist for identifying the poor might best be based on a smaller number of morerobust variables. Some generic assessment criteria are:(1) Assetlessness/landlessness;(2) Minimal or no education;(3) High demographic/economic dependency (i.e. too many small children or old

people);(4) No regular job in the last six months;(5) Children do not regularly attend schools;(6) Do not get two square meals round the year.

Any household scoring positive on at least four criteria could be eligible.17

(D) An important issue is also of itinerant populations. Population census or other large scalesurveys do not show migration to be such an issue, but then, these surveys might not be ablecapture itinerancy very effectively. Special effort will be required to capture such populations.

25

Box 4:Where self-targeting works and does not work: Examples from other countries

Self-targeting in not too low wage countries appears to be successful: in Argentina, those who qualified forTrabajar funds (meant to alleviate poverty through work programmes) were largely poor; others would notwork for a wage 40-50 per cent lower than that in the market, and also get stigmatised. In Botswana, again amedium wage country, wages were fixed at 70 per cent of the lowest statuary minimum wage, and the self-targeting worked. However, in countries where the prevailing market wage for casual work is very low (sayUS$ 1 or less) there is a moral dilemma as to how much lower could one fix the wage at. In Burkina Faso, alow wage country, fixing the wage at 1/3 the national minimum targeted the poor well, but it did not help inbringing them anywhere near the poverty line.

In MEGS, prior to 1988 the wages were kept 0.5-0.7 times the prevailing market wage rates but the authoritieshad to revise these upwards to at least the minimum wage due to union demands: that the wage rate was toolow to mitigate poverty.

Sources: Acharya (1990); Devereux and Solomon (2005)

18 See for example, Sumarto, Suryahadi and Widyanti (2001).

Note 1: In rural areas the poorest are often the landless farmers and casual labours (almost 30 per cent ofthe farming community in Java), who are not able to find jobs elsewhere for want of skills or education.They are intermittently unemployed, and when employed they are engaged in rather low productivityoptions; their real productive engagement in agriculture is limited to the sowing and harvesting seasons—not exceeding 2-3 months. They form the core of the chronic working poor, and the aim of the programmeshould be to net such persons into the poverty list and provide jobs to them for a part of the year. Notonly will this raise their incomes and reduce their slack time, it would also exert an upward pressure onwages in the off-seasons.Note 2: The present estimate of 62 million poor made by the BPS appears to be rather high tocover financially and organisationally, at least at the outset. The best approach is to stagger thecoverage of the programme, beginning with a few provinces.

3.2. Self targetingSelf targeting implies that the targets (in this case, the poor) identify themselves as beingeligible for the programme. Thus if public works programmes are so designed as to offerarduous work at rather low wages, only those who badly need to work will volunteer on theworksites. In principle, both, the costs of identifying the poor are reduced and the identificationis fairly accurate. Planners are also able to expand the programme over a vast geographicterrain as the administrative costs of targeting could be kept minimal.

There is a problem, however: it is seen from Box 4 that self-targeting is not very successful in fightingpoverty in very low wage countries. Indonesia faces a similar problem: the prevailing wage rate for low/unskilled work many times tends to dip below the minimum prescribed wage rate (or even US$ 1 a day);hence self targeting by keeping wages much lower than a dollar a day could defeat the very purpose ofpoverty alleviation. Experiences for PK bear out this dilemma.18

Recommendation: Seen from an anti-poverty perspective in Indonesia, self targeting alone whenused globally might not be a very good sole option for identifying the poor. As a principle, though,self-targeting is important and could be selectively put to use, as will be discussed in the Sections 6and 7 below.


19 For the method, see Hentschel, Lanjouw, Lanjouw, and Poggi (2000); for the Indonesian application, see Suryahadi, Widyanti,Artha, Perwira and Sumarto (2005)

3.3. Small area estimation approachesIt is relatively simple to accurately calculate for the country the proportion of persons below a(nutrition-calorie based) poverty line with the help of large sample surveys on consumptionexpenditure. These surveys, however, do not provide estimates at dis-aggregated units smaller thanthe provinsi as they are based on samples not more than 0.5 per cent of the population. It is infeasibleto conduct such detailed surveys on larger samples or on census basis, keeping in view the prohibitivecosts and time involved.One proposed way out is the ‘small area poverty estimation’ method put forward by the WorldBank. The SMERU Research Institute has carried out this exercise for Indonesia whose broadmethodology is as below: 19

(1) To identify those correlates of poverty at the provinsi level which could be dis-aggregatedat ‘small area’ levels as well (say, demographic, land-related);

(2) To estimate a regression equation between the poverty ratio and its correlates [in (1)above] at the provinsi level to obtain robust coefficients;

(3) To use these coefficients [i.e. the right hand side of the equation stated in (2) above], andvalues of the correlates at more localised levels to generate poverty estimates at thelocalised (‘small area’) level.

SMERU has generated district level poverty estimates though the authors claim that smallerarea estimates as well, could be generated. The problem with this approach is that the moredis-aggregated estimates one tries to obtain, the higher does the standard error become. Next,this method is useful in targeting geographic areas—it identifies geographical pockets ofpoverty—and not people or households. Thus, if an area-specific approach is to be adopted,as in the case of IDT programme of the 1990s, this approach could be useful.Recommendation: Should there be a regional targeting in NEGP? This depends upon the scale atwhich the employment programme is expected to be initiated. If funds are scarce or if the authoritieswish to initiate the programme in stages—either of which has been often the case elsewhere or herein other programmes—then a regional prioritisation with a relatively higher ranking to morepoor or denser areas is a logical choice. As a prelude, it is first recommended that more researchin terms of matching small areas identified by this method and as in Section 3.1 above must beconducted and the method standardised so that it could then be put to use.Note: Geographic targeting towards rural areas could check the rising rural-urban imbalance aswell as stem somewhat, the rising rural out-migration.

4. GOVERNANCE OF NEGPThe nodal ministry where the programme is proposed to be located is the National DevelopmentPlanning Agency (Bappenas), while the operations are to be carried out under the overall supervisionof the Ministry of Manpower and Transmigration (Depnakertrans). The reason why thisarrangement is proposed: Bappenas is a coordinating organ that has an inter-ministerial mandatewhile the manpower ministry is the operational ministry for employment programmes. However,it is expected that the programme will be implemented in a collaborative manner with many morepartners, particularly decentralised government representatives and NGOs to infuse a higher degreeof participation and local ownership (Illustration 1).

27

4.1. At the national level4.1.1 Constitution

A National Council is to be set up, chaired by the Minister In-charge of Planning, and co-chairedby the Minister of Manpower and Transmigration. Proposed members are: representatives fromministries of finance, agriculture, industry, education, health, home affairs [Directorate General ofRegional Autonomy (DGRA)] and public works; BAPPENAS; BPS; provincial governors; and selectprivate sector representatives. The council may co-opt any expert or national / international NGOsfor consultations as and when necessary. The Directorate General of Regional Autonomy has aspecial role here, given the fact that the provinces and districts fall under its purview: they will notbe able to act on orders from other ministries in the absence of a standing order from the DGRA.The programme would have the ‘necessary punch’ and be able to push forward with an inter-ministerial mandate if there is a Presidential Regulation (Peraturan Presiden—Per pres) tosupport it.There must be a full-time officer to attend to co-ordination, financing, governance andadministrative activities of the programme.

4.1.2 ResponsibilitiesThis council is to be responsible for:(1) Designing and guiding the overall policy framework of the programme;(2) Assessing the aggregate and regional labour supplies and demands based on BPS surveys

and assessments made by political leaders at different levels;(3) Coordinating between different ministries and departments—horizontally (between

ministries) and vertically (between the centre and other levels of governance, throughDGRA)—for a smooth administration of target enumeration and labour deployment;

(4) Developing a mechanism of communication and operation to facilitate an inter-ministerialprogramme—a smaller standing committee composed of representatives from Bappenas,Depnakertrans, DGRA and BPS might help; this committee could meet more often, anddecide the modus operandi of horizontal and vertical communication.

(5) Deciding regional allocation and targeting—actual finances could be transferred to eitherBappenas or Depnakertrans; and

(6) Commissioning special studies (and make inquiries) from time to time on any topic itdeems necessary.

