A STUDY OF POVERTY PROFILE OF INDONESIA AND ITS MANAGEMENT

South Asian Journal of Multidisciplinary Studies (SAJMS) ISSN:2349-7858 Volume 1 Issue 4

Published By : Universal Multidisciplinary Research Institute Pvt Ltd

A study of poverty profile of Indonesia and its management

Ms. Deepti Kakar1

Abstract

Indonesia is a prominent South East Asian economy whose growth patterns have been

exemplary. Yet Indonesias poverty at individual/household/societal level is a critical issue which

is conspicuous in the domain of international developmental research. After formation of the

Republic of Indonesia in 1945, the country has intermittently experienced political and economic

turmoil and prosperity till the end of the 20th century. Reduction of poverty and improvement in

the well being of the people has always been an important issue that has been given considerable

attention via economic planning. However, it was the financial crisis of 1997-98 that gave birth

to concerted State interventions in the form of poverty alleviation schemes. This paper discusses

the causes, measurement and incidence of poverty in Indonesia in addition to the strength of

economic growth at poverty reduction and also governmental efforts via various anti-poverty

programmes. The paper closes on a suggestive note of desired improvements in the strategy to

tackle poverty in Indonesia.

1 Associate Professor ,Jagan Institute of Management Studies,3, Institutional Area, Rohini Sector 5, Delhi 110085, India



Keywords: Economic Planning, Indonesia, Poverty, Poverty alleviation schemes

JEL Classification: I32

1. Introduction

Placed along the equator in the South East Asia, Indonesia is believed to have been inhabited as

early as 1.5 million years ago. The worlds largest archipelago, the present day diverse culture

and life of Indonesia can be attributed to its long history of migrations, invasions, wars and

international trade. Natural endowments in the form of resources, biodiversity and its

geographical location historically attracted people from far and wide and continues to do so in

the present.

Trade relations with India brought Buddhism and Hinduism to the Indonesian land in as early as

the 4th century. Since the 7th century the Srivijaya Empire ruled over Sumatra and spread to as far

as West Java and Malay Island. The Sailendra and Mataram dynasties and the Majapahit

kingdom flourished in most of modern Indonesia and Buddhism and Hinduism prevailed during

the reign of these empires. Islam entered the region in 12th - 13th century and became the major

religion by the 16th century. It was during this time that the nutmeg spice (the plant is a native of

Indonesia) brought the colonial Dutch, Portuguese and English forces and these ruled and

exploited the land draining it of its rich natural resources.



An independence movement led by young professionals and students began in early 20th century

and spread out fast in the time period between the two world wars. The Dutch rule came to an

end with the end of Second World War. Japanese invasion in 1942 was initially not detested due

to hatred for the Dutch colonists, but the cruel treatment meted out by the Japanese forces saw

the revival of the independence movement and after Japanese surrender to the Allied forces,

Republic of Indonesia was formed in August 1945. Normalcy did not return to Indonesia till

1949 - there were intermittent battles waged between the independence seeking groups of

Indonesia and the Allied forces, the Dutch made attempts to regain control, US interventions and

subsequent international pressure led to an end of colonial rule in Indonesia. Thus the country

gained sovereignty in 1949. A new Constitution was adopted and Parliamentary system of

government was chosen to run the country which saw its first national elections in 1955. One of

the early nationalist leaders, Sukarno led the country as the president for the initial (almost) two

decades after independence. After a military coup and lot of bloodshed, General Suharto became

the president in 1968 and continued to be elected for successive terms till 1998. Suharto made a

drastic change from the leftist policies followed by Sukarno. In 1997 the Asian financial crisis

and coupled with a cruel drought, hit the economy of Indonesia badly. Under lot of pressure,

Sukarno quit and the country again experienced unrest in 1999 following a referendum on the

status of East Timor. In the following years, the country has experienced largely free and fair

direct presidential elections. Thus, the country followed a communist pattern during the Sukarno

regime and experienced the right winged policies and alignment with the West under the Suharto

rule and open policies continue in the post Asian Financial Crisis period.



2. Poverty in Indonesia

Poverty in Indonesia has its deep roots in the long history of the country. When the country

gained independence in 1949, it was largely poor and illiterate. Broadly till Sukarnos regime,

Indonesia was primarily an agrarian economy backed by a rural society.

According to Maksum (2004) the problem of poverty was well recognized by all the

governments in post-independence Indonesia though it gained greater prominence after the

economic crisis of 1997-98.

2.1 Causes

Present day poverty in Indonesia has different determining factors as compared to the poverty

experienced by it historically. Historically, Indonesia experienced plunder and exploitation at the

hands of its colonial rulers similar to India under the British rule. As discussed earlier,

Indonesians lived under the colonial rule (majorly under the Dutch and to some extent under the

Portuguese and English) for more than three centuries. The colonial rulers made every attempt to

benefit from their stay even if it was at the cost of Indonesias economic and social well-being.

Various writings on the colonial rule in Indonesia are a proof to the poverty inflicted upon

Indonesians. Beck (2008) in his book titled South Asia 1800-1950 highlights the plundering of

natural resources in Indonesia and how the farmers were forced to put aside a portion of their

land holding and grow cash crops such as coffee, tobacco, pepper, sugar etc. In many parts, a

large number of families were involved in growing these crops. The sad part was that the crops

did not yield food for the natives but instead demanded more labor. Also, these crops were a



burden on the natural resources as they required more water and depleted the land of its natural

nutrients.

