development for the people: equity and poverty

Lecturer : Prof. Dr. Ginandjar [email protected], www.ginandjar.com

AssistantProfessor

: Dr. Dadang Solihin, SE, [email protected]

INTRODUCTIONWhat is Poverty?Evolving Strategy for Poverty ReductionThe UN Millennium Development GoalsPoverty Definitions And Measures

POVERTY IN INDONESIAPoor Village Development Program

THE CRISISMAJOR POST‐CRISIS POVERTY REDUCTION PROGRAMS

CONTENTS

2www.ginandjar.comGRIPS_2012

EQUITY: A Continuous ChallengeThe Ever Present Problem of InequalityRegional DisparityAttempts at Equitable DevelopmentPersistent Disparity Amidst Economic GrowthUnemploymentHuman Development Index

THE ROLE OF PUBLIC ADMINISTRATION IN POVERTY REDUCTION AND EQUITABLE DEVELOPMENT

LESSONS TO BE LEARNEDOn PovertyOn Equitable Development

CONTENTS


4

1998 CRISIS

POVERTY IS PRONOUNCED DEPRIVATION IN WELL‐BEING.TO BE POOR IS TO BE HUNGRY, TO LACK SHELTER ANDCLOTHING, TO BE SICK AND NOT CARED FOR, TO BE ILLITERATE AND NOT SCHOOLED.

BUT FOR POOR PEOPLE, LIVING IN POVERTY IS MORE THAN THIS. POOR PEOPLE ARE PARTICULARLY VULNERABLE TO ADVERSE EVENTS OUTSIDE THEIR CONTROL.

THEY ARE OFTEN TREATED BADLY BY THE INSTITUTIONS OF STATE AND SOCIETY AND EXCLUDED FROM VOICE AND POWER IN THOSE INSTITUTIONS.

WHAT IS POVERTY?


THE PRESENT VIEW OF POVERTY IS ENCOMPASSING NOT ONLY MATERIAL DEPRIVATION (MEASURED BY AN APPROPRIATE CONCEPT OF INCOME OR CONSUMPTION)BUT ALSO LOW ACHIEVEMENTS IN EDUCATION ANDHEALTH.

LOW LEVELS OF EDUCATION AND HEALTH ARE OF CONCERN IN THEIR OWN RIGHT, BUT THEY MERIT SPECIAL ATTENTION WHEN THEY ACCOMPANY MATERIAL DEPRIVATION.

THE NOTION OF POVERTY INCLUDES VULNERABILITYAND EXPOSURE TO RISK—AND VOICELESSNESS ANDPOWERLESSNESS.


ANOTHER IMPORTANT REASON FOR CONSIDERING A BROADER RANGE OF DIMENSIONS—AND HENCE A BROADER RANGE OF POLICIES—IS THAT THE DIFFERENT ASPECTS OF POVERTY INTERACT AND REINFORCE ONE ANOTHER IN IMPORTANT WAYS.

THIS MEANS THAT POLICIES DO MORE THAN SIMPLYADD UP. IMPROVING HEALTH OUTCOMES NOT ONLY IMPROVES WELL‐BEING BUT ALSO INCREASES INCOME‐EARNING POTENTIAL.


INCREASING EDUCATION NOT ONLY IMPROVES WELL‐BEING—IT ALSO LEADS TO BETTER HEALTH OUTCOMES AND TO HIGHER INCOMES. PROVIDING PROTECTION FOR POOR PEOPLE (REDUCING VULNERABILITY IN DEALING WITH RISK) NOT ONLY MAKES THEM FEEL LESS VULNERABLE—IT ALSO ALLOWS THEM TO TAKE ADVANTAGE OF HIGHER‐RISK, HIGHER‐RETURN OPPORTUNITIES.

INCREASING POOR PEOPLE’S VOICE AND PARTICIPATIONNOT ONLY ADDRESSES THEIR SENSE OF EXCLUSION—ITALSO LEADS TO BETTER TARGETING OF HEALTH AND EDUCATION SERVICES TO THEIR NEEDS.


THE APPROACH TO REDUCING POVERTY HAS EVOLVED OVER THE PAST 50 YEARS IN RESPONSE TO DEEPENING UNDERSTANDING OF THE COMPLEXITY OF DEVELOPMENT.

IN THE 1950S AND 1960S MANY VIEWED LARGE INVESTMENTS IN PHYSICAL CAPITAL AND INFRASTRUCTUREAS THE PRIMARY MEANS OF DEVELOPMENT. HENCE THE TRICKLING DOWN EFFECT IDEA.

IN THE 1970S AWARENESS GREW THAT PHYSICAL CAPITAL WAS NOT ENOUGH, AND THAT AT LEAST AS IMPORTANT WERE HEALTH AND EDUCATION.

EVOLVING STRATEGY FOR POVERTY REDUCTION


THE 1980S SAW ANOTHER SHIFT OF EMPHASIS FOLLOWING THE DEBT CRISIS AND GLOBAL RECESSION AND THE CONTRASTING EXPERIENCES OF EAST ASIA AND LATIN AMERICA, SOUTH ASIA, AND SUB‐SAHARAN AFRICA.

IN THE 1990S GOVERNANCE AND INSTITUTIONS MOVED TOWARD CENTER STAGE—AS DID ISSUES OF VULNERABILITY AT THE LOCAL AND NATIONAL LEVELS.

THE 20TH CENTURY SAW GREAT PROGRESS IN REDUCING POVERTY AND IMPROVING WELL‐BEING.

GRIPS_2012 www.ginandjar.com 10

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


HOWEVER THESE BROAD TRENDS CONCEAL EXTRAORDINARY DIVERSITY IN EXPERIENCE IN DIFFERENT PARTS OF THE WORLD‐AND LARGE VARIATIONS AMONG REGIONS, WITH SOME SEEING ADVANCES, AND OTHERS SETBACKS, IN CRUCIAL NON INCOME MEASURES OF POVERTY.

WIDENING GLOBAL DISPARITIES HAVE INCREASED THE SENSE OF DEPRIVATION AND INJUSTICE FOR MANY. AND SOCIAL MOBILITY AND EQUAL OPPORTUNITY REMAIN ALIEN CONCEPTS FOR FAR TOO MANY PEOPLE


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

(MILLENIUM DECLARATION, 2000)

MDGs: NEW INTERNATIONAL DEVELOPMENT IDEOLOGY

THE UN MILLENNIUM DEVELOPMENT GOALS


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


POVERTY DEFINITIONS AND MEASURES

Poverty headcount index (Po): This is the share of the population whoseconsumption is below the poverty line. The headcount index, sometimes referred toas the ‘poverty incidence’, is the most popular poverty measure. However, thismeasure fails to differentiate between sub-groups of the poor and does not indicatethe extent of poverty. It remains unchanged even if a poor person becomes poorer orbetter off, provided that they remain below the poverty line. Therefore, in order todevelop a comprehensive understanding of poverty, it is important to complement theheadcount index with the other two poverty measures of Foster, Green andThorbecke (FGT).

Poverty gap index (P1): The mean aggregate consumption shortfall relative to thepoverty line across the whole population, with a zero value assigned to those abovethe poverty line. The poverty gap can provide an indication of how many resourceswould be needed to alleviate poverty through cash transfers perfectly targeted to thepoor. This index better describes the depth of the poverty but does not indicate theseverity of poverty. However, it does not change if a transfer is made from a poorperson to someone who is even poorer.


Poverty severity index (P2): This measure gives more weight to the very poor bytaking the square of the distance from poverty line. It is calculated by squaring therelative shortfall of per capita consumption to the poverty line and then averagingacross population while assigning zero values to those above the poverty line. Whena transfer is made from a poor person to someone who is poorer, this registers adecrease in aggregate poverty.

US$1 and US$2 PPP per day poverty measures: To compare poverty acrosscountries, the World Bank uses estimates of consumption converted into US dollarsusing purchasing power parity (PPP) rates rather than exchange rates. The PPPexchange rate shows the numbers of units of a country’s currency needed to buy inthat country the same amount of goods and services that US$1 would buy in the US.These exchange rates are computed based on prices and quantities for each countrycollected in benchmark surveys, which are usually undertaken every five years. Chenand Ravallion (2001) present an update on world poverty using a US$1-a-day povertyline. According to their calculations, in 1993 the US$1-a-day PPP poverty line wasequivalent to Rp 20,811-a-month (US$2). The PPP poverty lines are adjusted overtime by relative rates of inflation, using consumer price index (CPI) data. So in 2006,the US$1 PPP poverty line is equivalent to Rp 97,218 per person per month while theUS$2 PPP poverty line is equivalent to Rp 194,439 per person per month.


18

1998 CRISIS

DURING THE PREVIOUS THREE DECADES, THE INCIDENCE OF POVERTY IN INDONESIA HAD DECLINED SIGNIFICANTLY AS RESULT OF A RAPID ECONOMIC GROWTH COUPLED WITH INVESTMENT IN SOCIAL INFRASTRUCTURE SUCH AS HEALTH AND EDUCATION, PROMOTION OF AGRICULTURAL DEVELOPMENT, AND RURAL INFRASTRUCTURES.

IN 1970S, SPECIAL MEASURES TO TARGETING TO THE ECONOMIC POOR WERE DIFFICULT DUE TO THE VERY HIGH PROPORTION OF PEOPLE LIVING BELOW THE POVERTY LINE.

IN THE ABSENCE OF GOVERNMENT INITIATED SOCIAL PROTECTION, THE POOR LEAN MOSTLY ON TRADITIONAL RISK POOLING MECHANISM.


IN THE YEARS PRIOR TO 1997/98 ASIAN CRISIS, INDONESIA HAD ADOPTED A LONG‐TERM POVERTY ALLEVIATION STRATEGY VIA MASSIVE INVESTMENT IN PUBLIC EDUCATION AND HEALTH, AGRICULTURE AND PUBLIC INFRASTRUCTURE.

AMONG OTHERS, THIS APPROACH HAS CONTRIBUTED TO THE IMPROVEMENT OF HUMAN CAPITAL ACCUMULATION, CREATION OF NEWLY EDUCATED MIDDLE‐CLASS AND OPENING ISOLATED AREAS TO WIDER ECONOMIC OPPORTUNITIES.


GOVERNMENT PROGRAM SUCH RICE SELF‐SUFFICIENCY AND FAMILY PLANNING HAD TREMENDOUS EFFECT OF POVERTY REDUCTION.