This council would meet, say about once or twice a year, to draw up broad policies, prioritiesand guidelines, and take stock of the progress made in the previous year. The smaller committeestated in (4) above could meet more often.

4.2. At the provinsi level4.2.1. Constitution

There would be a Provinsi Council, to be chaired by the Provinsi Governor. Proposed members are:representative from Regional Development Planning Board (Bappeda), select provincial parliamentmembers; representative from BPS; Depnakertrans representative; DGRA representative;agriculture, education, health and public works representatives; and kabupaten representatives (Bupati).Experts and NGOs could be inducted from time to time.

4.2.2 ResponsibilitiesThe provinsi council would be expected to:


(1) Interpret the national policy in the local context;(2) Coordinate inter-kabupaten activities—e.g. manage inter-kabupaten projects (water flows

and rivulets, roads, other commons) and resolve conflicts if any;(3) Standardise the product design;(4) Disburse funds to kabupatens in accordance with agreed principles;(5) Control and monitor flows of funds to the kabupatens;(6) Conduct inspections on sites and assess conditions of work and payments made;(7) Carryout special studies, surveys and inquiries as and when deemed necessary.

The executive powers at the provinsi level would lie with the governor (or an executive officerappointed by the governor, as the case may be). Activities: tracking flow of finances, maintainingstatistics and MIS, gauging progress, organising inspections, coordinating with DGRA for verticaland horizontal coordination, among others.

4.3. At the kabupaten/municipality (kota) levelThe kabupaten [or the city municipal council (kota) in cities]—there are about 100-140 villagesin a kabupaten—is to be the main implementing agency. As stated earlier, this proposal is inconjunction with the recognition that a local job creation programme should best be rooted atthe local level to be most effective. There would be a kabupaten level committee chaired bythe bupati. Other members: representatives from technical and line departments, heads ofkecamatans, a local NGO representative, and two members of workers (one of who is to bea woman worker). A DGRA representative would be a permanent invitee. This would be theadministrative-cum-planning committee.The kabupaten shall appoint a full-time programme officer in-charge of NEGP, who is to workunder the supervision of the bupati. This officer is to coordinate between the desa/kota/locallevels and itself on the one hand and technical (project executing) departments (or privateentrepreneurs, as the case may be) and itself on the other, to match the demand for work andits supply. The programme officer is to maintain a secretariat which would include a financeoffice, an engineering office and a statistical cum MIS office. The following tasks are identifiedfor the kabupaten committee and its programme officer:(1) Maintain a (dynamic) shelf of executable projects which are closely aligned with sectoral

priorities (as in Section 2.2.2, in consultation with technical/line departments)—this jobwould require cooperation with kecamatan and desa/kota/local level officials as well;

(2) Liaise with BPS on the one hand and local levels on the other, for a continuous updatingof the list of beneficiaries;

(3) Provide information to desa/kota/local officials on job avenues so as to facilitate desa/kota/local personnel to direct job seekers to project sites;

(4) Advise and direct technical and line departments (or private entrepreneurs) to initiatework on projects—for details, see later in Section 6;

(5) Take stock of the labour supply and demand situation, progress made in job provisionand gaps existing, and other issues in job-creation; all aimed to minimise the demand-supply disparities;

(6) Coordinate with the kecamatan officials in conducting inspections of sites, and locallevels to continuously assess the progress on the programme—in fact this is the only overtrole of the kecamatan as of now, though more might emerge later;

(7) Design and run a strong MIS;(8) Develop partnerships with select local NGOs to help in targeting and operations;(9) Maintain a fully up-dated, computerised and functional statistical office, connected with

technical/line departments, the provinsi, the centre, and if possible, the kecamatan anddesa/kota/local levels.

(10) Attend to grievances of applicants—see Section 8, later.

29

20 MEGS follows a similar arrangement.21 The notion of demand-led should be guided by whether or not the project adds net value after its completion.

The technical/line departments (or private entrepreneurs), at relatively small periodic intervals (sayfortnightly or monthly), are to report their labour requirements to the programme officer for all projectslisted in Section 2.2.2 in which they plan to, volunteer to, or have been asked to, enlist labourfrom the programme. These requirements, in turn, are to be sent to the desa (or kota/local) heads/secretaries, based on which the latter could direct workers on sites where work is available.20

On its part, the kabupaten office would regularly ask the technical and line departments to initiate work onprojects when the demand emerges (see Section 6, below). It would also advance to the technical/linedepartments, moneys to be spent by the latter on paying the wages of workers hired under the guaranteefor project types (1), (2) and (4) in Section 2.2.2, and full amount for project types (3) and (5). This is theonly operation where an administrative unit other than the central government would sanction or dealwith money; even here, it would be a bank-transfer.Note: There are technical and line departments at all levels of governance: centre, provinsi andkabupaten. The programme officer would have to maintain liaison with all, because a project mightfall into the jurisdiction of any of these three (Illustration 2).


Illustration 1: Governance of NEGP

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31

Illustration 2: Flow chart of work provision under NEGP

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4.4. At the desa/kota/local levelThe jobs of key officials at the desa/kota/local levels would be to:(1) Cross-verify the list of workers in village meetings—these lists are to be discussed in village

meetings to maintain transparency. In large urban areas, verifications could be made with thehelp of corporate officials and (maybe) recognised NGOs.

(2) Identify infrastructure projects required for the village and its surroundings—they have tobe demand-led, as articulated by the desa/other local communities;21

(3) Provide to the kabupaten office, lists of job-seekers from time to time (from a live registerthat they would maintain), and obtain from them numbers, types and locations of projects;

(4) Collaborate with the kabupaten office in monitoring and evaluation;(5) Coordinate with the kabupaten office in grievance redress;(6) Form committees of users of projects to ensure their satisfactory progress and completion

and get regular feedback from them on their use;(7) Co-opt village level NGOs and workers’ representatives.

Important note: As stated earlier, there are numerous local development and anti-povertyprogrammes currently in operation in the country. It might be possible to develop somesynergy with them in select spheres: e.g. identification of projects—KDP also does it, and thisinformation could be obtained from them. Some office space and administrative personnel toocould be shared by different programmes. There might thus be some saving on costs andduplication avoided.

5. THE SPECTRUM OF ASSETS TO BE CREATEDAt the outset it needs statement that projects identified for NEGP must form a part of theoverall sectoral development strategy of the country. Many of the projects would already beon the shelf: some on-going while others on drawing boards. An additional number will haveto be drawn up if the labour supply in a specific region out-strips its demand. The preparationis usually for about 10-15 per cent more work than the average demand. This activity has to beundertaken by the technical and line departments, first individually and then in a co-ordinatedmanner under the stewardship of the programme officer. The consolidated list of projects atthe kabupaten could be named as the Blue Print.Each of the project types in the Blue Print, listed in Section 2.2.2, is discussed in turn here.

Box 5:Do assets under employment programmes help in the net value added?

Is the net value added by taking up projects under NEGP type programmes reasonably large—morespecifically, is the benefit from the project offset by the value lost in, say agriculture from where theworkers are drawn? Answer: In general, if project schedules are timed in such manner that peak seasonsare left out, this problem could be taken care of. Java, which has among the densest populationsanywhere, should not have its agriculture affected because of withdrawal of some workers. As seen fromdata in Bangladesh (also very densely populated), agriculture has actually benefited because smallfarmers engage in public works programmes and plough back their wage earnings into their lands toraise productivity.

The most striking example other than MEGS where assets were created at a large scale was in China inthe late1980s/early 1990s. Under the Yigong-daizhen programme, there were 130,000 kilometres of ruralroads (and 8,000 bridges) constructed, connecting 10,000 villages, and 21 million rural people weresupplied with drinking water supply.

Sources: Subbarao (1997); Ling and Zhongyi (1995)

21 The notion of demand-led should be guided by whether or not the project adds net value after its completion.

33

5.1 Large on-going projectsThere is possibility of deployment of workers from the employment programme in relativelylarge, on-going (as well as planned) rural infrastructure projects: e.g. of water management, irrigation,drainage, roads, rural electrification, sanitation, construction of buildings (both rural and urban),drains, sewerages (both rural and urban), and the like. These projects could be community controlledas well as private.Of-course, these projects have their own requirements of human power, some of which wouldbe of highly skilled workers while the others, semi-skilled and unskilled. The proposal here isto deploy workers from the programme for undertaking part- or all unskilled component ofthe work.