Famines in 1840s were caused by dearth of rice as Chinese traders hoarded huge quantities in

warehouses to create shortages and raise prices making them unaffordable to the masses. Max

Havelaar: Or the Coffee Auctions of the Dutch Trading Company written by Eduard Douwes

Dekker (1860) is another significant proof that exposes corrupt and oppressive practices of the

Dutch rulers in Java, Indonesia. The book lays bare the testimony to the dismally low wages paid

to the Javanese which were just enough to keep them from starving. Uprisings, conflicts, slavery

and wars between Dutch and English to gain supremacy over regions for commercial interests

resulted in loss of life and belongings of many natives. Famines due to crop failure or flooding,

volcanic eruptions and epidemics not only took heavy toll of lives, it also pushed many to

penury. Absence of help or relief measures from the colonial officials was responsible for death

of larger numbers due to famines (Van der Eng, 2004).

Thus poverty was a natural outcome of the despotic Dutch rule. Natural calamities such as

floods, droughts, volcanic eruptions combined with epidemics added to the miseries of the

Indonesians putting them into the circle of poverty.

In the post independent years, President Sukarno desired to lead the country to attain social and

economic progress but political instability marked by sharp differences between political parties

and frequent dissolution of cabinets did not bring much desired progress for the country. With

passage of time his rule turned into dictatorship. Around the end of his term, the country was

reeling under massive foreign debt and hyperinflation and economic sufferings of the people



were widespread in the form of hunger and poverty. Various studies share that there was ample

evidence that falling average income was associated with increasing income inequalities between

the have and have-nots in many big cities.

The economic contraction that followed the Financial Crisis of 1997-98 was more severe as

compared to the economic troubles faced by the economy in Sukarnos time. A large number of

people working in the formal sector lost their jobs and were compelled to move to low paying

work in the primary and the informal sector. This change along with hyperinflation led to

massive erosion of purchasing power and consequently absolute poverty in Indonesia rose.

Though there was reduction in the number of absolute poor by 2002, the numbers rose again in

2006 due to State restriction on import of rice which led to its shortages in the country.

2.2 Measurement of poverty

Indonesian laws have bestowed the responsibility of gathering and releasing the basic official

statistics in Indonesia to Badan Pusat Statistik (BPS) - Statistics Indonesia. This central

Statistical Agency makes use of the National Socioeconomic Survey (SUSENAS) consumption

expenditure data for arriving at the official statistics on poverty. Till 2010, SUSENAS data was

collected every year and since 2011, quarterly information is made available.

The official publication of data on poverty has been practiced since 1984. In 1984, it covered the

data for the years 1976-81. Year 1990 onward, in addition to the national data, estimation was

expanded and the disaggregated (by province) data have been released. Since 1999, BPS has

been releasing data further disaggregated to regency/city level. Interestingly there are demands



for publication of data disaggregated to the village level. The information is extremely useful as

it not only serves the monitoring purpose but also enables targeted state interventions at poverty

alleviation.

Till 1993, BPS made use of the cost of calories method for calculation of poverty line and

measuring the incidence of poverty in Indonesia. Prior to 1993, the food poverty line was

constructed using the total expenditure and the corresponding energy intake in different

expenditure groups, thereafter linear interpolation is applied to the information. The average

consumption bundle is classified into sub-bundles of food items and non food items. These

include 52 items and 46 items respectively.

The basic minimum requirement of food for an individual is taken as 2100 calories per day. This

is in accordance with the recommendation (daily intake for a person to stay healthy) of the

National Workshop on Food and Nutrition held in 1978. (Maksum, 2004) In monetary terms the

poverty line is taken as the total expenditure in Rupiahs required to purchase food meeting the

2100 calories benchmark. Thus the poverty line (food) reflected the total expenditure required to

meet an energy requirement of 2100 calories per person per day.

The non-food poverty line is the average of the expenditures on the non food items made by the

reference population. Reference group is a marginal class of people, whose expenditure is just

above the poverty line. The estimation is based on the data collected from the Survey of Non

Food Basket Commodities.



1993 onward, the basic needs approach was used which involved the calculation of food as well

as non-food poverty line. The basic-needs approach views poverty as the economic inability to

meet the basic requirements of food items and non-food items. Being measured from the

expenditure dimension, it classifies a person as poor whose average monthly per capita

expenditure falls below the defined poverty line. A bundle of food items generally consumed (by

considering the consumption patterns of the reference group) to yield the specific energy

requirements (2100 calories) was identified for every province of the country. The total monthly

average per capita expenditure for each food item in the bundle helped to set the food poverty

line. Given the diversity in consumption preferences, the commodity bundles are unique for

every province.

Up-dation of the non-food poverty line is done on the basis of surveys of non-food consumption

of a reference group. The non-food consumption bundle is unique for each province and varies

from one to the other. For the non-food bundle, items such as health, education, housing,

transportation and durable goods were considered. Thereafter, the monetary conversion of the

basket was done to obtain the average monthly per capita expenditure. When added to the food

poverty line, this provided the total poverty line. Thus, from 1993 the methodology adopted

incorporated the differences in the preferences of consumption of both food and non-food items

across various regions of the country.

Initiated at the request made by the government, a poverty census beginning 2005 has been

conducted every three years 2005, 2008 and 2011. The data collected is used to arrive at a non-



monetary measure for poverty for household targeting. It covers various non-monetary

parameters of deprivation (Iriana, et al., 2012).

