MAKING GOVERNMENT WORK FOR THE POOR -THE CASE OF INDONESIA

PUBLIC ADMINISTRATION: CONCEPTS AND
PRACTICE

IX. MAKING GOVERNMENT
WORK FOR THE POOR

THE CASE OF INDONESIA

Graduate School of Asia and Pacific Studies
University of Waseda, Tokyo-JAPAN
2008

CONTENTS

POVERTY IN INDONESIA
SALIENT FEATURES OF POVERTY IN INDONESIA
THREE WAYS TO FIGHT POVERTY
MAKING ECONOMIC GROWTH WORK FOR THE POOR
MAKING SERVICES WORK FOR THE POOR
MAKING PUBLIC EXPENDITURE WORK FOR THE POOR
SOCIAL PROTECTION SYSTEM
MAKING GOVERNMENT WORK FOR THE PEOPLE
MONITORING AND ASSESSMENT
CONCLUSION

GSAPS-2008 www.ginandjar.com 2


45
40.1

40

33.3
35 Crisis

28.6
30
Povert Headcount (%)

26.9
ty

23.4
25

21.6
17.6* 18.2
20 17.4 17.4
16.7 16.0
17.8
15.1
13.7
15
11.34*

10

5
* Revised Method

0
1976 1978 1980 1981 1984 1987 1990 1993 1996* 1999 2002 2003 2004 2005** 2006


THE CHALLENGE OF REDUCING POVERTY
REMAINS ONE OF THE COUNTRY’S MOST
PRESSING ISSUES. THE NUMBER OF PEOPLE
ISSUES
LIVING BELOW US$2-A-DAY IN INDONESIA
COMES CLOSE TO EQUALING ALL THOSE LIVING
ON OR BELOW US$2-A-DAY IN ALL OF THE
REST OF EAST ASIA BESIDES CHINA.


ANALYSIS INDICATES THAT THERE IS LITTLE
THAT DISTINGUISHES THE POOR FROM THE
NEAR-POOR, SUGGESTING THAT POVERTY
REDUCTION STRATEGIES SHOULD FOCUS ON
IMPROVING THE WELFARE OF THE LOWEST TWO
QUINTILE GROUPS.


INDONESIA CAN LEARN FROM ITS OWN PAST ECONOMIC
GROWTH, GOVERNMENT POLICIES AND SOCIAL
PROGRAMS.
PROGRAMS INDONESIA HAS HAD REMARKABLE SUCCESS
IN REDUCING POVERTY SINCE THE 1970S. THE PERIOD
FROM THE LATE 1970S TO THE MID-1990S IS
CONSIDERED ONE OF THE MOST ‘PRO-POOR GROWTH’
‘PRO POOR
EPISODES IN THE ECONOMIC HISTORY OF ANY
COUNTRY, WITH POVERTY DECLINING BY HALF.

(WORLD BANK, 2006)


IN ADDITION TO THE MILLENNIUM
DEVELOPMENT GOALS (MDGS) FOR 2015, IN ITS
MEDIUM TERM
MEDIUM-TERM PLAN THE GOVERNMENT HAS
LAID OUT ITS OWN KEY POVERTY REDUCTION
OBJECTIVES FOR 2009. THIS INCLUDES AN
AMBITIOUS TARGET OF REDUCING THE POVERTY
HEADCOUNT RATE FROM 18.2 PERCENT IN 2002
TO 8 2 PERCENT BY 2009
8.2 2009.


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


POVERTY DEFINITION AND MEASURES

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

SALIENT FEATURES OF POVERTY
IN INDONESIA

POVERTY IN INDONESIA HAS THREE SALIENT
FEATURES.
FIRST, MANY HOUSEHOLDS ARE CLUSTERED
AROUND THE NATIONAL INCOME POVERTY LINE OF
ABOUT PPP US$1.55-A-DAY, MAKING EVEN MANY
OF THE NON-POOR VULNERABLE TO POVERTY.
SECOND,
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.


INCOME POVERTY

WHILE NATIONAL POVERTY RATES MAY BE CLOSE
TO PRE-CRISIS LEVELS, THIS STILL MEANS THAT
ABOUT 40 MILLION PEOPLE ARE LIVING BELOW
THE NATIONAL POVERTY LINE. MOREOVER,
ALTHOUGH INDONESIA IS NOW A MIDDLE-
INCOME COUNTRY THE SHARE OF THOSE
COUNTRY,
LIVING ON LESS THAN US$2-A-DAY IS SIMILAR TO
THAT OF THE REGION’S LOW-INCOME COUNTRIES
SUCH AS VIETNAM
VIETNAM.


FORTY-TWO PERCENT OF INDONESIA’S POPULATION LIVES ON
BETWEEN US$1- AND US$2-A-DAY (2004)

GSAPS-2008 www.ginandjar.com (WORLD BANK, 2006) 12

THIS ALSO MEANS THAT THE VULNERABILITY TO
FALLING INTO POVERTY IS PARTICULARLY HIGH:
WHILE ONLY 16.7 PERCENT OF INDONESIANS
SURVEYED WERE POOR IN 2004, MORE THAN
59 PERCENT HAD BEEN POOR AT SOME TIME
DURING THE YEAR PRECEDING THE SURVEY.
RECENT DATA ALSO INDICATE A HIGH DEGREE
OF MOVEMENT IN AND OUT OF POVERTY OVER
TIME: OVER 38 PERCENT OF POOR HOUSE
HOLDS IN 2004 WERE NOT POOR IN 2003.


NON-INCOME POVERTY

NON-INCOME POVERTY IS A MORE SERIOUS
PROBLEM THAN INCOME POVERTY. WHEN ONE
ACKNOWLEDGES ALL DIMENSIONS OF HUMAN
WELL BEING ADEQUATE
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.


INDONESIA HAS MADE GOOD PROGRESS IN PAST
YEARS ON SOME HUMAN CAPITAL OUTCOMES.
THERE HAVE BEEN NOTABLE IMPROVEMENTS IN
EDUCATIONAL ATTAINMENT AT THE PRIMARY
SCHOOL LEVEL; BASIC HEALTHCARE COVERAGE
(PARTICULARLY IN BIRTH ATTENDANCE AND
IMMUNIZATION); AND DRAMATIC REDUCTIONS IN
CHILD MORTALITY. BUT IN SOME MDG-RELATED
INDICATORS INDONESIA HAS FAILED TO MAKE
SIGNIFICANT PROGRESS AND LAGS BEHIND OTHER
COUNTRIES IN THE REGION
REGION.


REGIONAL DISPARITIES
REGIONAL DISPARITIES IN POVERTY ARE CONSIDERABLE.
WIDE REGIONAL DIFFERENCES CHARACTERIZE INDONESIA
INDONESIA,
SOME OF WHICH ARE REFLECTED IN DISPARITIES BETWEEN
RURAL AND URBAN AREAS.
RURAL HOUSEHOLDS ACCOUNT FOR ABOUT 57 PERCENT OF
THE POOR IN INDONESIA AND ALSO FREQUENTLY LACK ACCESS
TO BASIC INFRASTRUCTURE SERVICES: ONLY ABOUT 50
PERCENT OF THE RURAL POOR HAVE ACCESS TO AN
IMPROVED SOURCE OF WATER COMPARED WITH 80 PERCENT
WATER,
FOR THE URBAN POOR.
BUT IMPORTANTLY, ACROSS THE VAST INDONESIAN
ARCHIPELAGO, IT IS ALSO REFLECTED IN BROAD SWATHES OF
G O O O
REGIONAL POVERTY, IN ADDITION TO S
O SMALLER POCKETS O
OC S OF
POVERTY WITHIN REGIONS. FOR EXAMPLE, THE POVERTY RATE
IS 15.7 PERCENT IN JAVA/BALI AND 38.7 PERCENT IN MORE
REMOTE PAPUA.