5.2 Up-keep and repair of existing projectsDeployment of workers in already existing projects and activities is a distinct possibility. E.g.presently there are no formal municipal services for road cleaning, sewerage, drainage, orwaste disposal in cities. These activities could be put in order and the urban poor could bedeployed to undertake them, financed by the employment programme.Other activities could include regular tree-planting and the up-keep of saplings or upkeep andrepair of roads and canals, among others. In fact, such services are highly localised and couldbest be identified by local authorities at the kabupaten or kota levels.

5.3 Public works projects exclusively designed for NEGPThere is a possibility of designing efficient (labour intensive) medium or even medium-largeprojects where workers from the programme could be employed for 1-3 months at least. Inrural areas, a typical choice of assets could be:(1) Watershed development, (small and minor) irrigation projects, percolation and under-

ground recharge structures;(2) Drinking water supply projects;(3) Construction (and repair) of connecting roads;(4) Re-planting of degraded forests and planting of new forestry (on common lands and

undulating terrains to check landslides, and stopping excessive loss of fertile top-soils);(5) Building and repair of schools, health centres, community structures, rehabilitation, at

times of floods or natural calamities, or otherwise;(6) Construction of industrial parks for SME/rural industries.

Note: Irrigation/water management, soil conservation and forestry projects and industrial parkscould be taken up both on common and private lands.

5.4 Innovative and/or high risk projectsLabour from the employment programme could be deployed in innovative projects, whichmight not otherwise be launched in the absence of some subsidy: in this case coming in theform of wages from the employment programme. Some examples:(1) Indonesia primarily grows rice. Profitability in growing rice is not particularly high despiterecord productivity levels of 4+ tonnes per hectare (particularly in Java), because of pricecontrols and limited purchasing capacities of a large number of people. Also, a two season ayear rice production every year exhausts the soils, in turn which require increased inputs tomaintain the same productivity. Is crop diversification possible?


Box 6:Three questions about deploying NEGP workers on large projects

Q1: Would it not be more feasible for contractors to employ their own staff to maintain higher efficiency?

A 1: Yes, but in this case the employment programme funds the wages if workers from the programme areemployed, and this might just tilt the cost balance in favour of employing workers from the programme.Also, it is not necessary that all unskilled workers on the project are engaged from the programme; someefficient, specialised or trusted ones could be directly employed as well.

Q2: Would it not impinge upon the welfare of an unskilled (non-poor) worker in the market if s/he is denieda job so as to accommodate another worker on the poverty list, possessing a WEC?

A2: Yes, but the proposal being made here is only for situations when local labour is not available andworkers have to be transported from outside. Under these circumstances, those not on the list arenot directly deprived. This proposal would be more apt for projects like, schools, roads, healthcentres, etc. being built on remote islands or other low population density locales.

Q3: Would not a private venture get a windfall benefit because of subsidised labour (even if it is for theunskilled component only)?

A3: Yes, but in most cases the component of unskilled labour in large projects is rather modest. However,if it appears that a private party is getting windfall gains; methods of part-cost recovery could beenvisaged.

Box 7:Experiences of labour intensity and efficiency

There are projects that are fairly labour intensive, or have possibilities of using labour intensive technologies.But are labour intensive technologies cheaper? In some types of projects they are. Studies from differentcountries, including Cambodia, Ghana, Madagascar and Thailand, show that labour-based alternativesare about 10-30 per cent cheaper compared to capital intensive ones. Next, in these countries theyreduced foreign exchange requirements by up to 50-60 percent. Data further suggest that within thesame budget, they created 2-5 times more employment. In Ghana, small contractors were trained torehabilitate and maintain feeder roads, using employment-intensive methods; as a result, three timesmore jobs were created. Again, in Cambodia where the average cost of construction one kilometre ofroad is US$ 15,000, the overall weighted average cost of labour-based works is 17 per cent lower. Theseare facilitated by careful site selection, close supervision, and right production techniques.

Source: Devereux and Solomon (2005)

Box 8:An example deployment of labour under innovative and risky programmes

In Maharashtra, farmers have been encouraged to grow horticulture and fruits in place of millets. Labour ismade available from under the MEGS. Within the period 1992-2004, the area under horticulture in the provinceincreased from a few hundred hectares to over a million, and the produce is now exported. Individualprofitability has increased and so have spin-off activities. In many cases processing facilities too have been setup, inducing the value added to stay in the local/rural areas.

A typical risk is marketability of the products: the product has to be marketed fresh or else, cold chains andprocessing facilities need to be established, for which infrastructure is essential. Other risks: high cost, breakin the value or cold chain, market collapse.

Modus operandi: Workers seeking engagement are assigned to private farmer-employers who take up suchprojects for a period 1-3 months at a stretch. If workers are required for longer periods, a new batch isassigned.

MEGS directly pays the workers.

Source: Acharya (2005); Gulati, Minot, Delgado, and Bora (2005); Vatsa (2005)

35

MEGS has helped achieve this (Box 8). Most of Java has a far more favourable agro-climatic environment,both in water availability and soil quality compared to, much of Maharashtra. If possibilities of cropdiversification and vertical integration are possible in Maharashtra, Java would present superior options,both for crop diversification and vertical integration (e.g. in fruit / vegetable processing).(2) Some innovative projects of renewable energy could also be experimented with, as much of the ruralhinterland is not too well provided with modern energy sources. One way experimented with in other lowincome locales is to harness (renewable) natural combustible gas generated from organic waste. A singleproject could serve a village (or part of a village), it could mainly, though not exclusively be community-based—it could be private sector-operated as well—and deploy workers paid by the programme.

5.5 Small village infrastructureThe programme could additionally continue to undertake constructing local infrastructure,typically the way it did under its earlier incarnations, namely the PK. The difference proposedthis time is that the project should be selected after an assessment of its utility by the localcommunity, for ensuring its demand. Links with larger projects could be one such approach:e.g. laying down pipelines from existing/new irrigation projects for augmenting drinking watersupply on a small scale.Note 1: In those projects which are exclusively designed for the guarantee [(3) and (5) in Section2.2.2], labour intensity must assume primacy. While there should be no specification of technologyratios per se (i.e. expenditure on wages to total expenses), effort could be made to spend at least/about 40-50 per cent the total expenditure on wages (data for Indonesia suggest that this figure hadgone up to 70 per cent in some PK type projects in the past; so this suggestion is not unrealistic).The ratios could be in the said range when aggregated at the kabupaten level and not for individualprojects.Note 2: In projects where there is benefit to the private sector, a user fee or part cost-recoverycould selectively be contemplated at some stage.Note 3: It was stated in Section 4 (see, Important note) that there are a number of other anti-poverty development programmes functioning in the country. Many also create assets. Couldsynergies be established between the NEGP and similar programmes? For example, if KDP isbuilding water reservoirs, could NEGP build downstream canals? Such efforts could bringabout sufficient economies.Note 4: Assets created under the programme could also find some complementarity with otherpromotional and development programmes: of entrepreneurship development, SME growth,youth employment, and so on. This would not only enhance the use of assets, it could reducethe overhead cost of the programme as well.

6. THE WORKING OF NEGP

6.1 Responsibilities and pre-conditionsNEGP is to work as a large partnership between different organs of the government (and to asmall extent, private sector). Thus, while the kabupaten programme officer is to maintain ashelf of projects, the preparation of department-wise lists will have to be the individualresponsibility of each of the technical/line departments—at the centre, provinsi and kabupaten—which then are to be collected and collated by the programme officer.

Technical/line departments at the central, provincial and kabupaten levels as the case may be, wouldprincipally be responsible for undertaking and execution of the works.22 In the event that work is undertaken


under category (4) of Section 2.2.2, private parties are to perform this function. These technical/linedepartments (and stakeholders) would choose locations, design and execute projects, pay for materials,capital costs, wages and other services, certify closure of work and conduct all those activities essential tocomplete projects.It does not matter as to how many technical agencies, departments and private entrepreneursare involved in the construction and reconstruction process. Work could be executed throughcontractors or by authorities/stakeholders directly if they have the capacities. In fact there areseveral ministries and departments which have initiated labour works from time to time, as PKis more a principle rather than a programme and some are still operational. If they too couldestablish coordination with NEGP (at the kabupaten level for supply of labour) theirprogrammes too could come under the same umbrella. In this regard, their administrative coststoo could reduce.A strong dynamic (i.e. regularly up-dated) MIS coordinated at the Kabupaten level linking desas/locallevels for ascertaining numbers and availability of workers at each location on the one hand, andworksites (through technical and user departments) to obtain estimates of the demand for workersat the sites on the other, is to be established.