2.3 Incidence /Extent of Poverty

Before the financial crisis of 1997-98 hit Indonesia on both economic and social fronts, the rapid

economic growth experienced, helped it in a remarkable reduction in poverty with the incidence

falling from as high as 40% in 1970 to about 11% in 1996 (World Bank, 2006). Along with this

reduction in the proportion of the poor the absolute number of the poor also declined as

population under the poverty line reduced from 54.2 million to 22.5 million (JICA, 2001)

The financial crisis years saw a spurt in the number of poor and in 1999 about a fourth of the

country was living in poverty. The official estimates reported an increase in the incidence of

poverty from February 1996 to December 1998 increased by nearly 50%.

The poverty lines were restructured in 1998 - they were increased by 153.5 % and 165.5 % in

urban and rural areas respectively to create consistency with the sharp rise in prices, especially

food commodities, over this period. The financial crisis had an adverse impact on all the

segments of the society affecting the expenditures of all and interestingly, the income inequality

gap shrunk with the burden of the crisis proportionately affecting the middle and the upper

income earners more than the low income earners.

Economic stabilization reduced the poverty levels back to the pre-crisis times. Concerted efforts

of the government for poverty alleviation yielded results and the first decade of the twenty first

century saw a gradual decline in poverty and the fall continues in the present also.



Year Incidence of National Poverty

(%)

Incidence of Rural Poverty

(%)

1976 40.10 40.40

1978 33.30 33.40

1980 28.60 28.40

1981 26.90 26.50

1984 21.60 21.20

1987 17.40 16.10

1990 15.10 14.30

1993 13.70 13.80

1996 11.30/17.50 12.30/19.78

1998 24.20 25.72

1999 23.40 26.03

2000 19.10 22.38

2001 18.40 24.84

2002 18.20 21.10

2003 17.40 20.23



2004 16.70 20.11

2005 16.00 19.98

2006 17.80 21.81

2007 16.60 20.37

2008 16.40 18.93

2009 14.15 17.35

2010 13.33 16.56

Table1: Percentage of Population living in Poverty

Source: www.tnp2k.go.id

3. Tackling Poverty in Indonesia

Similar to most other nations, well being of the masses has always been a prominent item on the

development agenda of Indonesia. However, specific poverty alleviation programmes run by the

government were almost non-existent till mid 1990s (Sumarto et al., 2002). As discussed above,

the government used to run general welfare schemes mainly in the areas of health, education and

development and a few schemes targeted at the handicapped, etc. In addition the employees in

big organizations, government service and military personnel were covered by compulsory social

security and health insurance. Till the crisis hit the country, never was the need felt among the

policy makers to run specific poverty alleviation programmes.



3.1 Economic Planning

Similar to India, the government of Indonesia adopted the instrument of economic planning to

achieve an all rounded development of the country. The development strategy charted out by

State planning involved Repelita or Pembangunan Lima Tahun, the five-year development plans

developed by the Government of Indonesia. The government under General Suharto launched the

first five year plan in 1969 which marked the beginning of 25-year long-term national plan.

The first five year development plan or Repelita focused on rebuilding of the economy by

improving agriculture, irrigation, and transportation. The second five year plan or Repelita II

started in fiscal year 1973-74 attempted to raise the standard of living by provision of better

food, clothing and housing. Expansion of infrastructure, generation of employment opportunities

and provision of social-welfare benefits were also a part of the strategy for this plan. The third

five year plan or Repelita III was stated in the year 1978-79. It ushered the 'trilogy of

development' of high economic growth, stability and equitable distribution. The fourth five year

plan or the Repelita IV started in 1984-85 and lay focus on self-sufficiency in rice and industrial

machinery. Repelita V or the fifth five year plan started in the year 1989-90 and stressed rapid

development in both agricultural and industrial sectors. The sixth five year development plan or

Repelita VI encouraged foreign investment and eased high tariff barriers and heavy regulation.

Thus, economic planning in Indonesia aimed at an overall economic development without

specifically targeting poverty alleviation. The attention towards poverty as a critical issue

requiring solutions came up in late 1990s.



3.2 Economic growth inducing poverty reduction

The proposition that economic growth of the country as a whole was successful in reducing the

incidence of poverty has been studied for a large number of countries including Indonesia and

the studies have been successful in linking the growth in incomes to easing of poverty.

As discussed earlier, General Suharto became the president of Indonesia in 1968. At that time,

Indonesia was reeling under poverty and the nation was largely in a chaotic state both politically

and in economic terms. Also, it was one of the least industrialized nations of that time

(Feridhanusetyawan, 2000). The change in the political regime ushered in reforms bringing about

economic liberalization which attempted to move away from State interventions to a market led

economy.

The banking system was resurrected, the State spending was reduced, and balanced budget was

policy adopted, self sufficiency in food production was encouraged, price controls were

removed, investment laws were liberalized, foreign trade procedures were simplified. All these

measures facilitated industrial growth of the country (Hofman, et al, 2004). Increase in oil

production in the 1970s broadened the income stream and the revenues so generated helped to

lower the reliance on external assistance for capital investments (Feridhanusetyawan, 2000).

Content with the sufficiency of capital resources, the policy makers reverted back their focus on

public sector and import substitution was encouraged. A decline in the oil revenues in early

1980s once again shifted the focus of the policy makers towards encouraging exports and greater

private participation in economic activities. Subsequently, the manufacturing sector grew and the



manufacturing exports also increased at a remarkable rate. This trend of rapid economic growth

continued in the 1990s.