SERVICES ARE ALSO UNEQUALLY DISTRIBUTED ACROSS
REGIONS, WITH AN UNDERSUPPLY OF FACILITIES IN REMOTE
AREAS. IN JAVA THE AVERAGE DISTANCE OF A HOUSEHOLD
TO THE NEAREST PUBLIC HEALTH CLINIC IS 4 KILOMETERS
KILOMETERS,
WHEREAS IN PAPUA IT IS 32 KILOMETERS. WHILE 66
PERCENT OF THE POOREST QUINTILE IN JAVA/BALI HAVE
ACCESS TO IMPROVED WATER, IT IS 35 PERCENT FOR
,
KALIMANTAN AND ONLY 9 PERCENT FOR PAPUA.
ANOTHER CHALLENGE IS THAT ALTHOUGH POVERTY
INCIDENCE IS FAR HIGHER IN EASTERN INDONESIA AND IN
MORE REMOTE AREAS, MOST OF INDONESIA’S POOR LIVE IN
THE DENSELY POPULATED WESTERN REGIONS OF THE
ARCHIPELAGO. FOR EXAMPLE, WHILE THE POVERTY
INCIDENCE IN JAVA/BALI IS RELATIVELY LOW THE ISLAND IS
LOW,
HOME TO 57 PERCENT OF INDONESIA’S TOTAL POOR,
COMPARED WITH PAPUA, WHICH ONLY HAS 3 PERCENT OF
THE POOR
POOR.

THREE WAYS TO FIGHT POVERTY

AN ANALYSIS OF POVERTY AND ITS DETERMINANTS IN
INDONESIA, AS WELL OF INDONESIA’S HISTORY IN
REDUCING POVERTY TO DATE, POINTS TO THREE
WAYS TO FIGHT POVERTY THE THREE MEANS FOR
POVERTY.
HELPING PEOPLE LIFT THEMSELVES OUT OF POVERTY
ARE ECONOMIC GROWTH, SOCIAL SERVICES, AND
PUBLIC EXPENDITURES
EXPENDITURES.
EACH OF THESE PRONGS ADDRESSES ONE OR MORE
OF THE THREE DEFINING FEATURES OF POVERTY IN
INDONESIA: VULNERABILITY, MULTIDIMENSIONALITY,
AND REGIONAL DISPARITIES.
IN OTHER WORDS, AN EFFECTIVE POVERTY
WORDS
REDUCTION STRATEGY FOR INDONESIA HAS THREE
COMPONENTS:


AN APPROACH FOR ADDRESSING INDONESIA S POVERTY PROBLEMS
INDONESIA’S

Vulnerability Dimension of Indonesian Regional
poverty Multidimensionality disparities

Economic growth ○ •

Social services • ○

Public expenditure • ○ ○

Note: ● Indicates principal link between thematic area and the aspect of poverty; ○ indicates an
important linkage.
(WORLD BANK, 2006)


MAKING ECONOMIC GROWTH WORK
FOR THE POOR

FOR INDONESIA, GROWTH THAT BENEFITS THE
POOR HAS BEEN, AND WILL CONTINUE TO BE,
THE MAIN ROUTE TO POVERTY REDUCTION. FROM
THE 1970S THROUGH TO THE LATE 1990S,
GROWTH WAS RAPID AND IT REACHED THE POOR
POOR.
EACH PERCENTAGE POINT INCREASE IN AVERAGE
EXPENDITURE RESULTED IN A 0 3 PERCENT
0.3
REDUCTION IN THE POVERTY HEADCOUNT.
EVEN SINCE THE CRISIS, GROWTH HAS BEEN THE
,
PRIMARY DETERMINANT OF POVERTY REDUCTION.


HOWEVER GROWTH WILL NEED TO ACCELERATE AND
BENEFIT THE POOR MORE IF INDONESIA IS TO MEET
ITS POVERTY REDUCTION TARGETS. IF THE CURRENT
RATE AND PATTERN OF GROWTH CONTINUES,
INDONESIA WILL NOT MEET ITS POVERTY REDUCTION
TARGET OF 8.2 PERCENT BY 2009. IN FACT, IF THE
CURRENT PATTERN OF GROWTH CONTINUES, THE
MEDIUM-TERM POVERTY REDUCTION TARGET WILL NOT
BE MET EVEN IF GROWTH WERE ACCELERATED TO THE
PROJECTED RATE OF 6.2 PERCENT.
TO MEET THE POVERTY TARGET, GROWTH MUST
BECOME MORE PRO-POOR. FOR EXAMPLE, IF THE
INCOMES OF THE POOR GROW AT THE SAME RATE AS
THOSE OF THE RICH THEN THE MEDIUM-TERM TARGET
CAN BE BROADLY MET.


MAKING GROWTH WORK FOR THE POOR WILL
REQUIRE GETTING THE POOR ONTO EFFECTIVE
PATHWAYS OUT OF POVERTY. THIS WILL MEAN
POVERTY
HARNESSING THE STRUCTURAL
TRANSFORMATION THAT IS ONGOING IN
INDONESIA—ALBEIT AT A SIGNIFICANTLY
SLOWER RATE THAN PRE-CRISIS.


THIS TRANSFORMATION IS CHARACTERIZED BY
TWO PHENOMENA.

THERE IS AN ONGOING SHIFT FROM MORE RURAL-
BASED TO MORE URBAN-BASED ACTIVITIES.
INDONESIA HAS EXPERIENCED RAPID URBANIZATION
URBANIZATION,
WITH THE POPULATION OF INDONESIA’S CITIES
NEARLY TREBLING IN 25 YEARS. THIS HAS STIMULATED
A SHIFT FROM RURAL TO MORE URBAN-BASED
ACTIVITIES, EVEN WHEN HOUSEHOLDS HAVE NOT IN
FACT CHANGED LOCATION (SOME 35 TO 40 PERCENT
OF URBANIZATION). URBAN MARKETS ARE THUS
URBANIZATION)
BECOMING INCREASINGLY IMPORTANT FOR BOTH THE
RURAL AND THE URBAN POOR.


THERE HAS BEEN A MARKED SHIFT FROM FARM TO
MORE NON-FARM ACTIVITIES. IN RURAL AREAS IN
PARTICULAR, THIS HAS MEANT SUBSTANTIAL GROWTH
IN THE SHARE OF EMPLOYMENT IN RURAL (OR
PREVIOUSLY RURAL) NON-FARM ENTERPRISES (4
PERCENT PER YEAR BETWEEN 1993 AND 2002) THIS
2002).
TRANSFORMATION SUGGESTS TWO IMPORTANT
PATHWAYS THAT HOUSEHOLDS HAVE TAKEN OUT OF
INDONESIA.