6.2 Operationalising NEGPAt any time a number of works are expected to be operational [capacity: about 10 per centhigher more than the estimated demand—at least in categories (3)-(5) from Section 2.2.2].Initiation of works is the sole responsibility of the technical and line departments, whichconceive and implement these in close tandem with their sectoral priorities. Some projects[typically category (5), Section 2.2.2] though, could be initiated on behest of village communitiesas well.The process of initiation of work is expected to be somewhat like this:(1) The kabupaten programme officer, on receipt of the lists of on-going and proposed

works along with cost statements from technical and line departments, is to prepare akabupaten level financial estimate on a prescribed format to send it to the centre (Ministryof Planning/Labour) through the provinsi. This exercise is to be repeated every quarter.

(2) Based on this estimate the centre/provinsi authorities are to release funds to the kabupatenon a quarterly basis on pre-assigned dates. A separate bank account is to be maintainedfor this programme at the kabupaten level.

(3) The programme officer is to ask the technical and line departments to initiate at least 30per cent of the identified projects in categories (3) and (5) immediately upon receipt offunds, under the assumption that at least this much demand for work will always bethere. The funds are to be transferred to the technical and line departments for furtherdisbursal in accordance with the estimate as in (1) above.

(4) The programme officer is to make a detailed assessment of the further labour demand(beyond 30 per cent) based on data received from desas/local levels, as in point (3),Section 4.4 above. Based on this assessment work on more projects could be initiated forwhich resources would be transferred to the technical departments by the programmeofficer.

Workers are expected to apply for work with the village secretary or head, who in turn woulddirect them to pre-identified work sites. The maximum delay between, after the request forwork is made and work is actually provided could be up to 7-10 days. In the event that workers areexpected to travel to distant sites for work they should be forewarned of it at least two days in advance.Workers reporting to worksites must carry their WEC, which becomes a basis for marking attendance and

22 It is well known that works are undertaken by each of these agencies depending upon the scale and jurisdiction. Large irrigationand inter-province road projects thus are the responsibility of the central government (Ministry of Public Works), while smaller soilconservation projects are the responsibility of the kabupaten level technical departments.

37

receiving wages.It is the discretion of the (desa/kota/local) authorities as to where to the deploy workers. Suchdiscretion will extend to the type of work and ownership of the project as well. In principle,the criteria for the authorities to deploy workers could include: the labour demand on differentwork sites, distance of the sites from the workers’ villages, and (perhaps) individual attributesof the workers (e.g. female workers with small children might not be sent too far, etc.). Theprogramme officer could guide the desa/kota/local heads on such matters.In the event that work is required by a large (say 20-25) workers and is not available on existingsites, a new site could be opened from the shelf of projects in (3) or (5) [as listed in Section 2.2.2]—see (3) and (4) above.There might be situations in which projects require a certain specified quantity of workers fora defined period. This might not match with the supply of workers all the time. At the sametime, there might be other situations where more workers than what the projects could absorbask for work. To minimise this mismatch, workers might be required to sequence their availabilityaccording to the demand, and be asked to do so. This is permissible because NEGP is notexpected to be so much an emergency relief programme as an income-generating cum asset-building programme. Hence, as long as the authorities undertake to provide up to threemonths of work to workers in a household in a calendar year (combined), it should not somuch matter as to how they sequence them. There should, however, be no carryover of oneyear’s work quota (of a household) into another. Next, the technical/line department authoritiesmust be sensitive to the fact that during the peak agricultural months, the demand for labouris less; hence the work intensity should be kept low during those months.Note 1: There should be transfer of resources from the kabupaten to the technical departmentsthrough a bank transfer. The only point at which cash (currency) comes into picture is thedisbursement of wages (and perhaps material) by the technical departments. Direct cashtransaction with the workers is the prerogative of the technical departments alone.Note 2: It might appear complicated that labour demand with supply would be matched, whenworkers offer work for 1-3 months while projects might have completion cycles of several monthsto more than a year. In reality it is not, given the facts that: one, the same workers need not workon the site—one batch could be followed by another; two, some workers might be engaged forlonger periods if they are indispensable to the projects (Section 6.3, point 4, below); and last, therecould be workers other than those in the list who could be hired to complete urgent jobs, at thediscretion of the technical/line departments.MEGS has achieved positive results on this count.

6.3. Eligibility, rights and duties of workersThe programme is to be open to workers from households identified as ‘poor’. Those in the list,willing to engage in physical work (skilled, semi-skilled or unskilled, depending upon thequalifications and the requirement of projects in the vicinity at that point of time), must beprovided work under the programme.Note: There is thus some self-targeting among the poor here: only those willing to engage inmanual labour at the stipulated wage for a minimum length of time will join.The following proposals could be considered:(1) ‘Poor’ persons above the age 17 years (and not too old to work—say 60 years) will be

permitted to enrol for work. In the event that a household has none in the said age group,persons having attained 15 years or up to 65 years could be considered. Such persons,however, should not be given heavy work.

(2) Each household identified as poor in a particular year will be provided with an (annually renewable)card stating the number of members, by age and sex. Card holders are then expected to register


under NEGP with the kabupaten authorities (the programme officer). A separate card—the WorkEligibility Card (WEC)—will be given to them, in which entries of eligible members who volunteerfor work will be written. A possible sample of WEC is given in Illustration 3. The WEC is to be alegal document—preferably made out of plastic and/or laminated. Any tampering is to be a offence.A photo identity on it could be considered.

(3) Only one person from a household at a time will be provided work under the guarantee.There could be substitution, though: for example, if a household having two registeredpersons offers to work for 30 days at a stretch, then there could be an arrangement bywhich, for part of the time one person works while the other person works for the rest ofthe time. The WEC must have entries of all eligible workers in the household for suchfacilitation.

(4) Work should be guaranteed for a maximum of three months in a year to a household, i.e.it should guarantee additional annual income in the range Rp. 800,000-1,000,000 perhousehold (see section on Wages for this calculation).23 In the event that the worker(s)wish to work more (beyond their quota) on the same site and that the employer(s) havevacancies, they could continue, but not under the guarantee. For this additional work, theworkers will have to renegotiate with the employer(s): both, wage and other conditions.

(5) Job seekers would normally be provided work within a distance that could be reached inless than half hour from their abode. In the event that a large group of workers from thesame vicinity is to reach a site some distance away, the employing authorities couldconsider arranging transport for them at project expense. In the event that work is notavailable in the vicinity, workers could be transported to longer distances (at projectexpense), but maximum effort should be made not to transport rural workers to sites inlarge urban centres, lest it encourages unwarranted rural-urban migration.

(6) There would be provisions on the work site, of drinking water, first aid and such otherfacilities that are essential for a gathering of a score or more workers. In the event thatthere are at least 12 women with small children, facilities to look after these children areessential. It is practical to appoint one of the older [or very young persons as mentionedin (1) above, or lactating mothers] to take care of smaller children or do other suchchores, and be paid a minimum wage.

(7) Workers will have to ensure a minimum number of days of supply of labour from theirhousehold at a stretch (say, 30 days). In the event that this assurance is violated withouta reason—e.g. serious illness of self or dependents, or death in family—the concernedhousehold might face the risk of having its WEC temporarily suspended. Worker(s) shouldinform the site authorities of such an eventuality in advance unless the exigency does notpermit it. They should eventually inform the village head, who will adjust the worker’swork time quota accordingly.

(8) Workers are not expected to refuse work unless there are specified reasons; e.g. relativelyolder workers might not want to undertake strenuous work, female workers might notwant to take up physically very heavy tasks, some workers might have specific healthproblems, etc.; else they might face censure as stated in (7) above.

(9) Workers would be offered the prescribed wage (Section 6), and would be protected bylabour standards as laid down by the law. Wages are to be paid weekly.

(10) Workers would not have the right to any continuity in job, permanency in employment orother similar obligations due to their association with the NEGP, irrespective of the lengthof their association.