WITH THE CONSTRUCTION OF IRRIGATION, INLAND ROADS, ELECTRICITY THAT HAD COVERED AROUND 70 TO 80% OF THE POPULATION, AND NATION WIDE SCHOOLS AND HEALTH SERVICES, THE RURAL AS WELL THE URBAN AREAS WERE BOTH AFFECTED BY ECONOMIC DEVELOPMENT.

THE HIGH ECONOMIC GROWTH WAS ACCOMPANIED BY IMPROVEMENTS IN VARIOUS SOCIAL INDICATORS.



DURING THE PERIOD, LIFE EXPECTANCY INCREASED, INFANT MORTALITY RATES FELL, AND SCHOOL ENROLLMENT RATES ROSE.

IN ADDITION, THE PROVISION OF BASIC INFRASTRUCTURE – WATER SUPPLIES, ROADS, ELECTRICITY, SCHOOLS, AND HEALTH FACILITIES ‐ ALSO ROSE SUBSTANTIALLY.

HOWEVER ALTHOUGH ALL STRATA OF INDONESIA’S SOCIETY ENJOYED THE BENEFIT OF DEVELOPMENT, THOSE AT THE TOP DISPROPORTIONABLY ENJOYED THE MOST, THEREBY WIDENING THE SOCIAL AND ECONOMIC GAP BETWEEN THE RICH AND THE POOR.

BY 1990’S AT THE HEIGHT OF INDONESIA’S ECONOMIC RISE—BEING ONE OF THE ASIAN ECONOMIC TIGERS—THERE WAS A GROWING CONCERNED AMONG DEVELOPMENT PLANNERS THAT A MORE TARGETED AND SPECIAL POLICIES SHOULD BE ADOPTED TO ACCELERATE POVERTY ERADICATION.


IT SHOULD BE NOTED THAT DURING THE PRE‐CRISIS HIGH GROWTH PERIOD, THE GOVERNMENT OF INDONESIA (GOI) UNDER SUHARTO HAD ACTUALLY CARRIED ON A NUMBER OF POVERTY REDUCTION PROGRAMS.

IN THE EARLY NEW ORDER ERA FOR EXAMPLE, SEVERAL DEPARTMENTS INCLUDING THE DEPARTMENT OF HOME AFFAIRS RUN AN EXPERIMENTAL SAVINGS AND LOANS PROJECTS; THE DEPARTMENT OF SOCIAL AFFAIRS CONDUCTED PROJECTS FOCUSED ON INCREASING THE WELFARE OF THE POOR AND NEEDY; AND THE DEPARTMENT OF AGRICULTURE MANAGED PROGRAMS AIMING TO INCREASE THE INCOME LEVEL OF SMALL FARMERS (LEITH ET.AL, 2003).


BESIDES THERE WERE ALSO A MULTITUDE OF PRESIDENTIAL INSTRUCTIONS (INPRES) ALLOCATING FUNDS FOR EDUCATION, HEALTH, AND BLOCK GRANTS TO THE PROVINCES AND DISTRICS.

THEY ALL CONTRIBUTED TO THE FAST DROP IN POVERTY ALL OVER THE COUNTRY.


PRIOR TO THE 1997/1998 CRISIS, THE GOVERNMENT TOOK IMPORTANT STEPS ON WHAT LATER WAS THE INSPIRATION OF POST‐CRISIS POVERTY REDUCTION PROGRAM.

THE POVERTY REDUCTION INITIATIVES IN THE LATE NEW ORDER ERA INCLUDES: I. PRESIDENTIAL INSTRUCTION ON DISADVANTAGED VILLAGES (IDT); II. DISADVANTAGED VILLAGE INFRASTRUCTURE DEVELOPMENT

PROGRAM (P3DT); III. URBAN POVERTY REDUCTION PROGRAMME (P2KP); IV. MICRO CREDIT (TAKESRA/KUKESRA); V. SMALL FARMERS/FISHERMAN INCOME EXPANSION PROJECT (P4K);

AND VI. SUB‐DISTRICT DEVELOPMENT PROGRAM (PPK/KDP).(LEITH ET.AL, 2003)


DESPITE THE FACT THAT POVERTY ALLEVIATION IN INDONESIA ACHIEVED A GREAT SUCCESS IN THE PERIOD OF 1970S UNTIL MID 1990S, THE TERM 'POVERTY' HAD NOT PLACED IN THE TOP PRIORITY OF THE COUNTRY'S DEVELOPMENT AGENDA UNTIL THE EARLY 1990S.

THERE WAS NO SPECIFIC CHAPTER ON POVERTY ALLEVIATION IN THE FIRST FIVE OF FIVE YEARS DEVELOPMENT PLAN (REPELITA), THE NATIONAL MEDIUM‐TERM DEVELOPMENT PLAN IN THE NEW ORDER ERA.

THE DEVELOPMENT IDEOLOGY AT THAT TIME FOLLOWING THE ADVICE OF EXPERTS FROM THE WORLD BANK AN WESTERN COUNTRIES WERE GROWTH DRIVEN DEVELOPMENT COUNTING ON THE TRICKLE DOWN BENEFIT OF GROWTH TO THE POOR POPULATION.


THE SIXTH REPELITA 1994/1995 ‐ 1998/1999 WAS THE FIRST DOCUMENT THAT MENTIONED POVERTY ALLEVIATION AND EQUITY OF DEVELOPMENT. THESE TWO ISSUES WERE ALSO INTEGRATED IN OTHER CHAPTERS OF THE PLAN.

A NEW APPROACH ON POVERTY ERADICATION WAS LAUNCHED IN 1993, UNDER THE SIXTH FIVE YEARS DEVELOPMENT PLAN (REPELITA VI).

THE IDT (INPRES DESA TERTINGGAL, OR PROGRAM FOR ASSISTANCE TO BACKWARD VILLAGES). EVEN THEN THE USA OF THE WORD “POOR” WAS STILL AVOIDED.


IDT HAD THREE GOALS: 1) TO GALVANIZE A NATIONAL MOVEMENT FOR

POVERTY ERADICATION AND ENSURE THAT IT BECOMES A MASS (PEOPLE’S) MOVEMENT;

2) TO ACCELERATE REDUCTION IN INEQUALITIES OFINCOME AND WEALTH; AND

3) TO DEVELOP THE PEOPLE’S ECONOMY.

THE BASIC IDEA WAS EMPOWERING PEOPLE TO MAKE THEM CAPABLE TO LIFT THEMSELVES OUT OF POVERTY.


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

IN ONE VILLAGE THERE COULD BE MORE THAN ONE GROUP.


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


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

SUPPORTING THE IDT, IN 1996 A RURAL INFRASTRUCTURE PROGRAM WAS LAUCHED.


OTHER PROGRAMS RELATED TO POVERTY REDUCTION HAD ALSO BEEN UNDERTAKEN, FOCUSING ON VULNERABLE GROUPS: THE POOREST, ISOLATEDINDIGENOUS COMMUNITIES, THE DISABLED, ELDERLY, DESTITUTE CHILDREN, POOR WOMEN, AND SLUMDWELLERS. STILL OTHERS INVOLVE SUPPLEMENTARY FEEDING FOR ELEMENTARY SCHOOL CHILDREN AND INCOME GENERATING PROGRAMS.

THE RESULT WAS AN ACCELERATED REDUCTION IN POVERTY BETWEEN 1993‐1996.


PRE‐CRISIS POVERTY INCIDENCE AND NUMBER OF POOR

40,1%

33,3%

28,6%26,9%

21,6%

17,4%

15,1%13,7%

11,3%

54,2

47,2

42,340,6

35

30

27,225,9

22,5

0

10

20

30

40

50

60

0,0%

5,0%

10,0%

15,0%

20,0%

25,0%

30,0%

35,0%

40,0%

45,0%

50,0%

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

Percent Millions


NOTE: THE POVERTY LINES EQUAL TO 2100 CALORIE PER CAPITA PER DAY FOR THE FOOD COMPONENT (52 COMMODITIES) PLUS BASIC NON FOOD CONSUMPTION I.E. HOUSING, APPAREL, HEALTH, EDUCATION, UTILITIES AND TRANSPORTATION (47‐51 COMMODITIES).

THE AVERAGE COMPOSITION IS 74% FOR FOOD CONSUMPTION AND 26% FOR NON‐FOOD CONSUMPTION;

IN URBAN AREA 70% VS. 30% AND IN RURAL AREA 80% VS. 20%.


37

1998 CRISIS

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


DURING THIS CRISIS PERIOD, THE INDONESIAN PEOPLESAW: THE FALL OF THE VALUE OF RUPIAH TO AS LOW AS 15

PERCENT OF ITS PRE‐CRISIS VALUE IN LESS THAN ONE YEAR, ECONOMIC CONTRACTION BY AN UNPRECEDENTED

MAGNITUDE OF 13.7 PERCENT IN 1998, SKYROCKETING DOMESTIC PRICES (THE GENERAL INFLATION

RATE WAS 78 PERCENT IN 1998) AND PARTICULARLY THOSE OF FOOD (INFLATION RATE OF FOOD WAS 118 PERCENT IN 1998),

MASS RIOTING IN THE CAPITAL JAKARTA AND A FEW OTHER CITIES,

CULMINATING IN THE FALL OF THE NEW ORDER GOVERNMENT ‐WHICH HAD BEEN IN POWER SINCE MID 1960S TO MAY 1998.


THE SOCIAL IMPACT OF THE CRISIS, IN PARTICULAR ON POVERTY, WAS SUBSTANTIAL.

DURING THE PERIOD, THE NUMBER OF URBAN POOR DOUBLED, WHILE THE RURAL POOR INCREASED BY 75 PERCENT.

A STUDY (BY SURYAHADI, SUMARTO, AND PRITCHETT,2003) WHICH TRACKS DOWN POVERTY RATE OVER THE COURSE OF THE CRISIS SHOWS THAT THE POVERTY RATE INCREASED BY 164 PERCENT FROM THE ONSET OF THE CRISIS IN MID 1997 TO THE PEAK OF THE CRISIS AROUND THE END OF 1998.