THE FIRST PATHWAY: IMPROVED AGRICULTURAL
PRODUCTIVITY. THIS COULD COME FROM INCREASING
PRODUCTIVITY IN SMALL-SCALE AGRICULTURE OR AN
INCREASED SHIFT TO COMMERCIAL FARMING.
AGRICULTURAL PRODUCTIVITY GAINS FROM THE GREEN
REVOLUTION WERE ONE OF THE MAIN DRIVERS OF GROWTH
IN THE THREE DECADES COMMENCING WITH THE 1970S.
MORE RECENTLY, HIGH WORLD COMMODITY PRICES HAVE
RECENTLY
SUSTAINED OUTPUT GROWTH, WHILE THE SHIFT OF LABOR
OUT OF THE SECTOR HAS MAINTAINED THE GROWTH OF
LABOR PRODUCTIVITY IN AGRICULTURE AS A RESULT,
AGRICULTURE. RESULT
RECENT POVERTY DIAGNOSTICS SHOW THAT INCREASES IN
AGRICULTURAL INCOMES CONTINUE TO BE AN IMPORTANT
DRIVER OF REDUCTIONS IN POVERTY. PANEL DATA BETWEEN
POVERTY
1993 AND 2000 SHOW THAT 40 PERCENT OF AGRICULTURAL
WORKERS IN RURAL AREAS ESCAPED POVERTY WHILE
STAYING IN RURAL AGRICULTURE
AGRICULTURE.

THE SECOND PATHWAY: INCREASING NON-FARM
PRODUCTIVITY. THE TRANSITION THROUGH RURAL NON-
FARM ENTERPRISES IS AN IMPORTANT STEPPING-STONE TO
MOVING OUT OF POVERTY, EITHER BY CONNECTING RURAL
POVERTY
ENTERPRISES TO URBAN GROWTH PROCESSES OR,
IMPORTANTLY, BY THESE ENTERPRISES IN THE RURAL
FRINGE BEING SUBSUMED INTO URBAN AREAS. BETWEEN
1993 AND 2002, THE EMPLOYMENT SHARE OF NON-POOR
WORKERS IN RURAL NON-FARM EMPLOYMENT INCREASED BY
6.7 PERCENTAGE POINTS, SUGGESTING THAT INCREASING
,
NON-AGRICULTURAL PRODUCTIVITY IN RURAL AREAS WAS
AN IMPORTANT PATHWAY OUT OF POVERTY. MOREOVER,
MANY OF THESE ‘RURAL’ AREAS WERE URBAN BY THE END OF
THE PERIOD, SHOWING THE COMPLEMENTARY ROLES OF
URBANIZATION AND PRODUCTIVITY ENHANCEMENTS.


THE GOVERNMENT CAN CONTRIBUTE TO INCREASING
PRODUCTIVITY THROUGH:
1)
) BOOSTING INVESTMENT IN KEY INFRASTRUCTURE, NOTABLY
,
FARM-TO-MARKET ROADS AND IRRIGATION, WHILE WIDENING
LOCAL WATER MANAGEMENT;
2) ENCOURAGING AND SUPPORTING DIVERSIFICATION INTO
HIGHER VALUE-ADDED CROPS;
3) WORKING WITH THE PRIVATE SECTOR TO ENSURE THAT
EXPORTS MEET WORLD STANDARDS;
4) BOOSTING EXPENDITURE ON AGRICULTURAL RESEARCH; AND
5) REDESIGNING THE DECENTRALIZED EXTENSION SERVICE TO
ALLOW FOR GREATER INVOLVEMENT OF THE PRIVATE SECTOR
AND CIVIL SOCIETY.


ENCOURAGE THE DEVELOPMENT OF THE
PRIVATE SECTOR

DURING THE 1980s, THE PRIVATE SECTOR EXPANDED GREATLY,
CONTRIBUTING SIGNIFICANTLY TO GROWTH.
HOWEVER THE GROWTH OF THE PRIVATE SECTORS WAS NOT
SUPPORTED BY A STRONG LEGAL SYSTEM TO PROVIDE THE
CERTAINTY AND STRUCTURE FOR PRIVATE-SECTOR CONFIDENCE
(HOFMAN ET AL, 2004).
APART FROM A CHRONICALLY INEFFECTIVE JUDICIARY (AND THUS
ANY LEGAL RECOURSE), THE BASIC LEGAL FRAMEWORK DATING
BACK TO THE COLONIAL PERIOD GAVE INADEQUATE PROVISIONS TO
PROMOTE BUSINESS CONFIDENCE AND A LACK OF COOPERATION
CONFIDENCE,
BETWEEN RESPONSIBLE INSTITUTIONS LED TO POOR SEQUENCING
OF UPDATED REGULATIONS AND LEGAL CODES FOR ECONOMIC
ACTIVITY.


THIS WEAK ENABLING ENVIRONMENT HAD (AND
CONTINUES TO HAVE) PROFOUND LONG-TERM
LONG TERM
IMPACTS ON INVESTOR CONFIDENCE AND THE
SUSTAINABILITY OF PRIVATE-SECTOR
INVESTMENT IN A NUMBER OF SECTORS VITAL TO
CONTINUED GROWTH.


A STRATEGY TO HELP THE POOR TAKE
ADVANTAGE OF ECONOMIC GROWTH.
FIRST,
FIRST MAINTAIN MACROECONOMIC STABILITY KEY
STABILITY.
TO THIS ARE ENSURING LOW INFLATION AND A
STABLE AND COMPETITIVE EXCHANGE RATE.
COUNTRIES THAT HAVE HAD MORE
MACROECONOMIC SHOCKS EXPERIENCE SLOWER
GROWTH AND POVERTY REDUCTION THAN THOSE
WITH BETTER MACROECONOMIC MANAGEMENT
(WORLD BANK, 2005A). INDONESIA KNOWS BETTER
THAN MOST COUNTRIES THE DREADFUL POVERTY
IMPACT OF MACROECONOMIC CRISES.


SECOND, CONNECTING THE POOR TO
OPPORTUNITIES FOR GROWTH. BETTER ACCESS TO
ROADS, TELECOMMUNICATIONS, CREDIT AND
FORMAL SECTOR EMPLOYMENT ARE ASSOCIATED
WITH SIGNIFICANTLY LOWER POVERTY THE
POVERTY.
BENEFIT OF BEING ‘CONNECTED’ IS LARGE,
PARTICULARLY IN THE CASE OF FORMAL SECTOR
EMPLOYMENT OUTSIDE OF AGRICULTURE
AGRICULTURE.


THIRD, INVEST IN THE CAPABILITIES OF THE POOR.
,
PART OF THE STRATEGY FOR GROWTH MUST BE TO
INVEST IN THE POOR SO THAT THEY ARE WELL
PREPARED TO BENEFIT FROM THE OPPORTUNITIES FOR
INCOME GROWTH THAT PRESENT THEMSELVES. IN
BOTH RURAL AND URBAN AREAS, HIGHER LEVELS OF
EDUCATION OF HOUSEHOLD HEADS ARE ASSOCIATED
WITH HIGHER LEVELS OF CONSUMPTION. INVESTING
IN EDUCATION FOR THE POOR WILL BOOST THE
CAPABILITY OF THE POOR TO PARTICIPATE IN
GROWTH.
FOURTH, IMPROVE THE ECONOMIC AND BUSINESS
CLIMATE AND ENVIRONTMENT TO ENABLE THE
GROWTH OF A STRONG AND COMPETITIVE PRIVATE
S C O
SECTOR

MAKING SERVICES WORK FOR THE
POOR

MAKING SERVICES WORK FOR THE POOR REQUIRES
IMPROVING INSTITUTIONAL ACCOUNTABILITY
SYSTEMS AND INTRODUCING INCENTIVES TO
IMPROVE SERVICE DELIVERY IN ORDER TO IMPROVE
HUMAN DEVELOPMENT OUTCOMES. CURRENTLY,
POOR SERVICE DELIVERY LIES AT THE CENTER OF
WEAK HUMAN DEVELOPMENT OUTCOMES OR NON-
OUTCOMES, NON
INCOME ‘MULTIDIMENSIONAL’ POVERTY, SUCH AS
POOR QUALITY OF HEALTH AND EDUCATIONAL CARE.
ACCORDING TO S
CCO G O SURVEY DATA, 44 PERCENT O
C OF
HOUSEHOLDS IN THE POOREST QUINTILE WITH
CHILDREN ENROLLED IN SCHOOL REPORTED
DIFFICULTIES IN FINANCING JUNIOR SECONDARY
EDUCATION.