According to Timmer (2004), the income of the bottom 20 % of the income earners increased at

the same rate as the rate of growth of the average per capita income over the period 1967 to

2002, barring some variations in the sub-periods. However, Feridhanusetyawan (2000) found

that the reduction in income inequality was not remarkable over 1964 to 1996 and the Gini

coefficient stayed between 0.32 and 0.38 over these years. Studies by Cornia and Kiiski (2001)

show that rural development and subsequent reduction in income inequality came about due to

greater investments in rural infrastructure and public health and education made out of oil

revenues. Thus the period stretching from mid-1970s to the late 1980s was characterized by rapid

economic growth and reduction in poverty. But, Cornia and Kiiski (2001) find that beyond this

period till the onset of the financial crisis of mid 1970s, the emphasis of economic development

was largely urban, and the slow growth in agriculture increased the rural urban divide and thus

the overall inequality worsened. Importantly, the overall economic growth was accompanied by

decline in the national poverty rates in this period.

According to Hofman, et al. (2004), the per capita income increased to $3346(PPP) in 1995 from

$817(PPP) in 1965 and a major proportion of the population gained from this growth and

poverty rates reached a low of 11% (poverty headcount rate) in 1996.

Sala-i-Martin (2002) in his study World Distribution of Income attempts to construct a world

income distribution by combining the income distribution of the individual component nations.

Studying the income levels and income changes for 125 countries for the period over 1970 to



1998, he explores the relation between income growth and income inequality. Martin has

highlighted the experience of 9 heavily populated countries including India, Indonesia and

Brazil. For Indonesia, his findings corroborate the views discussed above - growth in income in

Indonesia was accompanied with reduction in extreme poverty.

To further the understanding of the existence and strength of the linkage between economic

growth and poverty reduction in Indonesia, various researchers have calculated the growth

elasticity of poverty. According to estimates by Warr (2001) the growth elasticity of poverty

reduction for Indonesia over 1976 to 1999 was -1.38 implying that a 1% increase in the real GDP

per capita resulted in a 1.38% reduction in the absolute poverty incidence. Also, the study

covering a small sample of six south Asian economies - upholds the proposition that open trade

brings about a higher rate of economic growth and a pattern which is poor-friendly. The

calculation of the study by Warr (2001) explains that only about 40% of the annual variation in

the rate of poverty decline is explained by variation in the rate of growth, thereby making it an

important variable determining poverty alleviation. Interestingly, in Warrs study, all the six

countries (namely, India, Indonesia, Malaysia, Taipei (China), Thailand and Philippines, the

sectoral distribution and contribution to the GDP was different. Therefore over the sample of

countries studies Warr, awards a lesser importance to the sectoral composition of growth as a

contributor to poverty alleviation.

Thus, the economic growth experienced by Indonesia has been a significant contributor in

improving the status of the poor - increases in income caused a decline in poverty rates.



Though well-being of the masses has always been a prominent item on the development agenda

of Indonesia (similar to other nations), specific poverty alleviation programmes run by the

government were almost non-existent till mid 1990s (Sumarto et al., 2002). As discussed above,

the government used to run general welfare schemes mainly in the areas of health, education and

development and a few schemes targeted at the handicapped, etc. In addition the employees in

big organizations, government service and military personnel were covered by compulsory social

security and health insurance.

3.3 Poverty Alleviation Programmes

Till the crisis hit the country, never was the need felt among the policy makers to run specific

poverty alleviation programmes. The economic and social impact of the crisis of mid-1997 was

tremendous as it pulled many below the poverty line and plunged the poor deeper into poverty.

Also, the existing welfare schemes of the government were insufficient to help the poor

population as the majority in the unorganized sector was not covered by the social security

schemes. Thus in 1998 programmes were specifically directed at the poor via Social Security

Nets or the JPS or Jaring Pengaman Sosial. The funds directed for these were largely influenced

by the ongoing macro economic conditions and the political intentions and capabilities. Due to

the lack of experience of the government in designing and implementing such programmes on a

large scale, the task that lay ahead was undoubtedly big.

In Indonesia social assistance is extended via a number of social welfare programmes that range

from improving access to healthcare to generating additional employment opportunities. These



programmes are coordinated, implemented and overseen by various line ministries. The broad

classification of these programmes is in the form of three clusters -

1. Household based social protection, for example Rice for Poor Household programme

2. Community based empowerment, for example Community Conditional Cash Transfer

3. Micro and small enterprise empowerment, for example People's Business Credit

The first cluster of programmes attempts to lessen the burden on the poor by means of improving

their access to education, healthcare, nutritious food, clean drinking water and sanitation. The

second cluster includes programmes that try to develop and strengthen poor communities,

empower them and help them to be gainfully engaged in progressive economic activities. This is

expected to increase their incomes and improve the standard of living. The third cluster is also an

attempt to empower by providing credit facilities to the micro and small enterprises.

In 2011, the government via a Presidential decree brought in a fourth cluster of six programmes

that intend to strengthen the existing pro-poor programmes by improving and expanding their

coverage. The six programmes making up this cluster include - Very Cheap Home Program,

Clean Water Program for People, Cheap Public Transport Program, Cheap and Save Electric

Program, Fisherman Life Improvement Program and Urban Poor Community Life Improvement

Program. The Master Plan for the Acceleration and Expansion of Indonesia Poverty Reduction

sought to change the ongoing poverty alleviation programs into a comprehensive set of actions

that would rescue the poor and enable them sustainable means of livelihood (OECD, 2013). The

Master Plan has set the long term strategy over 2012-2025. The Master Plan, popularly known as



MP3KI makes a specific description of the poverty reduction policy, strategy and design over

these years.

Social Security Nets/Jaring Pengaman Sosial (JPS):

The programme covered five major areas intending to mitigate the adverse impact of the crisis.

The five areas covered under the JPS included affordable food, employment generation, access

to healthcare, access to education, and credit facilities at the village level.