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


THE SOCIAL SAFETY NET (SSN) INVOLVED FOUR STRATEGIES:

I. ENSURING THE AVAILABILITY OF AFFORDABLE FOOD,

II. IMPROVING HOUSEHOLD PURCHASING POWER THROUGH EMPLOYMENT CREATION,

III. PRESERVING ACCESS TO CRITICAL SOCIAL SERVICES, PARTICULARLY HEALTH AND EDUCATION, INCLUDING SUPPLEMENTARY FOOD PROGRAM FOR SCHOOL CHILDREN AND LACTATING WOMAN IN POOR VILLAGES, AND

IV. SUSTAINING LOCAL ECONOMIC ACTIVITY THROUGH REGIONAL BLOCK GRANTS AND THE EXTENSION OF SMALL‐SCALE CREDITS.

THE IMPLEMENTATION OF THE SSN PROGRAMS HAD SIGNIFICANTLY REDUCED THE WORST EFFECTS OF THE CRISIS (SUMARTO, SURYAHADI, AND WIDYANTI, 2002).


TO PROTECT FOOD SECURITY, EDUCATION, HEALTH AND EMPLOYMENT OF THE POOR HOUSEHOLDS IN THE POOR AREAS, IN JULY 1998, THE GOVERNMENT OF INDONESIA INITIATED THE FIRST NATION WIDE SOCIAL PROTECTION SCHEME ON HEALTH AND EDUCATIONAL, IN ADDITION TO SUBSIDIZED RICE AND CASH‐ FOR‐WORK PROGRAM FOR POOR HOUSEHOLDS AND AREAS (SPARROW, 2006, 2007; WORLD BANK, 2006).

WITH SOME MODIFICATIONS, MANY OF THESE INITIATED SOCIAL SAFETY NETS ARE STILL PRACTICED – SEVERAL OF WHICH ARE DISCUSSED IN THE CONTEXT OF THE POVERTY ALLEVIATION STRATEGY IN THE POST‐CRISIS INDONESIA.


THE 1997/98 CRISIS WAS SIGNIFIED BY SKYROCKETING PRICE OF RICE, THE STAPLE FOOD FOR MOST INDONESIANS.

AMONG OTHERS DUE TO CROP FAILURE CAUSED BY SEVERE DRAUGHT (EL NIÑO) THE POOR, WHOSE RICE CONSUMPTION MADE UP TO A QUARTER OF TOTAL EXPENDITURES, WERE THE MOST NEGATIVELY AFFECTED.

THE DROP IN RICE CONSUMPTION WAS ACCOMPANIED BY AMONG OTHERS DIMINISHING HEALTH STATUS OF UNDER FIVE‐YEAR CHILDREN (WORLD BANK, 2006), INDICATING BAD COPING STRATEGY.


FOOD SECURITY

DURING THE CRISIS, PER‐CAPITA LEVELS OF HOUSEHOLD EXPENDITURE, DECLINED SUBSTANTIALLY AND POVERTY RATES HAVE RISEN BY AT LEAST 25 PERCENT.

IT APPEARED THAT TO SMOOTH CONSUMPTION, HOUSEHOLDS REDUCED THEIR INVESTMENT IN CHILDREN EDUCATION AND PUSH EARLY ENTRANCE TO LABOR MARKET.


IN MITIGATING THE HYPERINFLATION, HOUSEHOLDS TRIED TO MAINTAIN THEIR PHYSICAL AMOUNT OF STAPLE FOOD CONSUMPTION BY INCREASING THE VALUE AND PROPORTION OF THEIR FOOD CONSUMPTION AT THE COST OF HEALTH AND EDUCATIONAL EXPENDITURES, HAMPERING THE SUSTAINABILITY OF LONG‐TERM POVERTY ALLEVIATION STRATEGY THROUGH HUMAN CAPITAL ACCUMULATION.

THIS IS TRUE ESPECIALLY AMONG THE POOREST HOUSEHOLDS (FRANKENBERG, THOMAS, AND BEEGLE,1999).


THE MOST IMPORTANT BASIC COMMODITY WAS RICE. A PROGRAM WAS INITIATED IN JULY 1998 TO PROVIDE 10 KG OF RICE AT ABOUT ONE‐HALF OF THE MARKET PRICE TO LOW‐INCOME FAMILIES FIRST IN THE JAKARTA AREA AND IN SEPTEMBER EXTENDED TO COVER 7½ MILLION VERY POOR FAMILIES THROUGHOUT THE COUNTRY.

IN DECEMBER THE MONTHLY ALLOCATIONS UNDER THE SCHEME WAS INCREASED FROM 10 KILOGRAMS TO 20 KILOGRAMS PER FAMILY COVERING 17 MILLION POOR FAMILIES


TO IMPROVE PURCHASING POWER IN RURAL AND URBAN AREAS, THE GOVERNMENT HAD SET UP PUBLIC WORKS PROJECTS THROUGHOUT THE COUNTRY TO BOOST INCOMES OF THE POOR FORTHE UNEMPLOYED AND THE UNDEREMPLOYED.

TO SUPPLEMENT THESE EFFORTS, CASH‐FOR‐WORK PROGRAMS ARE BEING IMPLEMENTED IN DROUGHT‐STRICKEN AREAS OF THE COUNTRY.

IMPROVING PURCHASING POWER


PRESERVING ACCESS TO CRITICAL SOCIAL SERVICES FOR THE POOR CONSTITUTED AN IMPORTANT ASPECT OF THE SOCIAL SAFETY NET.

IN WHAT WAS CONSIDERED BY THE WORLD BANK AS THE MOST SUCCESSFUL INTERVENTION, AMONG THE SOCIAL SAFETY NETS HAD BEEN THE SCHOLARSHIP AND GRANT PROGRAM DESIGNED TO MAINTAIN ENROLMENTS AND QUALITY OF SCHOOLING AT PRE‐CRISIS LEVEL AND THE INTENSIFIED HEALTH CARE SERVICES.

SOCIAL SERVICES


EDUCATION

AMONG THE IMMEDIATE IMPACT OF THE ASIAN CRISIS WAS AN INCREASE IN DROP OUT RATES ESPECIALLY AMONG THE SCHOOL AGED GIRLS FROM POOR RURAL AREA, POTENTIALLY TRANSMITTING POVERTY TO NEXT GENERATION.

IN 1998, THE FIRST PRO‐POOR TARGETED SSN ON EDUCATIONAL WAS INTRODUCED TOGETHER WITH THE SSNON HEALTH.

THE SSN COMPOSED OF TWO PARTS: SCHOLARSHIP AND SCHOOL SUBSIDY PROGRAM.

BY FEBRUARY 1999, 5 PERCENT OF CHILDREN AGES 10 TO 18 (APPROXIMATELY 2.1 MILLION CHILDREN) HAD RECEIVED A SCHOLARSHIP (SPARROW, 2006).


FROM 1999‐2002 DATA, SPARROW FOUND THAT PARTICIPATION IN THE SCHOLARSHIPS INCREASED THE PROBABLY OF ATTENDING SCHOOL IN THE PREVIOUS WEEK FOR 1.5 PERCENTAGE POINTS HIGHER THAN THE NON‐PARTICIPANTS.

AT THE SAME TIME, THE SCHOLARSHIPS REDUCED THE INCIDENCE OF CHILD TO WORK FROM 14.0% TO 10.2%. THE EFFECT ON LABOR WAS HIGHER FOR STUDENTS FROM POOR HOUSEHOLDS IN RURAL AREAS, AND FOR THE BOYS.

THE CASH TRANSFER THROUGH THE SCHOLARSHIPS HAD HELPED THE POOR HOUSEHOLDS, TO CERTAIN EXTENT, TO PROTECT THEIR CHILDREN ENROLMENT IN ELEMENTARY AND JUNIOR HIGH SCHOOL AND AT THE SAME TIME PREVENT PREMATURE ENTRANCE TO LABOR MARKET.


THE PROGRAM EXTENDED TO THE POOREST 6 PERCENT OF STUDENTS ENROLLED IN PRIMARY SCHOOLS, 17 PERCENT IN JUNIOR SECONDARY AND 10 PERCENT IN SENIOR SECONDARY SCHOOLS.

IT ALSO PROVIDED GRANTS TO THE 60 PERCENT OF THE POOREST IN EACH CATEGORY (SEE WORLD BANK, 1999).

THE PROGRAM HAD REACHED 4 MILLION STUDENTS.


IN HEALTH SERVICES, THE PRIORITY WAS GIVEN TO THE POOR TO HAVE ACCESS TO BASIC HEALTH SERVICES AND ESSENTIAL MEDICINES, AND PREVENTED MALNUTRITION AND MICRONUTRIENT DEFICIENCIES.

THE GOVERNMENT MADE AVAILABLE SUPPLEMENTARY FOOD FOR YOUNG CHILDREN THROUGH THE SCHOOL SYSTEM AND PREGNANT AND LACTATING WOMEN IN POOR VILLAGES. THIS PROGRAM HAD REACHED 8.1 MILLION PUPILS IN 52.5 THOUSAND SCHOOLS NATIONWIDE.

HEALTH


AMONG THE FIRST SOCIAL HEALTH PROGRAM TARGETED TO POOR HOUSEHOLDS WAS STARTED IN 1994 WITH THE PROGRAM HEALTH CARD (KARTU SEHAT) AND FULLY NSTITUTIONALIZED IN 1998 THROUGH HEALTH SOCIAL SAFETY NET (JARING PENGAMAN SOSIAL JPS ‐ KESEHATAN).

IT WAS FUNDED BY ASIAN DEVELOPMENT BANK AND RUN FROM 1998 TO 2001.

THE SSN WAS LATER REPLACED BY A FUEL PRICE COMPENSATION SCHEME WHICH USED THE SSN PROGRAM MANAGEMENT (PKPS‐BBM 2001‐2005).


IN SSN SCHEME, ELIGIBLE HOUSEHOLD CAN APPLY FOR A HEALTH CARD (KARTU SEHAT) WHICH CAN BE USED TO WAIVE MEDICAL EXPENSES FOR OUTPATIENT AND INPATIENT CARE AT SUB‐DISTRICT HEALTH CENTERS AND THIRD CLASS PUBLIC HOSPITAL WARDS.

BY FEBRUARY 1999, 11 PERCENT OF INDONESIANS OR APPROXIMATELY 22 MILLION PEOPLE LIVED IN A HOUSEHOLD WITH A HEALTH CARD.


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

MAJOR POST‐CRISIS POVERTY REDUCTION PROGRAMS


FROM 1998 TO 2010, THE GOVERNMENT HAS SHIFTED ITS DEVELOPMENT AGENDA, NOT ONLY RELYING HEAVILY ON ECONOMIC GROWTH BUT ALSO CREATING POVERTY REDUCTION EFFORTS TO ENSURE THE ACHIEVEMENT OF DEVELOPMENT GOALS.