EDUCATION

THE POOR PAY 7.2 PERCENT OF THEIR TOTAL
EXPENDITURE FOR EACH ENROLLED STUDENT AT
JUNIOR SECONDARY LEVEL. ON THE DEMAND SIDE,
TO ADDRESS THIS ISSUE THE GOVERNMENT SHOULD
CO S OG SO
CONSIDER PROGRAMS OF TARGETED TRANSFERS,
G S S
SUCH AS SCHOLARSHIPS OR CONDITIONAL CASH
TRANSFERS LINKED TO ATTENDANCE TO JUNIOR
SECONDARY SCHOOL (AND VOCATIONAL SCHOOLS)
SCHOOLS).
JUNIOR SECONDARY SCHOOL CAPACITY IN
INDONESIA PROVIDES LEARNING OPPORTUNITIES
ON AVERAGE TO ONLY SOME 84 PERCENT OF
POTENTIAL STUDENTS IN THE 13 TO 15 AGE GROUP.


THE OTHER AREA OF FOCUS IS IMPROVED ACCESS
OF THE POOR TO SERVICES TO REDUCE REGIONAL
DISPARITIES IN HUMAN DEVELOPMENT INDICATORS.
THE VARIABILITY IN ACCESS TO SERVICES ACROSS
THE COUNTRY IS A FUNDAMENTAL DRIVER OF
REGIONAL INEQUALITIES IN POVERTY-RELATED
OUTCOMES.
OUTCOMES
WHILE IN SOME REGIONS, SUCH AS CENTRAL JAVA,
SCHOOL CAPACITY EXCEEDS 100 PERCENT, IN EAST
NUSA TENGGARA AND SOUTH SUMATRA THE
AVERAGE COVERAGE OF SCHOOL CAPACITY IS
BELOW 60 PERCENT OF THE NUMBER OF POTENTIAL
STUDENTS, INDICATING A LOWER DEGREE OF
ACCESS.


AND THE AVERAGE DISTANCE TO JUNIOR
SECONDARY SCHOOLS IN JAVA IS 1.9 KM WHILE IN
PAPUA THE AVERAGE DISTANCE IS 16.6 KM (PODES,
2005).
2005) OF THE JUNIOR SECONDARY SCHOOLS
AVAILABLE, A MINISTRY SURVEY IN 2004 FOUND
27.3 PERCENT OF THEIR CLASSROOMS TO BE
DAMAGED IN SOME WAY MORE JUNIOR SECONDARY
WAY.
CLASSROOMS AND SCHOOLS NEED TO BE MADE
AVAILABLE, AND ONE WAY THIS CAN BE ACHIEVED
IS BY CONVERTING PRIMARY SCHOOLS WHERE
THERE IS EXCESS SUPPLY.


PRIMARY HEALTH CARE

BETTER PRIMARY HEALTHCARE REQUIRES BETTER
INCENTIVES FOR BOTH THE POOR AND FOR
PROVIDERS. CHAUDHURY, ET AL (2005) FOUND THAT
ABSENTEEISM AMONG HEALTH WORKERS IN
INDONESIA IS 40 PERCENT, EVEN HIGHER THAN IN
BANGLADESH AND UGANDA.
ONLY 30 PERCENT OF PRIMARY HEALTH CLINICS
VISITED HAD COMPLETE STOCKS OF MEDICINES. FOR
HIGHER-LEVEL HEALTHCARE, AFFORDABILITY IS AN
ISSUE AND TARGETED PROGRAMS WOULD MAKE
SENSE, SUCH AS A HEALTH INSURANCE PROGRAM.


MATERNAL MORTALITY RATE

PROGRESS IN REDUCING MATERNAL MORTALITY LIES IN
INCREASING THE PROPORTION OF BIRTHS ATTENDED BY SKILLED
PROFESSIONALS, INCREASING THE PROPORTION OF
INSTITUTIONAL DELIVERIES AND IMPROVING ACCESS TO 24-
HOUR OBSTETRIC CARE. CURRENTLY, ONLY 72 PERCENT OF
BIRTHS ARE ATTENDED BY SKILLED PERSONNEL IN INDONESIA
NATIONALLY, COMPARED WITH 97 PERCENT IN MALAYSIA AND
CHINA AND 99 PERCENT IN THAILAND.
INCREASING DELIVERIES WITH SKILLED STAFF IN ATTENDANCE
IN HEALTH CLINICS WILL REQUIRE ACTION ON FOUR FRONTS:
INCREASING THE AVAILABILITY OF SKILLED MIDWIVES IN
REMOTE AREAS; IMPROVING THE AFFORDABILITY OF CARE BY
SKILLED PROFESSIONALS; INCREASING AWARENESS ESPECIALLY
AWARENESS,
AMONG WOMEN, OF THE IMPORTANCE OF SKILLED MIDWIFERY AT
BIRTH; AND IMPROVING THE QUALITY OF SKILLED BIRTH
ATTENDANT SERVICES.


SAFE WATER AND SANITATION

AN ESTIMATED 50 MILLION RURAL POOR ARE NOT
CONNECTED TO PIPED WATER AND OF THAT NUMBER
SIX MILLION PAY HIGHER RATES (IN EXCESS OF
THOSE CHARGED THE STATE WATER UTILITY
COMPANY). FOR RURAL AREAS, THE EXISTING
COMMUNITY MANAGEMENT SUPPLY MODEL THAT HAS
BEEN SHOWN TO WORK SHOULD BE EXPANDED.
THIS CURRENTLY COVERS 25-30 PERCENT OF THE
RURAL POPULATION, BUT COULD BE EXPANDED TO
COVER THE 50 MILLION PEOPLE CURRENTLY
WITHOUT ADEQUATE WATER SUPPLY.


CONSIDERATION NEEDS TO BE GIVEN TO
DESIGNING APPROPRIATE TARIFF STRUCTURES FOR
THE POOR WHO BENEFIT FROM CURRENT
CONNECTIONS,
CONNECTIONS OR WHO WILL HAVE FUTURE
CONNECTIONS. THE COVERAGE OF SANITATION
SERVICES IN INDONESIA IS THE WORST IN THE
REGION, WITH LESS THAN 1 PERCENT OF ALL
INDONESIANS ACCESSING PIPED SEWERAGE
SYSTEMS.
SURVEY DATA SHOW THAT 80 PERCENT OF THE
RURAL POOR AND 59 PERCENT OF THE URBAN POOR
HAVE NO ACCESS TO ADEQUATE SANITATION. IT IS
ESTIMATED THAT THE COST OF POOR SANITATION IS
ABOUT 2.6 PERCENT OF GDP, WHILE PUBLIC
SPENDING ON WATER AND SANITATION TOGETHER
IS LESS THAN 0.2 PERCENT OF GDP.