Subsidized rice was made available to households that met the eligibility criterion of falling in

either of the two lowest rungs of the prosperity ranking as done by the National Family Planning

Coordinating Agency. The labour creating programmes were diverse and handled by a number

of ministries. The programmes ranged from drought relief works to urban construction

programmes and the payment in them varied from cash to kind. Access to healthcare facilities

included entitled households to avail free medical services from the assigned healthcare centers.

Eligibility for households was determined by the village level lists that incorporated some

modifications over the criterion set by the National Planning Agency. Access to education was

improved via scholarships to individual students and grants to schools. The scholarships were

extended by means of direct cash transfers to the students or their families and covered the

primary, lower secondary and the upper secondary levels of school education. Here also the

targeting was of students - who belonged to the lowest two categories of the prosperity ranking

by the family planning agency, had a greater probability of dropping out and half of the

scholarships were reserved for the girl students. The community block grants were provided



directly to the villages for undertaking public works or served as a revolving fund for extension

of credit at their end.

Each of these five dimensions of social security programme was implemented under separate

specific names with varying coverage and eligibility criterion for beneficiaries. These are

discussed in the following sections.

Backward Village Programme/ Impres Desa Tertinggal (IDT):

The programme was launched in 1994 in accordance with a presidential instruction made in 1993

to financially help the backward or the so called 'left behind' villages. The scheme ran for three

years and aimed to close the gaps in regional development that had arisen in the normal course of

growth of the Indonesian economy. It was estimated that about 27 million poor Indonesians were

concentrated in these villages (Rigg, 1997).

The targeted villages were provided funds to develop physical infrastructure and also enable the

poor to use credit as capital for setting up their small scale ventures and thus grow their incomes.

The targeted villages (decided upon by the local authorities using various social and economic

parameters) made almost one third of the total villages in Indonesia. According to Robinson

(2002) about 3.3 million people had participated and availed the benefit of this programme by

mid-1997.

Special Market Operations/ Operasi Pasar Khusus/ OPK:



The Special Market Operations program was introduced in 1998 to ensure food security to the

poor who were pushed into greater difficulty due to the financial crisis. The programme aimed at

provisioning rice to the needy at prices much below the market prices (Hardjono, et. al. 2010). In

addition to the subsidized rice, the poor households had the opportunity of receiving cooking oil,

milk powder and soybean free of cost under the OPK programme.

Rice for poor households/Beras untuk Rakyat Miskin (Raskin):

The Raskin program is a continuation of the food security programme being run under the name

of OPK from its origination in 1998 to 2002. In 2002 the programme was rechristened as Raskin.

Raskin accounted for almost 53% of all the household-targeted social assistance State

expenditure in 2010 (World Bank, 2012b). Till 2005, the targeting of households for the

programme was done on the basis of the economic classifications as done by the National Family

Planning Agency (BKKBN). However 2006 onward, the target beneficiaries have been

determined on the basis of the Household Socio-economic Survey of 2005.

Health Insurance/Askeskin:

Askeskin or the social health insurance scheme in Indonesia was launched in 2005. At that time

only 10% of the population of the country enjoyed health insurance coverage (ILO, 2010) which

was via compulsory coverage of the government servants, armed personnel and those employed

in organized in private sector. Thus the coverage excluded the vast majority engaged in the

unorganized sector.



With the intention of covering the unorganized sector, the Askeskin scheme was introduced and

it included the basic outpatient care, third class hospital care in specified hospitals, an obstetric

service package, mobile health services and special services for remote areas, immunization

programs in addition to medicines. Askeskin provided universal health coverage through

mandatory public health insurance.

In 2008, the Askeskin scheme which was designed to help the poor was evolved into the

Jamkesmas that in addition to the poor, provided help the near-poor. Official claims put forward

coverage of more than 76 million Indonesians (Langenbrunner, et al., 2011). The program is

fully financed out of central government revenues and is administered by the Ministry of Health.

Unconditional Cash Transfer/Bantuan Langsung Tunai (BLT):

The scheme of unconditional cash transfer was launched in 2005 as an instrument to help

households adversely affected by the reduction of subsidies on fuel. The increase in fuel prices

due to calling off of the earlier subsidy increased the number of poor by 12% in 2006 (Sutiyo and

Maharjan, 2011). These transfers had no conditions attached to them and therefore the receiving

beneficiaries enjoyed freedom of choice with respect to spending the transfer money.

In March 2005 and subsequently in October 2005, the government of Indonesia reduced the

subsidies on gasoline, automotive diesel and kerosene, till then enjoyed by the consumers. The

policy makers justified their decision on grounds of equity and efficiency and pro-development

in nature. Stretching over a period of twelve months in 2005-06 and nine months in 2008-09, the

scheme targeted nearly 19 million poor and near poor households determined by the BPS (using



14 indicators of poverty). The beneficiaries received a cash equivalent of USD 10 per month so

as to improve their purchasing power. The fund comprised nearly 245 of the total monthly

expenditure of the poorest households in the rural areas.

Conditional Cash Transfer/Hope Family Programme/Program Keluarga Harapan (PKH):

Conditional cash transfer to the eligible households was extended by the Indonesian government

under the name of Program Keluarga Harapan in 2007. Initially the program was launched in

seven provinces namely West Sumatra, DKI Jakarta, West Java, East Java, North Sulawesi,

Gorontalo and East Nusa Tenggara. An additional 6 provinces were covered by the scheme in

2008.