SSN, THAT WAS COMMENCED AS AN EFFORT TO MITIGATE THE IMPACT OF FINANCIAL CRISIS THAT SEVERELY HIT THE POOR A DECADE AGO, HAS NOW EVOLVED INTO WIDER POVERTY REDUCTION EFFORTS. TODAY, POVERTY REDUCTION HAS BECOME ONE SPECIFIC OBJECTIVE THAT IS FORMALLY STATED IN THE NATIONAL DEVELOPMENT PLANNING DOCUMENTS.


IN POST‐CRISIS ERA, WHAT WAS STARTED AS A RESPONSE TO THE ASIAN ECONOMIC CRISIS THAT SWEPT THE COUNTRY A DECADE AGO, A SET OF SOCIAL SAFETY NET (JARING PENGAMAN SOSIAL, JPS) PROGRAMS HAVE NOW BECOME INSTITUTIONALIZED IN THE POVERTY REDUCTION PROGRAMS IN INDONESIA.

FROM THE ONSET OF THE CRISIS, THE GOVERNMENT EMPLOYED A SOCIAL PROTECTION SYSTEM THAT WAS A MIXTURE OF UNIVERSAL SUBSIDIES AND TARGETED SAFETY NET PROGRAMS.

THE AIM OF THIS INITIATIVE IS TO PREVENT THE CHRONIC POOR FROM FALLING MORE DEEPLY INTO POVERTY AND REDUCING THE EXPOSURE OF VULNERABLE HOUSEHOLDS TO RISKS.


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


THE LATEST DEVELOPMENT, ON FEBRUARY 2010 THE GOVERNMENT ISSUED THE PERPRES NO. 15/2010ABOUT POVERTY REDUCTION ACCELERATION. BASED ON THIS PERPRES, THE POVERTY REDUCTION BODY CHANGEITS NAME BECOMES THE NATIONAL TEAM FOR POVERTY REDUCTION ACCELERATION (TNP2K).

TNP2K HAS THREE MAIN TASKS, I.E. FORMULATE THE POVERTY REDUCTION POLICY AND PROGRAM, MAKE THEPOVERTY REDUCTION ACTIVITIES MORE SYNERGIC BETWEENMINISTRIES AND INSTITUTIONS, AND PERFORM THEMONITORING AND EVALUATION FUNCTION.

THIS NEW REGULATION ALSO HIGHLIGHTS A CHANGE INORGANIZATION AS THE VICE PRESIDENT WAS DESIGNATED TO LEAD THIS TEAM.


NATIONAL TEAM FOR POVERTY REDUCTION ACCELERATION

The Organization Chart based on Perpres No. 15/2010GRIPS_2012 www.ginandjar.com 61

DEVELOPMENT STRATEGY(Four‐Track Strategy)

• Pro‐Growth: Strategy to increase and accelerate economic growth through promoting investment, exports, and businesses including the improvement of investment climate.

• Pro‐Job: Strategy to create employment opportunities including the establishment of a flexible labor market and creation of conducive industrial relations.

• Pro‐Poor: Strategy to reduce poverty and to revitalize agriculture sector, forestry, maritime, rural economy. In the medium and long‐term period the poverty alleviation strategy is also aimed at increasing the participation (including the capacity and quality of the people at community level) to local development and providing access for the poor to basic services including education, health, sanitation/clean water, as well as rural infrastructure.

• Pro‐Environment: Strategy to protect and maintain the environment through sustainable development. Resources are optimally used while preserving the environment to meet present human needs and generations to come.


SOCIAL PROTECTION IN INDONESIA


Improvement on Social Welfare

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

Pro Poor• Social development• Cluster 1,2, dan 3Programs (SocialAssistance Programs)

Pro Job• Decent work• Social Security• Labor Competency•Migrant WorkersPro Growth

• Social Protection•Macro strategy• Sector strategy•Micro strategy (SME)

Social Welfare Development (Indicators)

DEVELOPMENT STRATEGY ON SOCIAL WELFARE

Growth &Economics stabilization(PRO‐POOR GROWTH)

Job Opportunity Creation(PRO‐JOB)

Poverty Reduction(PRO‐POOR)

Social WelfareImprovement (GROWTH with

EQUITY)

Family BasedSocial

AssistancePrograms

CommunityEmpowerment

Programs

PNPM Mandiri Core and Support

• Fiscal and MoneterPolicy

• Accelerate infrastructure development

• Improvement of Investment climate

• Policy on Energy sector

• Policy on small and medium enterprises

• Policy on Industrial sector

• Policy on Trade• Price stabilization basic needs

• National Social Security System

Conditional Cash Transfer (Program Keluarga Harapan/PKH), Subsidized Rice for Poor Families (RASKIN), Scholarship for

student from poor family, Health assistance

Small and Medium Enterprises

EmpowermentPrograms

Credits for the poor, Access to productive Resources, Training

64

POVERTY ALLEVIATION STRATEGY


Reduction in the Number of Poor and

Poverty Rate

Improvement in Purchasing Power

Improvement in Access to MarketPopulation Control

Productivity/ Capacity

Improvement

Improvement in Access to Basic

Services

Availability of Health services, Education, Clean water, Legal protection,

and other types of infrastructure

Family Planning programs

Market information availability, Access to productive resources

(capital, credit), Empowerment of micro & small scale enterprises

Quality growth (pro‐poor and pro‐job), Inflation control, Price stabilization for basic needs, Subsidy policy, Social

assistanceEmpowerment of poor

community, Improvement of community participation

FOUR CLUSTERS PRO‐PEOPLE PROGRAM

VERYPOOR

POOR

NEAR POOR

1ST CLUSTER

1. RICE SUBSIDY,2. CASH

TRANSFERS,3. HEALTH

INSURANCE, 4. SCHOLARSHIPS

2nd CLUSTER

1. Block grants for 6,408 sub‐districts (rural, urban, dis‐advantaged regions, regional & village infrastructures)

2. PNPM Mandiri

3rd CLUSTER

1. Micro credits provision (< Rp 5 million) through banks,

2. Other types of financial assistance

4th CLUSTER1. VERY CHEAP HOUSE PROGRAM2. CHEAP PUBLIC TRANSPORT VEHICLE PROGRAM3. CLEAN WATER PROGRAM FOR PEOPLE4. CHEAP & SAVE ELECTRICITY PROGRAM5. Fishermen's Life Improvement Program*)6. Urban Poor Community Life Improvement Program*)

MACRO‐ECONOMIC POLICY

• Improved Welfare• Expansion andIncreasing Employment Opportunities

VERYPOOR *)

POOR *)

NEAR POOR

Poverty Reduction


*) Fishermen's Life Improvement Program and Urban Poor Community Life Improvement Program are targeted for 60% poorest

Clusters of Poverty Alleviation Programs


Assistance &Social Protection Programs

Target: 17.5 mil. poor HH: rice subsidy, cash transfers,

health insurance, & scholarships

Target: the poorest, poor & near poor Households

Target: poor communities of subdistricts

Community Empowerment Programs

Block grants for 6,408 sub‐districts (rural, urban, dis‐

advantaged regions, regional & village infrastructures) PNPM

MandiriTarget: SMEs

Micro‐ & Small‐scale Enterprise Empowerment

Micro credits provision (< Rp 5 million) through banks, & other types of financial

assistance

1ST CLUSTER[Provide fish]

2nd CLUSTER[Facilitate with fish rod]

3rd CLUSTER[Assist to have fish‐rod & boat]

4th Cluster

6 Pro‐Poor Programs and 3 additional

programs

SOCIAL PROTECTION AND ASSISTANCE PROGRAMS (CLUSTER I)

GOVERNMENT SOCIAL ASSISTANCE IN PROTECTING RICE CONSUMPTION, EDUCATION AND HEALTH OF POOR HOUSEHOLDS.

THERE ARE FIVE PROGRAMS I.E. RASKIN SUBSIDIZED RICE, SOCIAL HEALTH INSURANCE (JAMKESMAS), POOR STUDENT SCHOLARSHIP (BKM/BSM) , SCHOOL OPERATIONAL SUPPORT FUND (BOS), CONDITIONAL CASH TRANSFER FOR HOUSEHOLDS (PKH).


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


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


COMMUNITY EMPOWERMENT (CLUSTER 2)

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


PREVIOUSLY THE IMPLEMENTATION OF SUCH PROGRAMS HAD RESULTED IN INEFFICIENCY AND INEFFECTIVENESS, THERE IS AN OVERLAPPING PROGRAMS IN VARIOUS SECTOR IN DIFFERENT REGIONS AS WELL AS EXCLUDED PROGRAMS IN OTHER SECTORS AND OTHER REGIONS.

IN 2006 A NEW POLICY WAS LAUNCHED TO ACCELERATE THE POVERTY ALLEVIATION EFFORTS AND TO EXTEND EMPLOYMENT OPPORTUNITIES FOR THE POOR BY CONSOLIDATING VARIOUS EMPOWERMENT PROGRAMS UNDER THE PNPM (NPCE).


AS MENTIONED, THE COMMUNITY EMPOWERMENT PROGRAM IS NOT A NEW APPROACH IN THE DEVELOPMENT APPROACH IN INDONESIA. THERE WERE INPRES DESA TERTINGGAL (IDT) AND VILLAGE INFRASTRUCTURES PROGRAM (P3DT) BEFORE CRISIS.

AFTER THE CRISIS, THIS KIND OF EMPOWERMENT PROGRAM HAS EXTENDED INTO VARIOUS PROGRAMS, SUCH AS EMPOWERMENT OF THE REGIONS TO OVERCOME THE IMPACT OF THE ECONOMIC CRISIS (PDM‐DKE), KECAMATAN DEVELOPMENT PROGRAM (PPK), URBAN POVERTY PROGRAM (P2KP), FARMER AND FISHER'S INCREASING INCOME PROJECT (P4K), AND ECONOMIC EMPOWERMENT FOR COASTAL COMMUNITY (PEMP).