FUNCTIONAL RESPONSIBILITIES

THE LACK OF CLARITY OF RESPONSIBILITIES IS PARALYZING
SERVICE DELIVERY THE FINANCING AND PROVISION OF
DELIVERY.
SERVICES IS BASED ON BUREAUCRATIC INSTRUCTIONS,
PROVIDING RELATIVELY LITTLE ACTUAL AUTONOMY TO
EITHER PROVIDERS OR BENEFICIARIES.
A TYPICAL GOVERNMENT HEALTH CLINIC HAS EIGHT
SOURCES OF CASH INCOME AND 34 OPERATIONAL
BUDGETS, MANY OF WHICH ARE PROVIDED IN KIND BY THE
CENTRAL OR LOCAL GOVERNMENT.
THE CENTRAL GOVERNMENT SHOULD LIMIT ITS ROLE TO
POLICY-MAKING, STAFFING ISSUES, INFORMATION AND
O C G, S G SSU S, O O
DEVELOPING CORE NATIONAL SERVICE-DELIVERY
STANDARDS.


PROVINCIAL LEVEL GOVERNMENTS SHOULD FOCUS
ON FIXING REGIONAL STANDARDS, BUILDING
CAPACITY AT THE DISTRICT LEVEL AND
IMPLEMENTING CROSS-DISTRICT SERVICES, WHILE
AT THE DISTRICT LEVEL LOCAL GOVERNMENTS
SHOULD BE RESPONSIBLE FOR PLANNING AND
BUDGETING, AND ENSURING IMPLEMENTATION OF
SERVICE DELIVERY.
COMMUNITIES SHOULD BE EMPOWERED TO PROVIDE
FEEDBACK TO SERVICE PROVIDERS, POSSIBLY EVEN
MANAGING THEIR OWN TARGETED PROGRAMS AND
HELPING TO BUILD/ MAINTAIN LOCAL
INFRASTRUCTURE.


IMPROVE CIVIL SERVICE IN SOCIAL
SECTORS

WHILE CIVIL SERVICE REFORM IS NOT EASY, IT IS
A VITAL COMPONENT TO ‘UNSTICKING’ SERVICE
DELIVERY.
DELIVERY
A RECENT STUDY INVOLVED MAKING SURPRISE
VISITS ON MORE THAN 100 PRIMARY SCHOOLS
AND HEALTH CENTERS IN INDONESIA. THE STUDY
FOUND ABSENTEEISM RATES OF 10 PERCENT
AMONG TEACHERS AND 40 PERCENT AMONG
HEALTH WORKERS.


INDONESIA HAD THE HIGHEST HEALTH-WORKER
ABSENTEEISM RATE OF ALL THE COUNTRIES
INCLUDED IN GLOBAL STUDY. NOT ONLY DOES HIGH
ABSENTEEISM REDUCE QUALITY BUT IT ALSO
QUALITY,
REDUCES THE DEMAND FOR PUBLIC HEALTH
SERVICES.
CREATING MORE ROBUST AND PREDICTABLE
INCENTIVES FOR STAFF WILL ALSO HELP, AS HAS
BEEN PROVEN IN THE CASE OF SOME FRONTLINE
SERVICE PROVIDERS.


STRONGER INCENTIVES FOR SERVICE
PROVIDERS
THE PROVISION OF CLEAR, PREDICTABLE REWARDS AND
CLEAR
SANCTIONS IS NECESSARY TO PROVIDE A FRAMEWORK
THAT WILL SYSTEMATICALLY PROMOTE GOOD BEHAVIOR
AND OUTCOMES BY SERVICE PROVIDERS INCENTIVES
PROVIDERS.
CAN TAKE THE FORM OF PERFORMANCE CONTRACTS OR
INCENTIVE PAYMENTS FOR GOOD RESULTS.
ONE SPECIFIC OPTION IS TO PILOT THE USE OF SERVICE
AGREEMENTS—A CONTRACT BETWEEN A PUBLIC SERVICE
PROVIDER AND LOCAL GOVERNMENT THAT SPECIFIES THE
SERVICES THAT WILL BE DELIVERED, AND THE
RESOURCES THAT WILL BE PROVIDED TO DO SO.


IN ADDITION, LOCAL GOVERNMENTS CAN WORK WITH
PRIVATE PROVIDERS AS PARTNERS IN DELIVERING
GOOD QUALITY SERVICES TO THE POOR. FOR EXAMPLE,
ALMOST 60 PERCENT OF ALL HEALTHCARE VISITS WERE
TO PRIVATE FACILITIES OR PROVIDERS IN 2004.
THE POOR USE PRIVATE SERVICES NOT ONLY BECAUSE
THEY ARE OFTEN CHEAPER, BUT THEY ARE PERCEIVED
TO BE OF HIGHER QUALITY. MANY LOCAL GOVERNMENTS
ARE WORKING CREATIVELY TO PROVIDE INCENTIVES
FOR IMPROVED EDUCATIONAL OUTCOMES AND
HEALTHCARE.


MAKING PUBLIC EXPENDITURE
WORK FOR THE POOR

TO DATE, PUBLIC EXPENDITURE HAS NOT ALWAYS
BEEN SUCCESSFUL AT EFFECTIVELY ADDRESSING
THE CONSTRAINTS THAT STILL HINDER THE POOR
AND KEEP THEM MIRED IN POVERTY.
PUBLIC SPENDING THAT CAN HAVE A DIRECT
IMPACT BY BOOSTING INCOME LEVELS WILL HAVE
A COMMENSURATE IMPACT ON POVERTY. ONE
PRIORITY THAT STANDS OUT IS THE SCALING-UP
OF COMMUNITY DRIVEN DEVELOPMENT
(CDD).


WHILE THE CDD APPROACH WILL ALLOW FOR A
BROAD FOCUS IN ADDRESSING WIDESPREAD
VULNERABILITY, IT WILL ALSO BE VITAL TO USE
PUBLIC EXPENDITURE TO TARGET THE VERY
POOREST, WHO LAG BEHIND IN TERMS OF THE
OO S O G SO
NON-INCOME, MULTIDIMENSIONAL ASPECTS OF
POVERTY.
POVERTY


ON EXAMPLE IS THE RURAL ROADS PROGRAM
PROGRAM.
ACCESS TO INFRASTRUCTURE AND ROADS IS SHOWN
TO BE A KEY CORRELATE OF POVERTY.
HAVING ALL-YEAR PASSABLE ROADS IS ASSOCIATED WITH
HIGHER EXPENDITURE LEVELS IN BOTH URBAN (7.7 PERCENT
HIGHER) AND RURAL (3.1 PERCENT HIGHER) AREAS. THE LESS
WELL CONNECTED REGIONS OF EASTERN INDONESIA WILL SEE
PARTICULARLY STRONG GAINS FROM IMPROVED
CONNECTIONS.
THE CRITICAL IMPORTANCE OF INFRASTRUCTURE IS ALSO
REFLECTED IN RESPONSES FROM SMALL RURAL ENTERPRISES.
IN A FIRM-LEVEL SURVEY, ROAD ACCESS, THE COST OF
TRANSPORTATION AND THE QUALITY OF ROADS ALL FEATURE
STRONGLY IN THE TOP CONCERNS OF RURAL ENTERPRISES
SURVEYED.