23 There are several ministries and departments which have initiated labour works, as PK is more a principle rather than a programme.If they too could evolve coordination with NEGP (at the kabupaten level for supply of labour) their programmes too could comeunder the same umbrella.

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7. THE WAGE RATE

7.1. To fix the wage closer to the prevailing wageThe two most important tools for raising workers’ incomes in any anti-poverty employmentprogramme are the wage rate and the number of days of engagement. The latter is fixed witha ceiling of three months; the former is discussed in this section.In the event that the wage in an employment guarantee programme is fixed normatively at alevel higher than that prevailing in the market (even for the least paid workers), it mightbecome administratively very difficult to target the programme efficiently (vertically efficiency),as the pressure from the non-poor to crowd-in would be high. A higher wage would as well,inhibit the programme from geographically spreading (horizontal efficiency). This is the reasonwhy wages are fixed at low levels. However, on the converse, offering a very low wage putsa question mark on the principle of poverty alleviation through wage employment programmes.The standard method of fixing wages in programmes of employment guarantee elsewhere isto pay somewhat less than (in moderate wage countries) or equivalent to (in low wagecountries) what the prevailing minimum wage is. It is argued that this is not only desirablefrom the point of self-targeting; it also would not overtly disturb the labour market.The monthly wage actually paid for the least remunerative jobs—casual work in agriculture—was in the range Rp. 275,000 (Rp. 328,000 for male and Rp. 181,000 for female) as in August2004, which was less than half the prescribed minimum wage rate.24

It is proposed here to fix the wage at about similar level as stated above [say Rp. 350,000 permonth (which is the rough average of the lowest and next prevailing wage rate) as the nationalaverage and let each provinsi fix wages at par with their prevailing standards of living andprices or wage rates].25 The programme would thus increase the numbers of days of work at thiswage rate to raise the overall incomes of workers, rather than raise the wages per se. A bettergender parity in wages, of-course, could be brought about (see Section 7.2). While it is admittedthat fixing the wage rate at the prevailing level could be a violation the ‘minimum wage’ principle,it could still be justified: for one, minimum wages apply to formal sectors only, and an employmentprogramme is not an attempt to formalise an otherwise informal sector; and two, employmentguarantees by their very definition are not meant to be a means of active intervention in the labourmarket, rather they are meant to provide succour to poor workers through providing somesupplements to their income.

25 Papanek (2005) proposes fixing wages at rates lower than the prevailing market wages to effect self targeting. This suggestion,however, is not preferred here for reasons stated in Box 4.

Box 9:The gender question

Should there be gender quotas in providing jobs under the programme? This question assumes importance in certainlocales where:

Women’s status is as such low, but gets enhanced, including an improvement in their human capital status,through better participation in market work (+impact);

Women can be better trusted with money for ensuring an improved nutrition status of self and other familymembers (+impact);

Women are already over-burdened with homework, and more work will only add to their woes (-impact);

The nature of work is such that it takes a heavy toll on women’s health (-impact).

In Indonesia there questions do not appear to be overtly strong either way; there is therefore a priori no case forquotas. Women workers, though, should not be discriminated against in the programme.


Will poor workers, by and large, be available at this wage rate? The answer is, yes; because evidence showsthat until so far they have come. In any case, Rp. 181,000-328,000 is the average (lowest) wage, implyingthat some persons work at wages lesser than this, as well. If they additionally see the continuation of theprogramme and its spin-offs, they will certainly find work here to be attractive. Result: Many workers andtheir households participating in the programme might not ‘cross’ the poverty line, but they certainly willbe a few rungs higher than their earlier income position.

7.2. To pay time rate or piece rate?In normal welfare programmes, payments are made gratis (Y amount for being unemployedfor Z days, etc.), but when the payment is made against work done—which in turn providesa worker a sense of dignity and right—payment must be linked to the extent of work done, of-course with a lower ceiling.It is proposed here that wages are paid on a piece-rate basis, i.e. workers (both male and female) arecompensated in conjunction with the work that they complete. If a worker puts in ‘normal dexterity’at her/his work, for say 40 hours in a week, then s/he should be able to earn a wage rate in thevicinity of Rp. 350,000 per month (actually, its equivalent at the location) under the programme.In the event that a worker puts in extra effort and exceeds the normal work target, s/he could earnmore. Such incentives are vital for keeping efficiency high.A wage payment manual will have to be drawn up, which classifies wages against work donein unskilled/semi-skilled/skilled activities. Some examples:

1. Digging soft earth (Y1 cubic metres) and heaping it at X1 metres distance – payment Z1Rp.

2. Breaking hard surfaces or digging deep gorges (Y2 cubic metres) – payment Z2 Rp.3. Planting Q1 saplings – payment Z3 Rp.4. Masonry with brick (plastering R1 X R2 surface area) – payment Z4 Rp.5. Bitumen surfacing of road [(R3 (breadth) X R4 (length)] – payment Z5 Rp.6. Cleaning up roads [R5 (breadth) X R6 (length)] – payment Z6 Rp.7. Emptying out water from deep ditches gorges (S kilolitres) - payment X7 Rp.

41

Illustration 3: Possible structure of the Work Eligibility Card

Republic of IndonesiaNEGP Work Eligibility Card

Calendar Year (Jan.1 -Dec. 31, 2007)

1. ID Number:2. Location

Desa/Municipality wardKecamatan:Kabupaten/KotaProvinsi

3. Household members

Side 2 (Back of the same card): Attendance

Week 1 Day 1 Day 2 Day 3 Day 4 Day 5 Day 6 Day 7Week 2 Day 1 Day 2 Day 3 Day 4 Day 5 Day 6 Day 7Week 3 Day 1 Day 2 Day 3 Day 4 Day 5 Day 6 Day 7Week 4 Day 1 Day 2 Day 3 Day 4 Day 5 Day 6 Day 7Week 5 Day 1 Day 2 Day 3 Day 4 Day 5 Day 6 Day 7Week 6 Day 1 Day 2 Day 3 Day 4 Day 5 Day 6 Day 7Week 7 Day 1 Day 2 Day 3 Day 4 Day 5 Day 6 Day 7Week 8 Day 1 Day 2 Day 3 Day 4 Day 5 Day 6 Day 7Week 9 Day 1 Day 2 Day 3 Day 4 Day 5 Day 6 Day 7Week 10 Day 1 Day 2 Day 3 Day 4 Day 5 Day 6 Day 7Week 11 Day 1 Day 2 Day 3 Day 4 Day 5 Day 6 Day 7Week 12 Day 1 Day 2 Day 3 Day 4 Day 5 Day 6 Day 7Week 13 Day 1 Day 2 Day 3 Day 4 Day 5 Day 6 Day 7

S. No Name of the household member Sex Age Relation with the head1 Self2 Wife3 Son4 Daughter5 Younger brother?67


Box 10:Measurement of work in MEGS

In MEGS, work is measured and payments are made weekly by local supervisors from technical departments.Specific tasks are allocated to groups of 8-12 workers known as ‘gangs’. All members of a gang are paid thesame amount. Wages, of course, could differ between gangs as they engage in different tasks and/or coulddiffer in productivity. If the (task/gang) productivity is very low, each worker is paid a minimum amount.This method of work measurement tends to cut costs of work measurement and induces each worker in agang to catch up with the other. It, however, also shelters the less efficient workers in a gang.

It has been a useful of training some younger workers to be taught how to measure work. This keeps malpracticesat a minimal level.