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


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


COMMUNITY EMPOWERMENT

Building community capacity as social capital

Enhancing social entrepreneurship at community level through facilitators/community leaders

Providing economic capital through community block

grants

A BASE FOR NATION BUILDING


RESPONSIVE GOVERNMENT/EMPOWERED COMMUNITIES

Strengthening bottom‐up planning and budgeting; Improving local government representation and

responsiveness; Improving social service delivery to the poor; Pro‐poor planning and budgeting

BLOCK GRANT TRANSFER TO

THE POOR

Market linkages Non-bank and

microfinance SADI (smallholder dvpt) Information technology Renewable energy

Social Protection Women’s participation Justice for the poor Helping marginal groups Budget transparency Community trust funds Sustainability

POVERTY REDUCTION THROUGH COMMUNITY EMPOWERMENT


TRAIN THE COMMUNITIES IN IDENTIFICATION, ANALYSIS AND DECISION MAKING PROCESS TO TACKLE THEIR POVERTY PROBLEMS

CREATE/EXPAND SMALL SCALE INFRASTRUCTURES AND COMMUNITY ECONOMIC PRODUCTIVITIES.

INCREASE COMMUNITY CAPABILITY AND SELF‐HELP TO ACHIEVE BETTER STANDARD OF LIVING

MAIN ACTIVITIES


EMPOWERMENT PROCESS


WHY NPCE?

THERE HAVE BEEN DIFFERENT KINDS OF POVERTY ERADICATION ACTIVITIES WITHIN MINISTRIES/INSTITUTIONS CREATING INEFFICIENCY AND OVERLAPPING ACTIVITIES, MECHANISMS, COMMUNITY'S INSTITUTIONS NEED HARMONIZATION.

IMPERFECT MARKET, ESPECIALLY IN MEETING PEOPLE’S NEEDS IN REMOTE AND ISOLATED AREAS.

DIFFICULTIES TO REACH THE POOR.


HOW IT WORKS?

PNCE‐SECTORAL PROGRAMS • CONSIST OF SECTORAL

EMPOWERMENT PROGRAMS• COMPONENTS:

• SECTORAL BLOCK GRANTS (RURAL ROADS, IRRIGATION, ETC)

• EXTENSION SERVICES

PNCE‐CORE PROGRAMS (IN 2008)• CONSIST OF:

• KDP: RURAL‐BASED COMMUNITY EMPOWERMENT

• UPP: URBAN‐BASED COMMUNITY EMPOWERMENT

• RISE: FAST‐GROWTH AREAS COMMUNITY EMPOWERMENT

• COMPONENTS:• COMMUNITY BLOCK GRANTS• FACILITATION, TECHNICAL ASSISTANCE, TRAINING, LOCAL GOVERNMENT CAPACITY


PREVIOUS CONDITIONPROGRAM PROGRAM PROGRAM PROGRAM

OVERLAPPING WITH OTHER PROGRAMS

FIELD COORDINATION

PROGRAM MANAGEMENT STRUCTURE

PROGRAM MANAGEMENT STRUCTURE

FIELD COORDINATION

??

MISDELIVEREDPROGRAM

?

OVERNUMBER IN MEDIATORS

??

IGNORED

????


UNDER NPCE

Data collection and targeting on the poor accurately

All programs run similar norms/criteria, standard, process, procedure

and guidance Community through

empowering groups conduct NPCE, supported by SectoralEmpowering Packages (BLM,

facilitator, training etc)

All empowering supports rest under and managed by “participative community body” which is formed by public itself, in each village

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

Program

ProgramProgram

Program

Program


MICRO‐ENTERPRISE EMPOWERMENT (CLUSTER 3)

THIS CLUSTER IS INTENDED TO EMPOWER THE POOR AND NEAR POOR WHO HAS AN OCCUPATION OR BUSINESS TO FULFILL THEIR BASIC NEEDS BUT THEY STILL NEED TO IMPROVE THE WELLBEING.

ALBEIT THE ROLE OF MICRO‐ENTERPRISE IN ERADICATING POVERTY HAS BEEN WIDELY KNOWN SINCE FEW DECADES AGO, THE CRISIS 1997/1998 SHOWED HOW SIGNIFICANT THE EXISTENCE OF MICRO‐ENTERPRISE HELPS THE POOR TO GET SURVIVED AND RECOVERED FROM THE CRISIS.

IT IS ALSO BEEN KNOWN THAT MOST POOR WORK IN INFORMAL SECTOR CONSISTS OF SMALL SCALE AND MICRO‐ENTERPRISE THAT PRODUCING OR DISTRIBUTING GOODS AND SERVICES.


THESE ENTERPRISES ARE GENERALLY INDEPENDENT, LARGELY FAMILY OWNED, EMPLOY LOW LEVELS OF SKILLS AND TECHNOLOGY, AND ARE HIGHLY LABOR INTENSIVE. INDEED, MICRO‐ENTERPRISES PROVIDE INCOME AND EMPLOYMENT FOR SIGNIFICANT PROPORTIONS OF WORKERS IN RURAL AND URBAN AREAS (HARVIE, 2003).

FOR INDONESIA, MICRO‐ENTERPRISES NOW HAS REACHED 43 MILLION UNITS AND SHARED MORE THAN 50% OF NATIONAL GDP.

THE DATA ALSO SHOWS THAT ONE UNIT MICRO‐ENTERPRISE CAN ABSORB ON AVERAGE 1‐5 WORKERS (TKPK, 2009).


HARVIE (2003) ALSO POINTS OUT THAT MICRO‐ENTERPRISE DEVELOPMENT‐COMPLEMENTED WITH PROPER MICRO‐FINANCE SUPPORT‐CAN PLAY PART IN THE ACHIEVEMENT OF MAIN SOCIAL AND ECONOMIC DEVELOPMENT OBJECTIVES, NAMELY POVERTY REDUCTION, WOMEN EMPOWERMENT, EMPLOYMENT CREATION, AND PRIVATE SECTOR ENTERPRISE DEVELOPMENT.

THOUGH THESE FOUR OBJECTIVES CANNOT BE FULLY SEPARATED, WE WILL FOCUS ON THE ROLE OF MICRO‐ENTERPRISE EMPOWERMENT TO REACH THE OBJECTIVES ON POVERTY ALLEVIATION.


THE PROGRAM OBJECTIVE IS TO INCREASE ACCESS OF THE POOR TO A CHEAP CAPITAL. FURTHERMORE, THE SNPK HAS ALSO ELABORATED THE RELATIONSHIP BETWEEN MICRO‐ENTERPRISES, MICRO FINANCE, AND MICRO CREDIT IN THE AGENDA OF POVERTY ALLEVIATION.

THIS PROGRAM IS A CONTINUATION AND INTEGRATION OF VARIOUS MICRO‐CREDIT PROGRAMS INITIATED BY PREVIOUS GOVERNMENT.


MICRO CREDIT (KUR) SCHEME

Source: TKPK, 2009GRIPS_2012 www.ginandjar.com 88

CLUSTER 3

THE GOVERNMENT PROVIDES A SUBSIDIZED GUARANTEE SCHEME AT AMOUNT 70% IN WHICH THE GOVERNMENT PAYS THE PREMIUM.

THE TARGET OF THIS MICROCREDIT PROGRAM IS THE MICRO‐ENTERPRISES AND COOPERATIVES WHICH HAVE FEASIBLE BUSINESS BUT ARE NOT BANKABLE BECAUSE OF LACK OF COLLATERAL.

MOREOVER, THIS MICROCREDIT ALSO PROVIDES ACCESS TO COMMUNITY GROUPS WHICH HAVE BEEN EMPOWERED IN THE PREVIOUS PROGRAM.


982

11.475

4.733

17.229

1.856

3.828

6.469

8.771

11.216

14.578

17.467

0

2.000

4.000

6.000

8.000

10.000

12.000

14.000

16.000

18.000

20.000

2007 2008 2009 2010 Jan-11 Feb-11 Mar-11 Apr-11 Mei-11 Jun-11 Jul-11 Agust-11 Sep-11 Okt-11 Nop-11 Des-11

Realisasi

1.6003.400

5.000

6.600

8.300

10.000

11.600

13.30015.000

16.60018.300

20.000

20.45922.236

24.40426.474

29.003

Target

(Rp Billion)

Realized

TARGET AND REALIZATION 2007‐ DECEMBER 2011

Source: Office of the Economic Coordinating Minister


SOCIAL PROTECTION COVERAGE

Social AssistanceSocial Security

•Pension.

•Old Age Security.

•Health.

•Work Injury.

•Death.

Social Security

•Pension.

•Old Age Security.

•Health.

•Work Injury.

•Death.• Scholarship.• Subsidized Rice.• CCT.*• Social Health Assistance• UCT (if needed)• Disabled.• Neglected Children.• Neglected Seniors.*

• Scholarship.• Subsidized Rice.• CCT.*• Social Health Assistance• UCT (if needed)• Disabled.• Neglected Children.• Neglected Seniors.*

NationalProgram onCommunity

Empowerment (PNPM)

NationalProgram onCommunity

Empowerment (PNPM)

•Credit Facility toSMEs

•Skilltraining for Indonesia’smigrantWorker

•Other Schemes

•Credit Facility toSMEs

•Skilltraining for Indonesia’smigrantWorker

•Other Schemes

Cluster 1Cluster 1

Cluster 2Cluster 2

Cluster 3Cluster 3

Q5Q5

Q4Q4

Q3Q3

Q2Q2

Q1Q1


* Pilot for the poorest households

Clusters of Poverty Alleviation ProgramsFourth Cluster


Access for the poor to buy very low price ‘basic needs’

‐ subsidized by government ‐

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

Three Clusters Poverty Alleviation and Social Welfare Improvement

The fourth cluster is planned to start in 2012 (complement to the three clusters)

4th CLUSTER

GOALS: ALIGNMENT OF KEY GOVERNMENT PRIORITIES WITH MDGs

INDICATORS/TARGET (%) 2002ACTUAL

2009TARGETS

MDGs 2015 TARGETS

PovertyPopulation below US$ 1 a day 7.2 10.3Poverty head‐count ratio 18.2 8.2 7.5HealthUnder 5 mortality rate (per 1,000 live births) 60 26 33Maternal mortality ratio (per 100,000 live births) 307 226 105EducationNet enrollment rate in primary education 92.7 99.6 100

Gross and net enrollment rate at junior level 79.7 98 ‐Literacy rate of 15‐24 y.o 98.7 100Water & Sanitation% of population that has access to improved water 78 80Rural Development Agricultural sector growth 35


POVERTYPOVERTY


POOR ↔ NON POOR MOVEMENT

POVERTY STATUS UNIT POVERTY STATUS 2009

POOR NON‐POOR

POOR % 45.6 54.4

NON‐POOR % 7.6 92.4

POVERTY STATUS UNIT POVERTY STATUS 2010

POOR NON‐POOR

POOR % 46.4 53.6

NON‐POOR % 7.3 92.7


IMPORTANT NOTE: NON‐INCOME POVERTY IS A MORE SERIOUS PROBLEM THAN

INCOME POVERTY. WHEN ONE ACKNOWLEDGES ALL DIMENSIONS OF HUMAN WELL‐BEING—ADEQUATE CONSUMPTION, REDUCED VULNERABILITY, EDUCATION, HEALTH AND ACCESS TO BASIC INFRASTRUCTURE—THEN ALMOST HALF OF ALL INDONESIANS WOULD BE CONSIDERED TO HAVE EXPERIENCED AT LEAST ONE TYPE OF POVERTY.