IMPROVING THE QUALITY OF ROADS WOULD BE
ASSOCIATED WITH A RISE IN THE AVERAGE
PROPORTION OF INCOME IN A VILLAGE COMING FROM
NON-FARM ENTERPRISE INCOME AND NON-FARM
SALARIES AND WAGES BY 33 PERCENTAGE POINTS. YET,
ONLY 61 PERCENT OF POOR HOUSEHOLDS HAVE ACCESS
TO ALL YEAR PASSABLE ROADS (WHILE 76 PERCENT OF
ALL-YEAR
NON-POOR HOUSEHOLD ACCESS THESE ROADS).


SOCIAL PROTECTION SYSTEM

THERE IS A NEED TO ESTABLISH A COHERENT AND
COORDINATED SOCIAL PROTECTION SYSTEM THAT
EFFECTIVELY AUGMENTS THE SET OF OPTIONS
HOUSEHOLDS HAVE TO MANAGE SHOCKS AND HELPS
IN THE BROADER POLICY DRIVE TO ELIMINATE
POVERTY.


SIMILAR TO MANY LOWER-INCOME COUNTRIES,
INDONESIA LACKS A STRUCTURED AND COHERENT
SOCIAL PROTECTION SYSTEM. EAST ASIA IN GENERAL
AND INDONESIA IN PARTICULAR RELY LESS ON SOCIAL
PROTECTION INSTRUMENTS RELATIVE TO OTHER
COMPARABLE COUNTRIES.


FROM THE CRISIS TO 2005, INDONESIA’S SOCIAL
PROTECTION SYSTEM WAS CHARACTERIZED PRIMARILY BY
(I) CRISIS-ERA SAFETY NET PROGRAMS; AND (II) LARGE
COMMODITY PRICE SUBSIDIES AND TRANSFERS,
PARTICULARLY THROUGH RICE AND FUEL PRODUCTS.
PRODUCTS
UNIVERSAL COMMODITY PRICE SUBSIDIES MAY BE
CONSIDERED A ‘FIRST GENERATION’ SOCIAL
PROTECTION APPROACH, HAVING BEEN THE INSTRUMENT
OF CHOICE USED BY MANY DEVELOPING COUNTRIES IN THE
1960s AND 1970s
1970s.


THE TARGETED PROGRAMS UNDERTAKEN DURING THE
CRISIS PERIOD MAY BE CONSIDERED AS AN ATTEMPT AT
‘SECOND GENERATION’ TYPE SAFETY NET PROGRAMS.
‘ ’
IN INDONESIA SHOULD BE READY TO MOVE TO A ‘THIRD
GENERATION’ SYSTEM THAT IS MORE COMPREHENSIVE
GENERATION
AND MATCHED TO THE ACTUAL RISKS AND
VULNERABILITIES FACED BY ITS MORE SUSCEPTIBLE
CITIZENS.


INDONESIA’S CRISIS-ERA SOCIAL SAFETY NET
Safety Net Objective
S f t N t Obj ti Specific Program
S ifi P
Food security Special Market Operation (operasi pasar khusus, or OPK) program: sales of
subsidized rice to targeted households, currently known as Raskin.

Employment creation A collection of ‘labor-intensive’ programs executed by various government
departments
Education Scholarships to elementary, secondary and upper secondary school students
and block grants to selected schools
Health Funding for:
Medical services
Operational support for health centers
Medicine and imported medical equipment
Family planning services
Nutrition
Midwife services
Community empowerment Regional Empowerment to Overcome the Impact of Economic Crisis (PDM-
DKE): block grants directly to villages for either public works or subsidized
credit
Source: Sumarto, Suryahadi and Widyanti, 2004

THE OBJECTIVES OF INDONESIA’S CRISIS-ERA SOCIAL SAFETY
NET (JPS) ARE GENERALLY WELL ALIGNED WITH
INTERNATIONALLY RECOGNIZED GOALS OF SOCIAL PROTECTION
POLICY: (I) TO ALLEVIATE THE POVERTY OF THE CURRENT POOR,
BY RAISING THEIR CONSUMPTION LEVEL; (II) TO PREVENT THE
NEAR-POOR
NEAR POOR FROM FALLING INTO POVERTY AND (III) TO HELP
POVERTY;
HOUSEHOLDS—BOTH NEAR-POOR AND NON-POOR—MITIGATE
THE FALL IN INCOME IN THE WAKE OF SHOCKS.
THE THREE OBJECTIVES ARE IN LINE WITH WHAT SOCIAL
PROTECTION SYSTEMS ARE COMMONLY EXPECTED TO ACHIEVE.
HOWEVER, THE CURRENT STRUCTURE OF THE SAFETY NET FAILS
TO DIFFERENTIATE THESE OBJECTIVES.


WHILE THE STRUCTURES OF SOME OF THE COMPONENT
PROGRAMS OF THE SAFETY NET ARE BEST SUITED TO
RAISING THE CONSUMPTION OF THE CURRENT POOR, ,
THEY DO NOT PERFORM WELL IN KEEPING THE NEAR-
POOR OUT OF POVERTY. LOOKING AHEAD, IN EXPLORING
OPTIONS FOR A NEW SOCIAL PROTECTION SYSTEM,
SYSTEM
ALTHOUGH THE THREE ABOVE ARE ADEQUATE, GREATER
CLARITY ON HOW EACH IS BEST PURSUED IS REQUIRED.


MAKING GOVERNMENT WORK FOR THE
POOR

INDONESIA'S PAST EXPERIENCE SHOWS THAT IT
HAS TO MAKE GOVERNMENT WORK FOR THE POOR.
THE HISTORICAL RECORD HERE IS MIXED AT BEST. ON
ONE HAND, HISTORY REINFORCES THE POINT THAT A
STRONG CENTRAL GOVERNMENT FULLY COMMIITED TO
POLICIES THAT REDUCE POVERTY AND WITH THE
TECHNICAL CAPACITY TO FORMULATE AND IMPLEMENT
THESE POLICIES CAN BE KEY TO POVERTY REDUCTION.


ON THE OTHER HAND, HISTORY ALSO TELLS THE STORY OF
HOW WEAK ACCOUNTABILITY AND INSTITUTIONAL CAPACITY
TO DELIVER SERVICES—AND NOT INVESTING IN SUCH
SERVICES AND
CAPACITY—CAN ITSELF UNDERMINE DEVELOPMENT. INDEED,
POOR GOVERNANCE, CAN CAUSE A COLLAPSE IN THE ENTIRE
DEVELOPMENT EFFORT
EFFORT.
MOREOVER, WEAK ACCOUNTABILITY, CAPACITY, AND
INSTITUTIONS AT ALL LEVELS OF GOVERNMENT MAKE THE
TASK OF ‘DELIVERING ON POVERTY REDUCTION’—WHETHER
IT BE THROUGH GROWTH, SPENDING, SOCIAL PROTECTION-
EXTREMELY DIFFICULT.


DESPITE THE STRONG CONNECTIONS THAT WERE
ESTABLISHED BETWEEN THE POOR AND THE
COUNTRY’S GROWTH, THE PROCESS WAS
STRAINED BY THE DYSFUNCTIONALITY OF
GOVERNMENT INSTITUTIONS, ESPECIALLY IN THE
SECTORS AND AT LOWER LEVELS OF
GOVERNMENT.