26 This is the practice in Sri Lanka.

Such lists are available with civil work departments everywhere in great detail: they have to be standardisedaround the mean wage rate for the guarantee programme, which could then be referred to a Wage Manualof NEGP. Next, there has to be a separate wage schedule for different locales—island specific, rural/urban etc., taking into account regional variations in the prevalent wages and the cost of living. In eachcase, the national average wage (or Rp. 350,000 per month) for the lowest paid job should form thereference point.Finally, there is the question of paying part of the wages in kind (food). This approach ensuresthat there is some food security as well as protection against short-term food price fluctuation.Since subsidised rice distribution is very much on the government’s agenda, a link with thatprogramme could create synergies. However, Indonesia is not surplus in rice anymore, andsuch a measure might become detrimental to the programme or overall budget. This issueneeds larger consultation at local levels as well as with the Ministry of Agriculture and BULOGbefore a firm decision is arrived at. One option here is to leave the choice to the workers: ifthey wish to get part of the wages in kind, food coupons, which could be exchanged for a fixedquantity of rice, could be issued to them.26 Local food vendors could be authorised to accept thesecoupons, in turn which could be en-cashed in banks at face value.Important: It is recommended that wage rates in the Wage Manual be indexed each time there isan official assessment of the standards of living—usually once in two years. If, however, there is asudden increase in the price of a key product, as has been the case with petroleum products in 2005,there should be provision for ad hoc revisions as well. Next, in the unlikely event that there is adrastic reduction in market wages, the wage structure in the employment programme should notbe scaled downwards—this way, the programme will help stabilise the lower ceiling on wagesovertime.Note: Among the well established indicators of whether or not an employment guaranteeprogramme is functioning with a fair degree of efficiency, is the presence of female workers inlarge numbers. Many male workers might not always find the wage too attractive while femaleworkers would, given the fact that they get a relatively more fair deal in these programmescompared to what the market offers to them.

43

8. MONITORING AND EVALUATION

Monitoring and evaluation, preferably carried out by at least three types of agencies—departmental audit,independent appraisals and user evaluations—are necessary for ensuring the success of any programmelike this. All data have to be periodically discussed at least the three councils mentioned in Section 4.

8.1 The questionsIt is necessary to answer the following nine questions for efficient operation of the programme:(1) How many jobs are created, by month and year, location and gender?(2) What is the rate of deployment of workers, by type of site (as in Section 2.2.2)?(3) What are the expenses made on wages, by location and gender?(4) What is the expense on the programme, by type of site (Section 2.2.2) and location?(5) What is the break-up of expenses in different kinds of works stated in (3), (4) and (5) of

Section 2.2.2?(6) What is the rate of completion of assets, at least for categories stated in (3), (4) and (5) of

Section 2.2.2?(7) What is the feedback from the stakeholders of assets created, as listed in asset categories

(1), (2) and (4) of Section 2.1.1 about the labour supply (regularity and quality)?(8) What is the wage rate that workers have actually got?(9) What is the extra income gained by the workers, and what is the change in their standards

of living as a result of the programme?

These questions require data on least at four levels: the project, kabupaten, selectively thestakeholders, and finally the workers (Illustration 4).

8.2. Data generating processFirst, the project authorities must keep account of the work done, on a periodic (weekly) basison each site. These records are to be collated at the kabupaten (monthly), and then at theprovinsi say every quarter, where the results could be scrutinised by the Provinsi Council.Annually, these figures could be collated at the national level for the National Council to makejudgements on the progress made and offer recommendations for future action. This task is notdifficult, as all projects keep such accounts anyway: they just have to be collated by thestatistics department in the programme officer’s office. The difference: accounts for labourexpenses (and attendances) for workers engaged through the employment programme would haveto be separately maintained at the project level, which is an extra step.Second, the kabupaten authorities are to maintain data on (financial) reimbursements thatthey make to the technical departments which could be collated and tabulated annually. Thismust be matched with the technical (completion) data to ensure consistency. For projectslisted in (1), (2) and (4) of Section 2.2.2, the reimbursement would be for labour cost alone—for the workers deployed through the programme—while for projects listed in (3) and (5) thereimbursement will be for expenses on labour as well as material. The accounts will have tobe accordingly maintained.Third, it is proposed that there are feedbacks obtained from the users of assets on the creationand use of assets. It would be useful if annual/periodic reports from these ‘stakeholders’ areobtained, so as to ascertain the completion and best utilisation of the assets created. Desa/local or kecamatan authorities could facilitate these group meetings.


Fourth, the BPS, while conducting its annual poverty (census) surveys, must collect data on the workprovided under the programme in the previous year, for which additional 3-4 questions will have to beadded to the existing questionnaire. Additionally (or alternatively) these data could be collected on arepresentative sample basis, either along with the three-yearly SUSENAS surveys or the annual SAKERNAS(labour) survey.Note 1: There is need to set up a grievance redress mechanism so that aggrieved workers couldmake a representation. The complaints could be about work, wage, non-compliance, or any othermatter. These ‘grievance cells’ should normally be located at the kabupaten level, though officialsmaking inspections or those supervising sites, or even desa/local officials could also entertainindividual complaints.Note 2: At the desa/kota/local levels, there should be at least quarterly meetings held to discussissues in job creation, wages paid, problems faced by the workers, and other issues like improvementsin the programme. Opinions on identifying newer projects too could be sought. Involvement ofordinary workers in the programme would help in better participation and gauging the nuances ofwork at the local level.Note 3: Non-receipt of funds from the higher authorities to the kabupaten, delayed or insufficientfund transfers of funds to technical/line departments, or non-payment of wages are to betaken rather seriously and explanations sought at the highest level for lapses.

9. HUMAN SECURITY

9.1 Capacity buildingCapacity building in programmes like these has been a rarity anywhere until so far. Neverthelessit would be a major challenge for a programme like this to create opportunities for workers togrow.27 The programme, therefore, must have some add-ons for workers to grow.One approach is to train workers in specific skills which are closer to their existing skills andexposure, so that the job could be carried out more effectively. The following could beattempted:1. Aim to train about 4-5 per cent of the target group workers each year: i.e. 0.50-0.75 million

persons. Aim at training persons located in rural areas and outer islands rather than thosewho are urban and Java-based, with women adequately represented.

2. Target the young, who have some proven capacities to pick up knowledge and also havesufficient time to make use of these. The selection process must be competitive: after theend of the first year of the programme, the choice of candidates must be made through afair and transparent process based on merit.28

3. Selected candidates could be trained for one month in the second year of the programmeif his/her household puts in a total of three months. In fact, one month could be carvedout of a full quota of work of three months; i.e. this household gets three months ofwages for two months of work, and receives one month training.29

4. The broad areas in which training could be provided—given that the poor would bebarely literate—are in masonry and house building, commercial/house painting, somebasic aspects of hydrology and water management, basics of soil management, simplehandling of mechanical tools (bicycle repair, mending punctures in tyres, changing heavyvehicle wheels, boat making and repair, etc.), simple electrical fixings (changing fuses, joining

27 MEGS has begun to face a ‘worker-exhaustion’ after 25 years; workers wish to grow out of pure unskilled work at minimum wage[Parikh, Acharya and Krishnaraj (2005)].

28 Details of such a programme have been elaborated in Acharya, Basak and Iyer (2005).29 BGMEA, UNICEF and ILO have initiated a similar learning programme ‘earn and learn’, a two-hour a day vocational teaching

module for working (age 14+) children in Bangladesh. See, BGMEA (1998).

45

wires, soldering, re-charging lead batteries, changing bulbs and tube lights, and so on), motor vehicledriving, navigating boats, among others. If there is demand in an area, some training in animalhusbandry could also be extended. Finally, many, even if they have been schooled, would havereverted into illiteracy; hence some basics in literacy and numeracy might be useful. In fact, much ofthe training should be determined by area-skill surveys that are conducted from time to time.

5. The location of training could be the kabupaten headquarters where existing training centres coulddouble up for training these workers we well, for a small price.

The cost of training is worked out at Rp. 1,000,000 (variable cost, to include trainer’s fee plusmaterials/tools—this matches with costs in other similar income countries in Asia) plus onemonth’s wage for the worker.Additionally, the programme contemplates that the beneficiary households must send theiroff-spring to schools on a sustained basis—targets to be set and monitored at the desa/kota/local level.30 The scheme could also delve into some critical interventions: children’s inoculation,family planning, others: these will have to be location-specific.Note: The inspection system for education and health programmes has to be different from theone from the one described in Section 8. This should be fully controlled from within thevillage, though it might use the WEC as a tool for compliance.

9.2. Social securityThere are a number of programmes of social security already existing in Indonesia; some areoperated under the garb of anti-poverty programmes while others are clear social securityprogrammes. Nevertheless, large sections, particularly the poor in informal sectors are outsidethe net.31 Since workers under the NEGP are expected to be from this (latter) populationgroup, the following are being proposed here:(1) Despite that there is health coverage for all under ‘health and nutrition’ schemes there is

need for a better health care extension. A social health insurance should be put in placefor the participating workers and their households. All cardholding households must jointhe insurance scheme.