The programme aims to enhance the quality of life through improvement in education and health

and nutrition in poor communities especially amongst the children. Eligibility of the beneficiary

households has been made contingent on geographical and household level targeting. A number

of criteria such as incidence of poverty, incidence of malnutrition, transition rate from primary to

secondary school education, supply of health and education facilities and approval from the local

government. Intended to lay the foundation of social security schemes of the future, the

programme PKH is expected to run till 2015 and benefit almost 6.5 million chronically poor

Indonesian households each of which is expected to receive the funds for a six year period.

The immediate advantage of the scheme is seen in terms of benefiting the poor households

improve their incomes. Additionally the scheme was expected to build an informed poor

population that would make the right choice of opting education and good health for their



children over child labour. The scheme is expected to yield a long lasting improvement in health

and nutrition and education of the children to improve their income earning capacity in the time

to come and thus help them escape the generational poverty trap.

The scheme imposed on the beneficiaries to ensure that their children go to school, obtain a

health check at the health center, and receive adequate nutritional intake. The mother or the

female adult member was extended the cash transfer every three months through the post office

as long as they would meet the health and education related pre-specified requirements.

Healthcare centers and schools regularly reported non compliance of the services to the sub-

district PKH management office and after a few warnings, the cash transfers were terminated.

Community Conditional Cash Transfer/ Program Nasional Pemberdayaan Masyarakat or PNPM

Generasi:

The programme of conditional cash transfer to communities was initiated along with the PKH

(discussed above) but covered a different set of regions. Cash transfers in this programme are

made in the form of block grants to communities instead of individual targeted households.

The underlying condition making the participating communities eligible for the cash transfer

involves a commitment towards improvement in health and education conditions. The scheme

focuses on investment in these areas.

Cash Transfer for the Poor Students Program/Bantuan Siswa Miskin (BSM):



The government started the programme in 2008 with the aim to extend assistance in the form of

cash transfers to poor students covering all levels - primary education to university education.

The scheme is tax financed by the central government. The targeted students from poor

households were identified by the school administration. The school administration decides on

the selection making use of various objective and subjective parameters such as a minimum

attendance percentage, good behavior, praise-worthy personality - disciplined, diligent, etc.

In 2008, the programme targeted and covered 2.7 million students across all level of education

and in 2010 the official coverage was of about 6 million students the coverage increased to 6.3

million students. The cash transfer was extended to all public schools and transferred in the form

of an annual one time lump sum help. The transfer was conditional upon completion of the

ongoing academic year and was given to the students in the subsequent year of studies.

According to the World Bank (2012) the BSM consists of 10 independent initiatives with

responsibilities and budgets delineated by type and level of education. Fragmented

implementation of the scheme at the level of the individual schools makes the monitoring and

evaluation of the programme a difficult task. The BSM programme was renamed as Subsidies for

Poor Students (SSM) in 2012. Subsidies are transferred directly to students, mainly via post

service, in several tranches a year.

School operational assistance/Bantuan Operasional Sekolah (BOS):

The programme initiated in 2005, was designed in tune with the mandate of the National

Education System that every citizen in the age group 7 to 15 years must have access to



compulsory basic education free of cost. Thus, the BOS program aims to ease the financial load

of public education in the context of 9-year compulsory education.

The programme involves transfer of block grants to schools to fund the basic schooling of poor

students from standard one to nine. The scheme extends free education to the target group and

ensures that they achieve basic education of good quality. Under this scheme since 2010, the

schools in rural areas receive a per capita grant of IDR 397,000 per annum and IDR 570,000 per

annum for the primary level and junior secondary school level respectively. According to ILO

(2012) 34.5 million students benefitted from this scheme in 2005 while more than 44 million

students benefitted from the schemes coverage in 2012.

Children's social welfare programme /Program Kesejahteraan Sosial Anak (PKSA):

The programme involves a conditional cash transfer for children with social problems. The

targeted children are classified in five groups, namely - abandoned infants/infants with special

needs (five years or younger), abandoned children (6 -18 years old), street children (6 -18 years

old), children with criminal charges (6 -16 years old) and children with disabilities (0 -18 years

old). The programme thus has five sub-programmes supporting each of these five categories. The

scheme extends a saving account which can be withdrawn on demand for any necessity with due

approval. The beneficiaries are encouraged to utilize the cash assistance for fulfillment of basic

necessities and access social services (World Bank, 2012).

School feeding programme/Program Makanan Tambahan Anak Sekolah (PMTAS):



The programme was launched in 2010 by the Government's Ministry of Education along with six

other ministries to provide additional food for primary school level students in 27 backward

districts of Indonesia. The targeted students are provided three meals every week. The

coordinating agency from each sub-district transfers the funds directly to the bank accounts of

the respective schools which manage and implement the programme at their own end. Nearly 1.4

million students in various public and Islamic schools were targeted under this programme in

2011.

3.4 Other Programmes

In addition to the above a number of poverty alleviation programmes are being run by the State

with international funding. For example the Kecamatan (sub-district) Development Programme

(PPK) that aims at rural areas and the Urban Poverty Reduction Programme (P2KP) whose

coverage is restricted to the urban areas. The Indonesian Government combined these two

schemes in 2007 and named it the National Community Empowerment Programme/Program

Nasional Pemberdayaan Masyarakat (PNPM) which was implemented on a larger scale. This

programme enjoys financial support of the World Bank. The PNPN aims to reduce poverty by

strengthening community institutions and local governance. In 2008, additional programmes

related to community development were added to it such as, the Special Area Development

Programme for the Disadvantaged with the help of loan from the World Bank; the Rural

Infrastructure Services with the help of assistance from the ADB; Social and Economic

Infrastructure Program that operated with a loan from JICA / JBIC.