DECENTRALIZATION CERTAINLY ENHANCES THE
OPPORTUNITY TO IMPROVE GOVERNMENT’S ABILITY TO
DELIVER ON POVERTY REDUCTION BY MOVING
O O UC O O G
DECISION-MAKING POWER CLOSER TO CITIZENS AND
ALLOWING EFFORTS TO BE TAILORED TO REGIONAL
ISSUES.
ISSUES
BUT, AT LEAST INITIALLY, DECENTRALIZATION ALSO
MAKES THE TASK MORE COMPLEX AND INDONESIA
NEEDS TO WORK ON SORTING OUT THE SPECIFICS OF
ITS DECENTRALIZATION FRAMEWORK.


THIS REFORM HAS CREATED ENORMOUS
OPPORTUNITIES FOR LOCAL INITIATIVES IN TACKLING
LOCAL PROBLEMS, AND DESIGNING DEVELOPMENT
STRATEGIES THAT BEST MEET LOCAL NEEDS.
SO A KEY QUESTION FOR POVERTY REDUCTION THEN
SO,
IS: HOW CAN INDONESIA BETTER MAKE
GOVERNMENT WORK FOR THE POOR?


GOOD GOVERNANCE IS A CRITICAL INGREDIENT FOR
SUCCESSFUL POVERTY REDUCTION. IT IS NOT JUST
REDUCTION
THE LEVEL OF SPENDING OR THE FOCUS OF THAT
SPENDING THAT DETERMINES IMPACT, BUT ALSO THE
WAY GOVERNMENT SPENDS THAT MATTERS: HOW
DECISIONS ARE MADE, HOW EFFECTIVELY THE FUNDS
MOVE,
MOVE HOW DELIVERY PROCESSES ARE ALIGNED AND
HOW WELL PROGRAMS ARE MONITORED.


THREE KEY AREAS OF GOVERNMENT ACTION

Incentives
I ti Clarity f
Cl it of
and Skills Functions
Better align policy, planning, and budgeting
systems

Strengthen institutional accountability

Enhance assessment and monitoring of poverty
reduction

Results
Information,
Information
Orientation
Participation
and
Consultation

POLICY, PLANNING AND BUDGETING SYSTEMS

THE ALIGNMENT OF POLICY, PLANNING AND BUDGETING
,
SYSTEMS HAS A MAJOR IMPACT UPON POVERTY REDUCTION
OUTCOMES. THE SYSTEMS FOR PLANNING AND BUDGETING AT
THE NATIONAL LEVEL HAVE FACED CHALLENGES.
MOREOVER, SINCE DECENTRALIZATION, IT HAS BECOME MORE
COMPLEX TO COORDINATE BOTH THESE PROCESSES AMONG
DIFFERENT TIERS OF GOVERNMENT. THE RESULT HAS BEEN A
GOVERNMENT
LESS PREDICTABLE ENVIRONMENT FOR SECTOR AND LOCAL
SPENDING CHARACTERIZED BY AD HOC DECISION-MAKING AND
BOTH OVERLAPS AND GAPS IN EFFORTS TO ALLEVIATE POVERTY
POVERTY.


AT PRESENT, THE GEOGRAPHIC ALLOCATION OF REVENUE TO
PRESENT
REGIONS IN INDONESIA IS NOT PRO-POOR. ALTHOUGH ABOUT
ONE-THIRD OF CENTRAL GOVERNMENT SPENDING IS
ALLOCATED GEOGRAPHICALLY ACROSS INDONESIA THROUGH
TRANSFER PAYMENTS TO SUB-NATIONAL GOVERNMENTS, THIS
FUNDING IS NOT EFFECTIVELY USED FOR POVERTY.
GIVEN THAT 40 PERCENT OF TOTAL PUBLIC SPENDING IS NOW
THE RESPONSIBILITY OF SUB-NATIONAL GOVERNMENTS,
DISTRICT AND MUNICIPAL SPENDING PATTERNS AND
PROCESSES ARE CRITICAL. THE PRO-POOR FOCUS OF PUBLIC
SPENDING IN INDONESIA IS CONTINGENT ON THE
PERFORMANCE OF LOWER LEVELS OF LOCAL GOVERNMENT, ,
AND EXPERIENCE SINCE DECENTRALIZATION PROVIDES SOME
SOBERING LESSONS.


TO DATE, PLANNING AND BUDGETING AT THE PROVINCIAL
DATE
AND DISTRICT LEVELS HAVE NOT BEEN AS PRO-POOR AS
THEY COULD HAVE BEEN, ALTHOUGH TOTAL SPENDING ON
HEALTH AND EDUCATION IN RICHER PROVINCES
INCREASED IN THE POST-DECENTRALIZATION PERIOD OF
2000-03. EVIDENCE FROM THE EDUCATION SECTOR, FOR
,
EXAMPLE, SUGGESTS THAT INCREASED INEQUALITY IN
SPENDING STEMS FROM SUB-NATIONAL SPENDING
BECOMING MORE UNEQUAL


CLARITY OF FUNCTIONS BETWEEN CENTRAL AND
SUB-NATIONAL GOVERNMENT UNITS

MANY OF THE CURRENT ARRANGEMENTS GOVERNING PUBLIC
SERVICE PROVISION ARE UNCLEAR ON WHAT PROVIDERS ARE TO
DELIVER AND HOW MUCH THEY ARE TO RECEIVE FOR DOING SO.
THE FINANCING AND PROVISION OF SERVICES IS BASED ON
BUREAUCRATIC INSTRUCTIONS, PROVIDING RELATIVELY LITTLE
AUTONOMY TO PROVIDERS OR BENEFICIARIES.
A TYPICAL GOVERNMENT HEALTH CLINIC (PUSKESMAS) HAS
EIGHT SOURCES OF CASH INCOME AND 34 OPERATIONAL
BUDGETS, MANY OF WHICH ARE PROVIDED IN KIND BY THE
CENTRAL OR LOCAL GOVERNMENT (WORLD BANK, 2005B). THE
( , )
SYSTEM IS CHARACTERIZED BY OVERLAP SAND GAPS, AND IT IS
INEVITABLY THE POOREST WHO FALL THROUGH SUCH A
COMPLEX SYSTEM.


LACK OF CLARITY REGARDING CENTRAL AND LOCAL
FUNCTIONS IMPACTS DIRECTLY UPON THE PROVISION OF
EDUCATION AND HEALTH SERVICES. FOR EXAMPLE,
TEACHER MANAGEMENT—IN THE FORM OF DECISIONS
REGARDING RECRUITMENT, DEPLOYMENT, PERFORMANCE
EVALUATION,
EVALUATION AND PAY—ARE MADE AT DIFFERENT LEVELS
OF GOVERNMENT. HIRING DECISIONS ARE NOW
DECENTRALIZED, BUT COMPENSATION STANDARDS ARE
STILL CENTRALIZED. SIMILARLY, IT IS NOT CLEAR WHO
HAS THE AUTHORITY TO OPEN AND CLOSE HEALTH
FACILITIES.
FACILITIES


THE CONSTRAINTS AT THE SUB NATIONAL LEVEL ARE
SUB-NATIONAL
SIMILAR TO THOSE AT THE NATIONAL LEVEL, ONLY
MAGNIFIED DUE TO LOWER CAPACITY AND VARIABLE
LEVELS OF LOCAL POLITICAL COMMITMENT. TO THE EXTENT
THAT DECENTRALIZED SPENDING IS EXPECTED TO MORE
DIRECTLY ADDRESS THE NEEDS OF LOCAL COMMUNITIES,
THE PLANNING AND BUDGETING PROCESS AT THE LOCAL
LEVEL IS ALL THE MORE IMPORTANT.
IMPORTANT
STRUCTURAL PROBLEMS WITH DISTRICT/MUNICIPAL LEVEL
PLANNING AND BUDGETING SYSTEMS ARE COMPOUNDED BY
THE WEAK CAPACITY IN LOCAL GOVERNMENT TO MANAGE
THESE PROCESSES.
1) PLANS AND BUDGETS ARE NOT USUALLY SUPPORTED BY
LOCAL LEVEL
LOCAL-LEVEL POVERTY DIAGNOSTICS AND WHERE
AND,
DIAGNOSTICS DO EXIST, THESE ARE NOT USED FOR
DECISION-MAKING.