(2) It is proposed that out of the monthly wage of about Rp. 350,000, a sum equivalent to fiveper cent (about Rp. 17,000) per month is deducted for health insurance. A matchingamount could be contributed by the programme, totalling up to Rp. 100,000 for threemonths (i.e. annually, as employment is offered for three months only) per household.

How would this money be used? One way is to link it with the health and nutrition programmealready being implemented. The problem with such a link is that the coverage and span of theexisting programme is too scattered and any add-on to it will also suffer the same fate.32

Therefore, a separate programme similar to that of SEWA in western India could be promotedto cover the workers.33 In this programme, workers and their households are provided a healthand nutrition check up annually, they are reimbursed for the treatment of specific ailments(there is a modest limit), and they are actively encouraged to practice norms of a small family.

30 Such an arrangement is practiced in Mexico as well. See Jakarta Post, November 1, 2005. Kakwani, Soares and Son (2005) havecarried out computer simulations for many African countries to conclude that conditionality in cash transfer is necessary toachieve better school attendance.

31 See for example, ILO (2002).32 Arifianto (2004)33 Why SEWA—because it is among the most successful programmes for low income group households. See Jhabvala, Sudarshan

and Unni (2003)


Illustration 4: Monitoring and evaluation system

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47

10. FINANCING

10.1 The cost and sequencingThe employment programme presented in this paper contemplates providing job to one personfrom about each of the 15 million households for a period of maximum three months, at anaverage wage of Rp. 350,000 per month. A simple calculation suggests that the maximumwage cost is likely to be in the range Rp. 15.75 trillion (about US$ 1.58 billion).But this is not all: while for part of the labour, i.e. those workers employed in large on-goingdevelopment projects, maintenance work in large sites and private innovate projects, theprogramme will only pay wages [(1), (2) and (4) in Section 2.2.2—first type]; for projects listedin (3) and (5) of Section 2.2.2—the second type—the programme will pay the full (variable)cost.In MEGS, the labour deployed in the first type of projects has been small, less than 10 percent.34 But the difference is that MEGS, unlike NEGP, is a self-targeting, (worker) demand-ledprogramme, implying that workers could leave anytime they want. Most large project managersare not keen to deploy workers who they cannot retain, lest the project schedule gets disturbed.In the NEGP it is being ensured that workers would be available for at least one month at alength. Additionally, workers at times could be asked to sequence their availability accordingto the project needs. Under these circumstances one could expect a larger proportion, perhapsup to 15 per cent (about 6.75 million person-months) to be deployed on the larger sites eachyear, to begin with. The annual cost of this labour is expected to be in the range Rp. 2.36trillion. Next, the private sector could deploy up to, say five per cent of the workers (2.25million person months), costing Rp. 0.79 trillion.The rest of the workers would be deployed in the second type projects where the programmeis expected to meet all the costs. The PK experience in Indonesia is that up to 70 per cent ofthe expenses are made of wages. If one assumes that in projects listed in (3) in Section 2.2.2the ratio is likely to be 40:60 on wages and material respectively, then the average of (3) and(5) could be 45 (wages):55 (material), given that the lion’s share is expected to be allocated forprojects listed under (3) [in Section 2.2.2].35 It implies that the second type projects will cost Rp.28 trillion for wages and material [Rp. 12.60 trillion for wages and Rp. 15.40 million formaterial].Adding the two, the total annual expense comes to Rp. 31.15 trillion. This excludes all theimplicit costs such as those on salaries of officials, technical staff and some skilled workers,travel costs, office costs, and so on. These are not expected to exceed five per cent, and sincethese could be absorbed within the costs of bureaucracy, it should not be so such a concern.Add to it is the health insurance cost to be borne by the programme, which at Rp. 50,000 perhousehold for 15 million households works out to Rp. 750 billion. There will be no capacitybuilding cost in at least the first year; hence that cost is not being counted. [This, if counted,could be another Rp. 500 billion].The notional total, therefore, adds up to Rp. 31.9 trillion (US$ 3.2 billion), which is 1.75 per centof the GDP and some 8.4 per cent of the total current state budget (expenditure).36 On a unit basisthis turns out to be about Rp. 23,630 worker per day (US$ 2.3 per person day).37

34 Of late, a court order has debarred larger projects to engage MEGS labour because it is felt that by this, programme will help therich (landowners) more compared to the poor. This, however, should not be a consideration here.

35 These ratios appear to be tilted towards higher capital intensity, but it has been deliberately kept this way because there is acomplaint from the field that high labour intensity could compromise on quality of work in specific kinds of projects.

36 Contrast this with Maharashtra where about two per cent of the state GDP is spent on MEGS. Even the Indian governmentcontemplates to spend at least 1-1.5 per cent on its GDP on EGAI. Those programmes have smaller components of capacitybuilding or asset creation compared to NEGP.

37 The cost of a person day of work created is US$ 1.5-2 in South Asia and up to US$ 8 in Bolivia under similar programmes.


Important note 1: Out of the 15 million households many would not have able-bodied or youngerworkers, and those who would have, might not use their three-month quota fully. If the MEGS experienceis any indication, at least 25-30 per cent of this budget will be chipped of; i.e., it would be realisticto work within a budget of Rp. 20-24 trillion.Important note 2: In the event that the authorities wish to concentrate on only the real poor and not the‘near’ poor at the first instance, the coverage reduces to about 9.7 million households and the notionalexpenses to Rp. 20.7 trillion. In this case, following from the note above, the actual budget might notexceed Rp. 15 trillion.Important note 3: It was stated earlier in Section 3.1 ‘Note 2’ and Section 3.3 ‘Recommendation’,that there is need to stagger the programme or even pilot it in select more provinces thatinhabit larger numbers of poor people. A thumb rule is to look at the small area estimates ofSMERU and match these with the poverty census data. Possible province to begin the programme:East Java?

10.2 Sharing of fundsGiven the new decree on decentralisation and also that there is need to promote institutions andcapacities at the decentralised level, it is important that the programme costs are shared betweenthe centre, provinsis and kabupatens. There is more than one possibility here:(1) A formula could be worked out to share the expenses of this programme in accordance

with the proportion of the central revenue vis a vis the proportion of the revenue at theprovinsi/kabupaten levels. Since the bulk of the revenues accrue to the centre, its sharewould accordingly be determined.

(2) Alternatively, there is possibility of sharing the expenses based on a formula like: allexpenses on wages are to be borne by the central government (EGAI does that), whilethe non-labour component is to be shared on an equal sharing basis. The direct expenseson non-wage items are calculated (maximum) at about Rp. 15.4 trillion, of which Rp. 7.7trillion is to be spent by the centre and Rp. 7.7 by the provinsis and kabupatens.

(3) One variation that could be contemplated is to subsidise those provinsis and kabupatensmore, which have fewer sources of revenue and inhabit larger proportions of the poor. Aformula on how much extra subsidy is to be given in the options stated in (1) or (2) abovecould then be worked out. A consensus between provinsis and the centre for this isessential.

10.3 Sources of fundsUsually, such programmes are funded by budgetary support. At times there are possibilities oflevying earmarked taxes like those on luxury items, transport, urban housing, timber trade,petroleum products, etc. to part-fund the programme. Both the centre and the decentralisedauthorities could levy these taxes, though it is better that a single authority (the centre) does itfor ensuring uniformity as well as better compliance.In the long run, possibility of levying user fees on the users of assets and earmarking the proceedsto part-finance the programme is a distinct possibility.38

38 Maharashtra imposes earmarked taxes and also levies user fees on the use of assets created. These finance up to 35 per cent of theprogramme.