POVERTY INCIDENCES USING DIFFERENT MEASUREMENT (%)


101

1998 CRISIS

THE EVER PRESENT PROBLEM OF INEQUALITY

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


AT THE HEIGHT OF THE PRAISE FOR THE NEW ORDER ACHIEVEMENT, MANY INDONESIAN SCHOLARS AND CRITICS NOTED THE LACK OF DISTRIBUTIVE JUSTICE AS ONE OF THE MAJOR CRITICISM OF THE NEW ORDER.

THEY ARGUED THAT THE INDONESIAN ECONOMIC SUCCESS HAD BENEFITED THE URBAN AND INDUSTRIAL SECTOR WHILE (RELATIVELY) MARGINALIZING THE RURAL AND TRADITIONAL SECTORS.


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


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


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


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


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


ANOTHER ARGUMENT RAISED AGAINST THE APPARENT SUCCESS OF INDONESIA’S DEVELOPMENT STRATEGY TURNS THE SPOTLIGHT ON THE ISSUE OF INCOME DISTRIBUTION. SOME CRITICS OF THE ECONOMIC REFORMS ARGUED THAT INCOME DISTRIBUTION WORSENED THROUGHOUT THE PERIOD OF RAPID GROWTH.

THERE IS IN FACT SOME EVIDENCE FOR THIS.


THE GINI COEFFICIENT, CALCULATED FROM EXPENDITURE DATA, SHOW THAT INCOME DISTRIBUTION IMPROVED WITH THE GINI‐COEFFICIENT FALLING FROM 0.35 IN 1970 TO 0.32 IN 1990.

BUT THEREAFTER THE DATA SUGGEST SOME WORSENING IN THE DISTRIBUTION WITH THE GINI COEFFICIENT RISING TO 0.34 IN 1993 AND TO 0.36 IN 1996, A RISE THAT OCCURRED IN BOTH RURAL AND URBAN AREAS ALTHOUGH THE INCREASE IN THE RURAL GINI‐COEFFICIENT WAS SMALL.


HOWEVER, INDONESIA’S INCOME DISTRIBUTION COMPARES FAVORABLY TO THAT FOUND IN NEIGHBORING COUNTRIES.

OVER THE PERIOD 1993‐98, THE GINI INDEX WAS 36.5 FOR INDONESIA, 41.3 FOR THAILAND, 46.2 FOR THEPHILIPPINES AND 48.5 FOR MALAYSIA (WORLD BANK. WORLD DEVELOPMENT INDICATORS 2000).


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

REGIONAL DISPARITY


THESE PROVINCES, RICH IN NATURAL RESOURCES, WERE RESENTFUL OF THE RETURNS THAT THEY RECEIVED FROM THEIR REGIONS’ CONTRIBUTION TO THE NATIONAL ECONOMY. THE WIDENING DISPARITY BETWEEN REGIONS WAS ANOTHER SOURCE OF CRITICISM AGAINST THE NEW ORDER.

TO A SIGNIFICANT EXTENT THIS PROBLEM STILL PERSISTS TODAY, AND IS ONE FACTOR DRIVING THE SOVEREIGNTY CONFLICTS IN ACEH AND PAPUA.


DURING THE NEW ORDER PERIOD VARIOUS MEASURES WERE UNDERTAKEN TO ADDRESS THE IMBALANCES.

THROUGH VARIOUS SCHEMES: GRANTS, MICRO CREDIT IS, SUBSIDIES, USING VARIOUS MECHANISMS THROUGH THE BANKING SECTOR AND THROUGH FISCAL POLICIES, THERE WERE ATTEMPTS TO RIGHT THE BALANCE.

THE PRESIDENTIAL INSTRUCTION (INPRES) MECHANISM WAS AMONG THE MOST EFFECTIVE MECHANISM PROVIDING GRANTS TO THE REGIONS AS WELL AS TO SECTORS SUCH EDUCATION AND HEALTH AND TARGETED TO THE POOR SUCH AS IDT.

ATTEMPTS AT EQUITABLE DEVELOPMENT


THOSE MEASURES WERE EFFECTIVE IN REDUCING POVERTY BUT NOT SUFFICIENT IN OVERCOMING THE IMBALANCES.

IN THE 1980’S THROUGH THE PROMOTION OF DOMESTIC PRODUCTS CAMPAIGN, THE GOVERNMENT LAUNCHED AFFIRMATIVE ACTION TO PROMOTE AND PROTECT LOCAL PRODUCTS. IN PARTICULAR COMING FROM SMALL AND MEDIUM INDUSTRIES (PRESIDENTIAL DECREE 10/1980).


THE PROGRAM WAS EXPANDED TO GIVE ASSISTANCE TO THE INDIGENOUS (PRIBUMI) BUSINESSMEN. THE RESULT WAS VISIBLE, NOW MANY OF THOSE INDIGENOUS BUSINESSMEN PROMOTED AT THAT TIME HAD RISEN TO BECOME BIG BUSINESSMEN AND EVEN CONGLOMERATES.

IN THE 1990’S THE INPRESESWERE ENLARGED BOTH IN COVERAGE AND AMOUNT TO ASSIST THE REGIONS WITH MORE GRANTS.

BUT ALL THOSE EFFORTS WERE NOT SUFFICIENT TO ARREST THE WIDENING GAP BETWEEN THE RICH AND THE POOR, BOTH INCOME GROUPS AS WELL AS REGIONS.


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


IF ONE APPLIES THE WORLD BANK STANDARDS TO INDONESIA’S STATISTICS (US$2 PPP), THEN PEOPLE LIVING UNDER POVERTY LINE WILL BE 23.78%. IT CORRESPONDS TO 51 MILLION PEOPLE IN 1993 PPP US$. IF ONE APPLIES 2005 PPP US$, IT WILL BE 49.91% OR 120 MILLION IN 2011.

IN ITS 2006 REPORT, THE WORLD BANK UNDERLINES THAT THE NUMBER OF PEOPLE LIVING BELOW US$2‐A‐DAY IN INDONESIA COMES CLOSE TO EQUALING ALL THOSE LIVING ON OR BELOW US$2‐A‐DAY IN ALL THE REST OF EAST ASIA OUTSIDE CHINA.


IF PEOPLE LIVING ABOVE INDONESIA'S POVERTY LINE BUT BELLOW INTERNATIONAL (WORLD BANK) POVERTY LINE IS CATEGORIZED TO BE NEAR POOR, THEN THERE ARE 11.42% OR 27.3 MILLION NEAR‐POOR.

THE DIFFERENCE BETWEEN THE POOR AND NEAR‐POOR IS ACTUALLY ONLY IN STATISTICS. IN REAL LIFE THERE IS LITTLE THAT DISTINGUISHES THE POOR AND THE NEAR‐POOR, SUGGESTING THAT POVERTY REDUCTION STRATEGIES SHOULD FOCUS ON EMPOWERING AND IMPROVING THE WELFARE OF AT LEAST A QUARTER OF THE POPULATION (STILL USING THE 1993 PPP US$ INSTEAD OF 2005).


DISPARITY IS A REAL PROBLEM.

FIRST BETWEEN RURAL AND URBAN AREA. 15.72% OF RURAL POPULATION ARE POOR COMPARED TO 9.23% IN THE URBAN AREA. MOST OF THE POOR PEOPLE IN THE RURAL AREAS WORK IN AGRICULTURE. AND MANY WORK ON SMALL PLOTS OF LAND OR AS LABOR FARMERS.

REGIONALLY, THE HIGHEST POVERTY INCIDENCES ARE FOUND IN EASTERN PART OF INDONESIA, NOTABLY PAPUA’S 32%, WEST PAPUA’S 31.9%, MALUKU’S 23%, EAST NUSATENGGARA’S 21.2%, AND WEST NUSATENGGARA’S 19.7%. ACEH, A RICH PROVINCE BUT RAVAGED BY YEARS OF HOSTILITY, WAS SIXTH AT 19.6%.


INDONESIA IS LOSING ITS INVESTMENT [DURING THE NEW ORDER] ON IRRIGATION BECAUSE IRRIGATED LAND HAS TURNED INTO CONCRETE OR ASPHALT. AND AS A RESULT, WE ARE NOW AGAIN BECOMING THE BIGGEST RICE IMPORTER AS WE WERE, BEFORE WE ATTAINED RICE SELF‐SUFFICIENCY BACK IN THE1980’S.

THE MEAGER LAND AVAILABLE FOR THE FARMERS TO TOIL IS SHRINKING. AS IT IS NOW 17.17% OF FARMER HOUSEHOLDS OWN LESS THAN 0.10 HA WHILE 39.24% OWN BETWEEN 0.10 TO 0.50 HA. THIS SITUATION CONTRIBUTES TO THE ABJECT POVERTY OF FARMING FAMILIES. AGRARIAN REFORM IS A MUST, AND URGENTLY NEEDED TO GET TO THE CORE OF RURAL POVERTY.



WITH ALL THOSE PROGRAMS INDONESIA'S BUDGETARY ALLOCATIONS TO SOCIAL AND HUMAN DEVELOPMENT PRIORITIES AS A PROPORTION OF GROSS DOMESTIC PRODUCT (GDP) STILL REMAIN AMONG THE LOWEST IN SOUTHEAST ASIA.

OBVIOUSLY THE POLICY MAKERS FACE A CRITICAL TRADE‐OFF BETWEEN BALANCING THE STATE BUDGET AND MAKING NECESSARY SOCIAL INVESTMENTS (SUMARTO, SURYAHADI, AND BAZZI, 2008).

THERE IS INSUFFICIENT MEASURES TO CLOSE THE GAP BETWEEN RICH AND POOR.