National Health Insurance/Jaminan Kesehatan Nasional (JKS):



The scheme inaugurated by the President Susilo Bambang Yudhoyono came into effect from

January 01, 2014. The programme is a nationwide health insurance for the poor with initial

service for about half of the population. By 2019, the programme is intended to extend health

cover to all residents and by 2029 a single health employment benefit system will come into

force. The programme attempts to make healthcare affordable to all the sections of the society

and at the same time bring the coverage of social security benefits under one umbrella namely

Badan Penyelenggara Jaminan Sosial (BPJS)

People's Business Credit/Kredit Usaha Rakyat (KUR):

The programme was started in 2008 This programme is a financing scheme that extends credit

for investment or meeting working capital requirements of micro, small, and medium enterprises

and also cooperatives involved in productive activities which are viable but lack the eligibility

criterion for availing loan from a bank (due to absence of any bankable collateral) (OECD,

2012). The People's Business Credit scheme originated as an integration of several credit

guarantees schemes which were already in progress being run under various ministries. Under

the scheme, the government provides guarantee up to 70% of the loan which can be at maximum

be IDR 500 million. The implementing bank accepts 30% of the risk.

Rural Agribusiness Development Programme/Pengembangan Usaha Agribisnis Perdesaan

(PUAP):

As only 16% of the credit demand under the KUR scheme was for agribusiness, the government

launched a separate programme - PUAP in 2008, to overcome the capital shortages in this area.



3.5 Issues with the anti-poverty programmes

Assessment of these poverty alleviation programmes by various individual and institutional

researchers indicates that each of the schemes was less than perfect and poor targeting and

monitoring kept the desired results much desired. For instance, Raksin programme offered too

little rice to the households and the cost of delivery was very high and the performance of PHK

programme was not up-to the mark (Widianto, 2013). The researcher explains poor targeting of

anti-poverty programmes as one of the reasons for lower impact of these schemes in reducing

poverty. The study shows that the benefit of the programmes has been uneven with some

communities gaining more than some others. Sumarto and Bazzi (2011) have also discussed the

difficulty of anti-poverty programme targeting due to sub-standard data, poor accountability and

lack of coordination across various agencies involved in delivery of services.

According to Manning (2011) Indonesia's progress in lowering poverty and improving the

general standard of living has been commendable even though uneven. Perdana (2004) in a study

has commented that employment related programmes were ineffectively run. In all the

programmes monitoring has been raised as an important issue which was temporary and

awareness of the programmes at a number of places was low.

Thus the programmes have faced serious issues including - poor coverage and targeting, lack of

awareness, improper scheme designing, ineffective and sporadic monitoring and leakages.

4. Suggestions and conclusion



There is broad agreement that over the last two decades, the significance of economic growth in

contributing towards poverty reduction has been accentuated by the presence of concerted and

targeted efforts in improving the status of the poor. The social protection programmes launched

after the onslaught of the financial crisis were implemented in an untargeted manner and these

were too broad based and not sustainable. As a result the Government decided to revamp them

with a targeted approach. These have proved to be better in improving the condition of the poor

in Indonesia.

A study by Asian Development Bank shows that economic reforms which have brought about

greater fiscal decentralization have been instrumental in improving the economic growth rates at

the local level and have in turn reduced poverty. Also, in 2011, the Government set up a new

system for targeting the poor beneficiaries (Widianto, 2013). This involved a new survey for

identification of poor and a comprehensive and centralized databank of the same which would

help improve the delivery mechanism of the poverty alleviation/social assistance schemes.

Some improvements which can enhance the effectivity of poverty alleviation programmes

include the following-

Increase in resource allocation by the government towards poverty alleviation and social

assistance schemes. Currently Indonesia spends less than 1% of the national GDP on

social assistance programmes. This is less as compared to other countries in the same and

lower income group (World Bank, 2009, 2012a).



Countries with instable macro-economies not only suffer lower economic growth but also

fare poorly as far as tackling the issue of poverty is concerned (Ames et al., 2001). A

number of Indonesians live close to the poverty line and any adverse situation/shock is

disturbing enough to throw them below the poverty line. A very significant adversity is

inflation which is a prominent cause of transient poverty. Thus it is significant to keep the

countrys economy stable and resilient to any external shock.

Greater effort is desired in the direction of increasing awareness of the various anti-

poverty schemes prevailing among the masses.

Amongst all the programmes being run to improve the condition of the poor, skill

development and job creation should be emphasized the most.

Improvement in decentralized financial management has been a facilitator in improving

economic growth at regional or local level and this has subsequently helped in poverty

reduction. This decentralized mechanism should be further strengthened.

Though the Government of Indonesia follows a multi-pronged approach to reducing poverty, by

strengthening each of the effort - by enhancing the targeting and plugging the leakages,

Indonesia would be able to get rid of poverty.