49

11. CONCLUSION

This paper stems from the belief and conviction that to work with dignity and earn wages there from; isa fundamental component ‘decent work’. In the context of labour surplus developing countries, modelsof pro-poor growth could be operationalised through setting up projects wherein the un/underemployedlabour could be productively deployed to create assets. This approach would then serve the dual purposeof income distribution and capital formation.The system could work through evolving a close partnership between different agencies of thegovernment—at desa/kota/local level, kecamatan, kabupaten, provinsi and the centre—alongwith the private sector and organs of the populace at large. Different tasks like identification ofthe poor, defining local priorities, fixing wages, and many others, could be jointly and collectivelyundertaken in a decentralised, participative manner.The paper attempts to put together some concrete proposals for initiating an ‘employmentguarantee’ type programme for Indonesia. There is a strong case made to target the programmein rural areas, though some activities are proposed for urban areas as well.The programme bears in mind that the poor must be guaranteed work for at least an assignednumber of days each year, at a wage that has a defined lower ceiling. More than one memberof a household would be eligible to join work within a household’s work quota, of say threemonths. The benefits extend to providing basic social security to the workers in addition tosome selective training. Statutory as well as participative monitoring processes should ensurethat the workers’ interests are protected.Workers could be deployed to take up the unskilled labour component in large on-goingprojects, maintenance work in existing projects, construction works, projects meant to strengthenrural infrastructure, private projects that require subsidies (through wages or else they mightnot be taken up due to risks involved), or small village based projects. In short, the span ofworkers’ deployment should widen beyond the narrow confines of the village.The programme is proposed to be funded through a joint effort of the central, provinsi andkabupaten governments, in addition to raising some earmarked taxes.


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Appendix 1: Employment Guarantee Scheme in Maharashtra (MEGS)The earliest of the sustained efforts to provide jobs to the poor on demand, is the Employment Guarantee Scheme ofMaharashtra (a province in western India), a scheme that began in 1976. MEGS is a statuary Act of the province; itguarantees work, or else compensation in lieu of. The programme began as a drought relief scheme in 1973, but hassince grown in its diversity, design and size overtime. As in 2004, it spent about US$ 235 million to create about 155million person-days of work, at a daily wage rate of about US$ 1.1 (about PPP$ 4). Its principal features are as below:

a. The profile of work offered (i.e., unskilled, manual activities and relatively low wage rates) has ensured targetingtowards landless labourers and populations in the lower income groups. It provides seasonal/temporaryemployment.

b . The programme guarantees work within the local (about five kilometre) area.c. A job seeker is to be provided employment within fifteen days, failing which the applicant is

entitled to a small unemployment allowance.d . Projects are designed so that expenditure on labour would constitute at least 60 per cent of total

(now revised to 51 per cent).e . The different projects undertaken are in moisture and water conservation, soil conservation and

land development, afforestation and social forestry, rural roads including internal village roads,and of late, works on specific schemes like horticulture or well digging, the latter two in theprivate sector.

f. Wages are fixed on a piece rate basis. A wage schedule is drawn up which is revised from time totime. Wages rates are fixed such that the daily wages conform to the minimum wages prescribedfor agricultural labour in the corresponding zone. Earlier they were somewhat lesser.

g . Workers are provided medical services, shelter for rest, crèches, ex-gratia payment in the case ofdeath while employed, and maternity benefit.

h . Sources of MEGS’s funds are taxes on professions, callings and employment, additional tax onmotor vehicles, additional sales tax, special tax on irrigated agricultural land, surcharge on landrevenues and non-residential tax on urban lands and buildings. Additionally, there is budgetarysupport.

A four-tier administrative structure comprising of the province (44,000 villages), district (about 1,200 villages),sub-district (about 100 villages) and village has been developed. Additionally, specific committees forplanning, direction, control and coordination have been set-up. The distribution of planning andimplementation responsibilities across the administrative framework is as follows:

The planning department at the province level is the overall in-charge of MEGS, covering all aspects ofplanning administration, provision of funds and monitoring and evaluation. The district administrativehead (a bureaucrat) is overall in-charge of the programme at the district level. At the sub-district level, thesub-district in-charge (a subordinate bureaucrat) assesses the demand for employment and deployment oflabourers on different works in the sub-district area. MEGS’s works are implemented by the government’stechnical agencies: they identify project sites, draw engineering designs, select material and certify thecompletion of projects. The actual execution of projects is devolved to officers such as junior engineers,agricultural scientists, and forest conservators. District head is empowered to release funds for financingMEGS projects. The district head is assisted by a full time deputy, exclusively in-charge of MEGS.

Inspection and vigilance duties are carried out throughout the chain of command through inspections. Inaddition, legislators also tour the work sites.

MEGS workers are given identity cards-cum-wage books in which their attendance and the wages theyreceive are shown.

Lessons: MEGS functions most efficiently in areas where the workers’ organisations are strong, theadministrative process is transparent, and the asset link is strong. Next, MEGS had earlier worked most effectivelyin emergency situations compared to otherwise. Its performance improved under normal conditions only afterthe asset link was strengthened.

Appendix


Appendix 2: The Rural Employment Guarantee Act of India (EGAI) 2005Work guarantee: EGAI offers a guarantee of at least 100 days of employment in a year to an adult member ofa poor household residing in rural areas, willing to engage in casual manual work on an asset-creating public worksprogramme. Work is to be provided within 15 days of making an application within a radius of five kilometres of theapplicant’s place of stay. In the event that job is provided outside this radius, it must be provided within the concernedsub-district (100-120 odd villages) and the prospective worker is to be paid 10 per cent of the wage rate as extra amountto meet the additional transportation and living expenses. A job card would be issued to each poor (and willing to workin the programme) household, which would contain details of the adult members of the household. Initially, theprogramme will be implemented in 150 poorest districts. The bill entitles a worker a wage rate as specified by the centralgovernment; s/he must be paid within a week when the work is done, in any case not later than a fortnight after thework has been carried out. The wages under the scheme may be paid either wholly in cash or in cash and kind providedthat at least one-fourth of the wages are paid in cash. Facilities of safe drinking water, shade for accompanying childrenand first-aid box shall be provided at the work site. Where at least 20 women are employed at the work site, provisionshall be made for one of them to be deputed to look after children under the age of six years, who may be brought tothe work site. The bill further says that in the event that employment is not provided within 15 days of an applicationmade, an unemployment allowance shall be offered to the applicant, which would not be less than one-fourth of thewage rate for the first 30 days and not less than one-half of the wage rate for the remaining period of the financial year.

Governance of EGAI: The programme is to be implemented though the sub-district/village system, dove-tailed withcentral, provincial government and district authorities. A central employment guarantee council and province-specificemployment guarantee councils shall be constituted at the national and state levels, respectively, to provide broadguidelines and make recommendations for improvements in the programme. Its members (at both levels) should beabout 15 (non-official), representing the sub-district/district local self governance (LSG) system, organisations ofworkers and disadvantaged groups, women and minorities. At the district LSG shall constitute a standing committee tosupervise, monitor and oversee the programme. The chief executive officer of the district LSG shall be designated asthe district programme coordinator (DPC) for the implementation of the scheme at the district level. The DPC is toprepare a labour budget every year, containing the anticipated demand for unskilled manual work and submit it to thestanding committee. At the sub-district level, a programme officer, who will be responsible for matching the demandfor employment with employment opportunities arising from projects, shall be appointed. The village council shall beresponsible for identification of the projects to be taken up in an area, in accordance with recommendations from thevillage general body. The village council shall allocate employment opportunities among the applicants and ask them toreport for work. The village council shall also monitor the execution of works within its domain and conduct regularsocial audits of all the projects. The provincial government is to set up appropriate grievance redress mechanisms at thesub-district and district levels for dealing with complaints in respect of the implementation of the scheme.

The asset link: Creation of durable assets and strengthening the livelihood resource base of the rural poor are importantobjectives in the scheme—water conservation and water harvesting; drought proofing (including afforestation and treeplantation); constructing irrigation canals; renovation of traditional water bodies; land development; flood control;eco-protection works. Village councils (in consultation with general body) are to prepare a shelf of projects, in turnwhich are to be technically examined by the programme officer and cleared at the sub-district level, and then by astanding-committee at the district level. Projects might be other than in the list above, depending upon the local agro-geographic conditions and the local needs—there is considerable autonomy provided to local authorities on this.

Resource flows: The bill proposes creation of a national employment guarantee fund and a provincial employmentguarantee fund for the implementation of the programme. The central government is to bear the entire wagecomponent and 75 per cent of material cost (including wages of skilled and semi-skilled workers) of projectsundertaken under the programme. At present, the provincial government would be required to bear 25 per centof the material component (including wages of skilled and semi-skilled workers), and the unemployment allowancepayable under the scheme. The material component of the projects is normally not expected to exceed 40 percent of the total project cost. In short, up to 90 per cent of the programme (excluding unemployment allowance)would be borne by the central government.

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