THE SITUATION IS ILLUSTRATED BY A REPUTABLE BUSINESS MAGAZINE, FORBES ASIA. IN ITS DECEMBER 2011 ISSUE, THE MAGAZINE PUBLISHED 40 WEALTHIEST PEOPLE IN INDONESIA.

THE MINIMUM WEALTH TO GAIN ENTRY, MEANING THE “POOREST” AMONG THE RICH, IS $630 MILLION.

TOGETHER THEIR WEALTH IS $85 BILLION, AN INCREASE OF 18% FROM LAST YEAR, COMPARE TO INDONESIA’S GDP GROWTH WHICH WAS “ONLY” 6.5%. AND $85 BILLION IS EQUAL TO 10% OF INDONESIA’S GDP.


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


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


AVERAGE EXPENDITURES BY DECIL

Growing disparity: lower growth in lower income group


RISING GINI RATIO


UNEMPLOYMENT AND POVERTY

SOURCE: BPS


EMPLOYMENT 1988‐2011

5,78%

7,24%

6.46%

6,50% 7,82%

4,70%

‐13,13%

0,79%

4,92%3,64%

4,78% 5,50% 6,06%

4,30%

6,10%6,50%

‐14%

‐11%

‐8%

‐5%

‐2%

1%

4%

7%

‐14,0

‐11,0

‐8,0

‐5,0

‐2,0

1,0

4,0

7,019

88

1989

1990

1991

1992

1993

1994

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Million

Changes in labor forceChanges in employmentEconomic growth

BETWEEN 2002‐2005, NEW ENTRANTS TO THE LABOUR FORCE WAS LARGER THAN EMPLOYMENT OPPORTUNITY.

2006‐2010: EMPLOYMENT OPPORTUNITY WAS LARGER THAN NEW ENTRANTS TO THE LABOUR FORCE, REDUCING UNEMPLOYMENT.

IN 2011 THERE WAS AN INCREASE IN LABOUR FORCE OF 800 THOUSANDS, WHILE EMPLOYMENT OPPORTUNITY ROSE BY1.46 MILLION.


RISE IN FORMAL EMPLOYMENT

2010‐2011, THERE WAS AN INCREASED IN FORMAL EMPLOYMENT BY 5.71 MILLION, RISING FROM 33.07% TO 37.83%

THE NUMBER OF INFORMAL WORKER DECLINED BY 4.24 MILLION, OR FROM 66.93% TO 62.17%.

30,73%33,07%

37,83%

69,27%66,93%

62,17%

0%

10%

20%

30%

40%

50%

60%

70%

80%

0,00

10,00

20,00

30,00

40,00

50,00

60,00

70,00

80,00

2005 2010 2011

Persentase

Jumlah pekerja

Formal (dalam juta) Informal (dalam juta)

% Formal % Informal

MILIIO

N OF WORK

ERS

PERC

ENTA

GE

FORMAL (MILLION) INFORMAL (MILLION)


OPEN UNEMPLOYMENT AND UNDER‐EMPLOYMENT (2005 ‐ 2010)

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

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

27

28,3

29,6

30,9

32,2

33,5

UNDER

‐EMPLOYM

ENT (M

ILLION)

7

8

9

10

11

12

OPE

N EMPLOYM

ENT (M

ILLION)

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

27,7

28,929,2

27,9

28,9 29,1

30,431,1

31,6

33,3

8,0

9,1

9,910,3

11,9

10,9

10,09,4

9,08,3

UNDER‐EMPLOYMENT OPEN EMPLOYMENT

OPEN UNEMPLOYMENT AND UNDER2001 ‐ 2010


UNEMPLOYMENT BY AGE

‐

500.000

1.000.000

1.500.000

2.000.000

2.500.000

3.000.000

3.500.000

2007 2008 2009 2010 2011 *)

UNEM

PLOYED

15 ‐ 19

20 ‐ 24

25 ‐ 29

30 ‐ 34

35 ‐ 39

40 ‐ 44

45 ‐ 49

50 ‐ 54

55 +

31%29%

134

AGE 15‐24 YEARS

%

2007 (Ø) 35

2008 (Ø) 29

2009 (Ø) 28

2010 (Ø) 29

Ø = AVERAGE FEBRUARY AND AUGUST


IMBALANCE ECONOMIC AND EMPLOYMENT STRUCTURE

POOR HOUSEHOLD 135

Mining (11,15%)

Agriculture (15,34%)

Transportation (6,50%)

Finance (7,21%)

Services (10,19%)

Manufacturing (24,82%)

Trading (13,72%)

Construction(10,29%)

Electricity(0,78%)

ECONOMIC STRUCTURE2010

Agriculture (38,17%)Transportation (5,02%)Finance (1,85%)

Social Services (15,30%)

Mining (1,22%)

Manufacturing (12,31%)

Trading (20,88%)

Construction (5,02%)Electricity, gas, water (0,23%)

EMPLOYMENT STRUCTUREFebruary 2011

Unemployed7%

Agriculture72%

Manufacturing/Industry

6%

Others15%

3,644,50 4,78 5,03 5,69 5,50

6,35 6,014,58

6,10

4,89 5,28

6,30 7,13

7,81 7,43

8,96 8,55

6,02

8,19

0,00

1,00

2,00

3,00

4,00

5,00

6,00

7,00

8,00

9,00

10,00

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

PDB Sektor non tradable

2.64

3.863.51 3.23 3.72 3.47

Sektor tradable

Sektor tradable: (1) Agriculture, Animal Husbandry, Forest and Fishery, (2) Mining (3) Manufacturing Industry. Sektor non‐tradable: 1. Electricity, Gas, Clean Water, 2. Construction, Trading, Hotel, and Restaurant, 3. Transportation and Communication, 4.Finance, Real Estate and Corporate Service, 5. Social Services.

3.81 3.853.05

3.85

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

Non TradableGDP Tradable


REGIONAL DISPARITY

Poverty incidence by provice (2011)

3.7 4.25.3 5.8 6.3 6.6 6.8 7.4

8.5 8.5 8.6 8.7 9.0 9.210.310.7

11.3

13.914.214.214.615.815.816.1

16.917.518.819.6

19.721.2

23.0

31.9 32.0

0

5

10

15

20

25

30

35Jakarta

Bali

Kalse

lBabel

Banten

Kalteng

Kaltim

Kepp

riRiau

Sulut

Kalbar

Jambi

Sumbar

Malut

Sulse

lJabar

Sumut

Sulbar

Jatim

Sumsel

Sultra

Jateng

Sulteng

Yogya

Lampu

ngBengkulu

Goron

talo

Aceh

NTB NTT

Maluku

P.Barat

Papu

a

Jakarta = 3,75%, Papua = 31,98%, Indonesia = 12.49%

12.5


WESTERN VS EASTERN INDONESIA

% RGDP 1980 1990 2000 2010

WI 80 84 83 82

EI 20 16 17 18

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

% Population 1980 1990 2000 2010

WI 83 82 81 80

EI 17 18 19 20

GiniCoefficient 2007 2008 2009 2010

WI 0.33 0.31 0.32 0.35

EI 0.34 0.33 0.34 0.38


THE HUMAN DEVELOPMENT INDEX IS A SUMMARY MEASURE OF HUMAN DEVELOPMENT. IT MEASURES THE AVERAGE ACHIEVEMENTS IN A COUNTRY IN THREE BASIC DIMENSIONS OF HUMAN DEVELOPMENT:

1. A LONG AND HEALTHY LIFE, AS MEASURED CY LIFE EXPECTANCY AT BIRTH.

2. KNOWLEDGE, AS MEASURED BY THE ADULT (OVER 25) POPULATION MEANS YEARS OF SCHOOLS AND EXPECTED YEARS OF SCHOOLING.

3. A DECENT STANDARD OF LIVING, AS MEASURED BY GDP PERCAPITA IN PURCHASING POWER PARITY (PPP) TERMS IN US DOLLAR.


COUNTRY2010

LEVEL INDEXSINGAPORE 27 0.846BRUNEI 37 0.805

MALAYSIA 57 0.774

THAILAND 92 0.654

PHILLIPINES 97 0.638

INDONESIA 108 0.600

VIET NAM 113 0.572

CAMBODIA 124 0.490

MYANMAR 132 0.451

169

HDI ASEAN 2010

In 2009 Indonesia’s HDI was 111Source: HDR 2010: The Real Wealth of Nations (UNDP)


HDI BY COMPONENTS(Selected Countries, 2011)

LIFE EXPECTANCY MEANS YEARS OF SCHOOLING

EXPECTED YEARS OF SCHOOLING

Philippines 68.7 8.9 11.9

China 73.5 7.5 11.6

Thailand 74.1 6.6 12.3

Malaysia 74.2 9.5 12.6

Indonesia 69.4 5.8 13.2

Viet Nam 75.2 5.5 10.4


Source: HDR 2010: The Real Wealth of Nations (UNDP)

HDI BY PROVINCE, 2004 ‐ 2010


*Using BPS incidesSource: BPS

HUMAN DEVELOPMENT INDEX INDONESIA, 1980‐2011

Source: Human Development Report – UNDP, 2011


INDONESIA’S HDI TRENDS(By Components)

Based on consistent time series data, new component indicators and methodologySource: Human Development Report – UNDP, 2011

LIFE EXPECTANCY AT BIRTH

EXPECTED YEARS OF SCHOOLING

MEANS YEARS OF

SCHOOLING

GNI PER CAPITA

(2005 PPP$)

HDI VALUE

1980 57.6 8.7 3.1 1.318 0.423

1985 60.0 10.1 3.5 1.539 0.460

1990 62.1 10.4 3.3 2.007 0.481

1995 64.0 10.5 4.2 2.751 0.527

2000 65.7 11.1 4.8 2.478 0.543

2005 67.1 11.8 5.3 2.840 0.572

2010 68.9 13.2 5.8 3.644 0.613

2011 69.4 13.2 5.8 3.716 0.617


146

1998 CRISIS

IN MOST DEVELOPING COUNTRIES POOR PEOPLE HAVE TROUBLE GETTING PROMPT, EFFICIENT SERVICE FROM THE PUBLIC ADMINISTRATION.

TO CHANGE THIS, THE FIRST STEP IS BUILDING THE CAPACITY OF PUBLIC ADMINISTRATION.

OFFICIALS NEED TRACTABLE REGULATORY FRAMEWORKS, WITH PROPER PERFORMANCE INCENTIVES AND MECHANISMS TO ENSURE ACCOUNTABILITY AND RESPONSIVENESS TO CLIENTS, INCLUDING POUR PEOPLE.