References



Ames, B., Ward Brown, Shanta Devarajan and Alejandro Izquierdo (2001) Macroeconomic

Policy and Poverty Reduction, Prepared by the International Monetary Fund and the World

Bank, retrieved from www.imf.org on 25/12/2014

Beck, Sanderson (2008) South Asia 1800-1950. Goleta, California: World Peace

Communications

Cornia, G.A. and S. Kiiski (2001) Trends in income distribution in the post-World War II period

- Evidence and Interpretation, Discussion Paper no.2001/89, United Nations University, World

Institute for Development Economics Research

Feridhanusetyawan, T. (2000) Globalization, poverty and equity in Indonesia, Country

background paper for the OECD Conference: Poverty and Income Inequality in Developing

Countries - A policy dialogue on the effects of globalization, Paris, November 30 - December 1,

2000

Hardjono, Joan; Nuning Akhmadi; Sudarno Sumarto (2010) Poverty and Social Protection in

Indonesia, Institute of Southeast Asian Studies

Hofman, B., E. Rodrick-Jones, and K.W. Thee (2004) Indonesia: Rapid growth, weak

institutions. A case study from: Scaling up poverty reduction, presented at a global learning

process and conference, Shanghai, May 25-27, 2004; World Bank

ILO (2010) Social security for informal economy workers in Indonesia: Looking for flexible and

highly targeted programmes, Jakarta, ILO Publishing



ILO (2012) Social protection assessment based national dialogue: Towards a nationally defined

social protection floor in Indonesia, Jakarta, ILO Publishing

Iriana, Nona; Ahmad Avenzora and Jainal Abidin (2012) Indonesia: Poverty Data Governance,

Paper presented at Kunming, PRC October 23-25, 2012, Retrieved from 2012

http://www.adbi.org/files/2012.10.25.cpp.sess5.10.indonesia.poverty.data.gov.pdf on 10/10/2014

JICA (2001) Poverty Profile: Executive Summary - Republic of Indonesia, Japan Bank for

International Cooperation, Retrieved from

http://www.jica.go.jp/activities/issues/poverty/profile/pdf/indonesia_e.pdf on 10/10/2014

Langenbrunner, John C., Jack Langenbrunner and Aparnaa Somanathan (2011) Financing Health

Care in East Asia and the Pacific: Best Practices and Remaining Challenges; World Bank

Publications

Maksum, Choiril (2004) Official Poverty Measurement in Indonesia, Paper Presented at 2004

International Conference on Official Poverty Statistics, 4-6 October 2004, ESDA, Philippines,

Retrieved from www.nscb.gov.ph/poverty/conference/papers/2_indonesia.pdf on 20/11/2014

Manning, Chris and Sudarno Sumarto (2011) Employment, Living Standards and Poverty:

Trends, Policies and Interactions in Chris Manning and Sudarno Sumarto edited Employment,

Living Standards and Poverty in Contemporary Indonesia, Institute of Southeast Asian Studies,

Singapore



OECD (2012) Review of Agricultural Policies OECD Review of Agricultural Policies: Indonesia

OECD Publishing

OECD (2013) Economic Outlook for Southeast Asia, China and India 2014 - Beyond the Middle-

Income Trap, OECD Publishing

Perdana, A. Ari and J. Maxwell (2004) Poverty Targeting in Indonesia: Programs, Problems and

Lessons Learned, Centre for Strategic and International Studies, Indonesia CSIS Working Paper

Series, WPE 083

Rigg, Jonathan (1997) Southeast Asia: The Human Landscape of Modernization and

Development, Psychology Press

Robinson, Marguerite S. (2002) The Microfinance Revolution: Lessons from Indonesia World

Bank Publications

Sala-i-Martin, Xavier (2002) The World Distribution of Income (estimated from Individual

Country Distributions) NBER Working Paper No. 8933, Retrieved from

http://www.nber.org/papers/w8933 on 24/09/2014

Sumarto, Sudarno, Asep Suryahadi, and Wenefrida Widyanti (2002) Designs and Implementation

of the Indonesian Social Safety Net Programs, Developing Economics, 40(1)

Sumarto, Sudarno and Samuel Bazzi (2011) - Social Protection in Indonesia: Past Experiences

and Lessons for the Future, Paper presented at the 2011 Annual Bank Conference on



Development Opportunities jointly organized by the World Bank and OECD, 30 May-1 June

2011, Paris

Sutiyo and Maharjan, K.L. (2011) Rural Poverty Alleviation in Indonesia: Programs and the

Implementation Gap, Journal of International Development and Cooperation, 18.1

Timmer, Peter (2004) Operationalizing Pro- Poor Growth, A joint initiative of AFD, BMZ (GTZ,

KfW Development Bank), DFID, and the World Bank, A Country Case Study on Indonesia,

retrieved from www.worldbank.org on 25/09/2014

Van der Eng, Pierre (2004) Famines in Ooi Keat Gin edited Southeast Asia: A Historical

Encyclopedia, Santa Barbara: ABC-Clio

Warr, Peter (2001) Poverty reduction and Economic Growth: The Asian Experience, Paper

delivered at Asia and Pacific Forum on Poverty: Reforming Policies and Institutions for Poverty

Reduction, at the Asian Development Bank, Manila, 5-9 February 2001, Retrieved from

http://www.policyinnovations.org/ideas/policy_library/data/01101/_res/id=sa_File1/ on

26/08/2014

Widianto, Banmbang (2013) The Political economy of social protection reforms in Indonesia in

Katja Bender, Markus Kaltenborn, and Christian Pfleiderer edited Social Protection in

Developing Countries: Reforming Systems, Routledge

World Bank (2006) Making the New Indonesia Work for the Poor, Jakarta

World Bank (2009) Social Assistance Public Expenditure Review, ESW Concept Note



World Bank (2012a) Protecting poor and vulnerable households in Indonesia, retrieved from

https://openknowledge.worldbank.org/ on 27/12/2014

World Bank (2012b) Raskin subsidized rice delivery. Public expenditure review, Social assistance

program and public expenditure review; No 3 Washington, DC

www.tnp2k.go.id

Date post:	14-Sep-2015
Category:	Documents
Upload:	universal-multidisciplinary-research-institute-pvt
View:	6 times
Download:	0 times

A STUDY OF POVERTY PROFILE OF INDONESIA AND ITS MANAGEMENT

Documents