POOR ORGANIZATIONAL DESIGN ENGENDERS INEFFICIENCY AND CORRUPTION, TYPICALLY HURTING POOR PEOPLE THE MOST.

(World Development Report 2000/2001: Attacking Poverty, World Bank)


DURING THE PAST TWO DECADES, AS SOCIETIES AND THEIR GOVERNMENTS HAVE BECOME AWARE OF THE NEED OF PUBLIC SECTOR REFORMS TO FOCUS PUBLIC ACTION AND PROGRAMS ON SOCIAL PRIORITIES AND INCREASE THE CAPACITY OF THE STATE TO REDUCE POVERTY.

PUBLIC SECTOR REFORM AND MODERNIZATION HAVE GREAT POTENTIAL TO REDUCE POVERTY, IF THEY ARE AT THE CORE OF A DEVELOPMENT STRATEGY THAT ESTABLISHES CLEAR PRIORITIES FOR PUBLIC ACTION.


THE FUNCTIONAL AND ORGANIZATIONAL STRUCTURE OF THE PUBLIC SECTOR NEEDS TO BE RATIONALIZED TO IMPROVE RESOURCE ALLOCATION FOR PROGRAMS THAT ARE SOCIAL PRIORITIES AND HAVE GREATER CAPACITY TO REDUCE POVERTY.

MOST IMPORTANT IS TO STREAMLINE AND "RIGHTSIZE" PUBLIC ADMINISTRATIVE ENTITIES AND PRIVATIZE PUBLIC ENTERPRISES AND OTHER OPERATIONAL PUBLIC PROGRAMS.


BEYOND RATIONALIZING THE STRUCTURE OF THE PUBLIC SECTOR THERE IS A NEED TO IMPROVE PUBLIC MANAGEMENT SYSTEMS TO MAKE PUBLIC PROGRAMS MORE EFFICIENT AND ACCOUNTABLE.

INVOLVING CIVIL SOCIETY IN PLANNING, MONITORING, AND EVALUATING PUBLIC PROGRAMS AND POLICIES IS ALSO CRUCIAL TO ENSURE STEADY PROGRESS TOWARD A FULLY RESPONSIVE AND ACCOUNTABLE STATE.


LEGISLATIVE OVERSIGHT OF THE EXECUTIVE, CARRIED OUT ACCORDING TO TRANSPARENT PROCEDURES, IS AN IMPORTANT PART OF MONITORING AND IMPROVING PERFORMANCE. PUBLIC ADMINISTRATIONS ALSO NEED TO BE SUPPORTED AND ACTIVELY MONITORED BY POLITICAL LEADERS.

BUT SOMETIMES THIS PROCESS BECOMES SUBJECT TO POLITICAL PARTY’S INTEREST OR THE PERSONAL GOALS OR WHIMS OF INDIVIDUAL POLITICIAN, RESULTING IN EXCESSIVE POLITICAL INTERFERENCE. THE QUALITY OF PUBLIC SERVICE IS REDUCED WHEN PUBLIC OFFICIALS ARE HELD ACCOUNTABLE MORE TO THEIR HIERARCHICAL SUPERIORS THAN TO THE PEOPLE 'THEY SERVE.


152

1998 CRISIS

POVERTY IN INDONESIA HAS THREE SALIENT FEATURES. FIRST, MANY HOUSEHOLDS ARE CLUSTERED AROUND THE NATIONAL

INCOME POVERTY LINE OF ABOUT PPP US$1.25‐A‐DAY, MAKING EVEN MANY OF THE NON‐POOR VULNERABLE TO POVERTY.

SECOND, THE INCOME POVERTY MEASURE DOES NOT CAPTURE THE TRUE EXTENT OF POVERTY IN INDONESIA; MANY WHO MAY NOT BE ‘INCOME POOR’ COULD BE CLASSIFIED AS POOR ON THE BASIS OF THEIR LACK OF ACCESS TO BASIC SERVICES AND POOR HUMAN DEVELOPMENT OUTCOMES.

THIRD, GIVEN THE VAST SIZE OF AND VARYING CONDITIONS IN THE INDONESIAN ARCHIPELAGO, REGIONAL DISPARITIES ARE A FUNDAMENTAL FEATURE OF POVERTY IN THE COUNTRY.


ON POVERTY

THREE IMPORTANT ELEMENTS FOR EFFECTIVE POVERTY REDUCTION. FIRST, ALL PROGRAMS SHOULD INTEGRATE EQUITY OBJECTIVES. IT

WAS A CORRECTION FOR THE PAST APPROACH EMPHASIZING ONLY EFFICIENCY.

SECOND, THE POOR, WHO ARE THE FOCUS OF THE PROGRAMS, MUST PARTICIPATE FULLY IN THEIR DESIGN, IMPLEMENTATION, AND MONITORING.

THIRD, MORE SPECIFICALLY, THEY MUST BE EMPOWERED TO RUN THE PROGRAMS THEMSELVES.

THE KEY IS EMPOWERMENT, NOT CHARITY.


INCOME DISPARITY IS A PROBLEM IN INDONESIA AS IT IS IN MOST OF THE DEVELOPING WORLD.

DESPITE THE POSITIVE TRENDS IN POVERTY REDUCTION AND ECONOMIC GROWTH, THE GAP IS NOT NARROWING, IT IS WIDENING.

GROWTH IS ESSENTIAL, THROUGH GROWTH NEW JOBS WILL BE CREATED, THE COUNTRY’S DEBT WOULD BE BETTER SERVICED, MACROECONOMIC STABILITY WOULD BE STRENGTHENED AND MOST IMPORTANTLY, POVERTY WOULD DECLINE.


ON EQUITABLE DEVELOPMENT

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


THE PATTERN OF GROWTH IS JUST AS IMPORTANT AS THE RATE GROWTH. THE RIGHT KIND OF GROWTH IS NOT THE VERTICAL FLOWS ALLOWING FOR THE TRICKLE DOWN OF BENEFIT TO THE POOR, BUT THE KIND THAT ALLOWS HORIZONTAL FLOWS, BROADLY BASED, EMPLOYMENT INTENSIVE AND NOT COMPARTMENTALIZED (KENDRA AND SILK, 1995 AND RANIS, 1995)

THERE IS NO SUCH THING AS A TRICKLE DOWN EFFECT OF GROWTH TO EQUILIZE BENEFIT OF DEVELOPMENT. IT MAY TRICKLE DOWN BUT ONLY IN TRICKLES, THE MAIN STREAM GOES INTO OTHER DIRECTION, THE HAVES.


INDONESIA’S RELATIVELY HIGH GROWTH SO FAR HAS BEEN AT THE EXPENSE OF ITS ENVIRONMENT. ITS FOREST HAS BEEN OVER EXPLOITED, RIVERS POLLUTED, CITIES LITTERED WITH WASTE.

THE SAD STORY OFTEN TOLD IN INDONESIA ABOUT ITS WEATHER WHEN IT IS DRY THERE IS SHORTAGE OF WATER WHICH AFFECTS THE CROPS. BUT WHEN IT IS WET THE RICE FIELDS AND THE VILLAGES ARE FLOODED. SO THE CARE OF ENVIRONMENT SHOULD BE SPELLED IN THE SAME BREATH AS THE NEED FOR GROWTH.


PUTTING A CURB ON INDIVIDUAL INITIATIVE,INVENTIVENESS AND COMPETITIVENESS, IS NOT AN OPTION. ON THE CONTRARY IT SHOULD CONTINUE TO BE ENCOURAGED.

BUT THE WEALTH OF THE INDIVIDUALS SHOULD BE SHARED BY OTHERS, IN A FAIR AND JUST WAY.

NOT ONLY FOR THE RICH TO GET RICHER, BUT ALSO TO GET THEIR BUSINESS SUCCESSES DIRECTLY BENEFIT THE PEOPLE.

SOME COUNTRIES, INCLUDING INDONESIA ADOPTED. CORPORATE SOCIAL RESPONSIBILITY (CSR). IT IS FINE BUT NOT ENOUGH.


ONE OPTION IS PROGRESSIVE INCOME TAX SYSTEM. TAX SYSTEM NOW FAVOURS THE RICH. INDONESIA SHOULD ADOPT PROGRESSIVE TAXATION, A RISING TAX RATES AS INCOME RISES. IT CAN GO TO AS HIGH AS 50% FOR THE HIGHEST INCOME BRACKET, AND FOR INHERITANCE.

JAPAN, SCANDINAVIAN AND OTHER EUROPEAN COUNTRIES HAVE DOING SO FOR DECADES.

IF THE RICH WANT TO AVOID THE HIGH INCOME TAX, THEY CAN ALWAYS REINVEST AGAIN, SO THE TAXABLE INCOMES WILL NOT GROW THAT MUCH AND BY DOING SO THEY WILL CREATE MORE JOBS, AND STILL CONTINUE TO BECOME RICHER.


THERE IS A NEED TO RECALIBERATE INDONESIA’S ECONOMIC DEVELOPMENT STRATEGY.

MORE ACTIVE ROLE OF THE GOVERNMENT TO MAKE SURE THAT THE IDEALS OF ECONOMIC DEMOCRACY AND SOCIAL JUSTICE EMBODIED IN THE CONSTITUTION, ARE ACHIEVABLE.

MORE ACTIVE REDISTRIBUTION EFFORT FROM THE GOVERNMENT IS A MUST.


IN CONCLUSION, THE GOVERNMENT SHOULD NOT BECOME A SPECTATOR IN THE ECONOMIC GAME, BELIEVING THAT THE LESS GOVERNMENT IS THE BETTER GOVERNMENT AND THE LEAST GOVERNMENT IS THE BEST GOVERNMENT.

THE GOVERNMENT NOT ONLY HAS TO SET THE RULES OF THE GAME AND MAKE SURE THE RULES ARE FOLLOWED, BUT THE GOVERNMENT SHOULD TAKE PART IN THE GAME AS A PACE MAKER.

AFFIRMATIVE ACTION AND SMART INTERVENTION ON THE PART OF PUBLIC ADMINISTRATION ARE IMPORTANT ELEMENTS IN POVERTY ERADICATION AND EQUITABLE DEVELOMENT.


どうもありがとうございましたどうもありがとうございました

development for the people: equity and poverty

Education

poverty line

poverty incidence

extent of poverty

popular poverty measure

contents equity

poor person

dadang solihin

livinginpoverty ismorethanthis