2) PREPARATION OF MEDIUM-TERM PLANS AT THE LOCAL
LEVEL HAVE BEEN FREQUENTLY ‘CONTRACTED OUT’ TO
UNIVERSITIES OR OTHER ORGANIZATIONS WITH THE
RESULT THAT THEY ARE COMPLETED FOR OFFICIAL
PURPOSES BUT HAVE LITTLE OWNERSHIP BY
GOVERNMENT OFFICIALS
OFFICIALS.
3) THE DISCONNECT BETWEEN PLANS (PREPARED BY THE
LOCAL PLANNING OFFICER) AND BUDGETS (PREPARED
BY FINANCE UNITS) IS EQUALLY PROBLEMATIC AT THE
LOCAL LEVEL.


INSTITUTIONAL ACCOUNTABILITY

THE CONFUSION OVER FINANCING AND RESPONSIBILITIES
LIES AT THE HEART OF THE PROBLEM OF EFFECTIVE AND
COORDINATED SERVICE DELIVERY (WALLACE ET AL, 2006).
IN ADDITION, HOWEVER, LOCAL GOVERNMENTS HAVE
ONLY JUST STARTED TO CONSIDER THE BEST WAYS TO
DELIVER THE SERVICES FOR WHICH THEY ARE
RESPONSIBLE.


BLOCKAGES IN SERVICE DELIVERY OCCUR ON BOTH THE
DEMAND AND THE SUPPLY SIDES: THE GOVERNMENT AND
DELEGATED PROVIDERS DO NOT ALWAYS PERFORM THEIR
FUNCTIONS,
FUNCTIONS AND THE USERS OFTEN DO NOT DEMAND
ACCOUNTABILITY FROM THEM.
THERE ARE A NUMBER OF FACTORS CHARACTERIZING
SERVICE DELIVERY OVER A RANGE OF SECTORS IN
INDONESIA:
1) BASIC SERVICES (HEALTH, EDUCATION AND WATER, FOR
( , ,
INSTANCE) ARE PREDOMINATELY PUBLIC;
2) THEY ARE POORLY COORDINATED ACROSS A RANGE OF
AGENCIES AND TIERS OF GOVERNMENT;
3) AND, THESE PUBLIC AGENCIES ARE NEITHER ACCOUNTABLE FOR
THE QUALITY OF THE SERVICE THEY DELIVER, NOR FOR THE
OUTCOMES OF THEIR INTERVENTIONS.


CIVIL SERVICE FUNCTIONS AND
CONSTRAINTS
THE STRENGTHS AND WEAKNESSES OF THE CIVIL SERVICE IN
INDONESIA HAVE BEEN EXTENSIVELY ANALYZED, AND THERE
IS BROAD AGREEMENT THAT SIGNIFICANT CHALLENGES EXIST
IN REFORMING THE CIVIL SERVICE.
THE MASSIVE GROWTH OF THE CIVIL SERVICE
REFLECTED THE POLICY EMPHASIS ON SERVICE
DELIVERY AND INFRASTRUCTURE DEVELOPMENT
(ROHDEWOHLD, 1995), AND THE RECRUITMENT OF
TEACHERS, DOCTORS AND ENGINEERS INCREASED THE
OVERALL SIZE OF THE CIVIL SERVICE FROM 525,000 IN
1970 TO 2 MILLION IN 1990 AND OVER 4 MILLION IN
1993.


THIS REPRESENTED A FIVE-FOLD INCREASE
FROM 4.1 TO 21.8 STAFF PER THOUSAND
INHABITANTS BETWEEN 1960 AND 1993
(HOFMAN, 2004). THE PROBLEM WAS NOT
SIZE BUT QUALITY
QUALITY.
THREE PRIORITY AREAS THAT WILL DRIVE
REFORMS: IMPROVING RULES AND RESTRAINTS,
,
ENHANCING VOICE, AND STIMULATING
COMPETITIVE PRESSURES.


RULES AND RESTRAINTS

WEAK INCENTIVES AND A RIGID PERSONNEL SYSTEM MAKE
SUCCESSFUL PROGRAM IMPLEMENTATION DIFFICULT. MANAGERS
ARE IN MANY CASES NOT ACCOUNTABLE FOR THE OUTPUTS
ASSOCIATED WITH SERVICE DELIVERY. THE LACK OF
ACCOUNTABILITY IS EXACERBATED BY A CLOSED PROMOTION
SYSTEM AND THE LACK OF A PERFORMANCE-LINKED SALARY
PERFORMANCE LINKED
STRUCTURE.
PROMOTIONS ARE BASED ON SENIORITY, THERE IS NO LATERAL
ENTRY (PROMOTING COMPETITION) AND, AS A CONSEQUENCE,
AND CONSEQUENCE
THERE ARE FEW INCENTIVES TO FOCUS ON RESULTS. THIS LACK
OF ACCOUNTABILITY CREATES FEW INCENTIVES TO, FOR
EXAMPLE, IMPLEMENT A POVERTY REDUCTION MANDATE, OR TO
MOBILIZE STAFF TO ENGAGE IN POVERTY REDUCTION
INITIATIVES.


FEW WITHIN THE CIVIL SERVICE SEE THE BENEFITS
OF STRIVING FOR RESULTS IN TERMS OF POVERTY
REDUCTION. INCENTIVES TO PERFORM DEPEND ON
REWARDS (PAY AND ALLOWANCES), AS WELL AS
INFORMAL INCENTIVES THAT COME WITH A
MERITOCRACY (SUCH AS RECOGNITION FROM
SUPERVISORS AND PEERS) AND PUNISHMENT FOR
)
POOR PERFORMANCE OR FOR BREAKING THE RULES.


THE RIGIDITY OF THE STAFFING SYSTEM HINDERS THE
FLEXIBLE HIRING, TRANSFER AND PROMOTION OF GOOD
PEOPLE.
PEOPLE FOLLOWING DECENTRALIZATION
DECENTRALIZATION,
OVERSTAFFING HAS BECOME MOST COMMON AT THE
LOCAL LEVEL, WITH AN IMBALANCE FAVORING
LEVEL
GENERALISTS OVER MORE NEEDED TECHNICAL STAFF.
TRANSFERS ARE THE EXCEPTION RATHER THAN THE
RULE AND CIVIL SERVANTS WITH ILL-ADAPTED SKILLS
FOR THEIR POSITIONS CAN STAY PUT FOR YEARS.


THE INTERGOVERNMENTAL TRANSFER SYSTEM NOW
ENCOURAGES LOCAL GOVERNMENTS NOT TO REDUCE THE
NUMBER OF CIVIL SERVANTS. THE GENERAL ALLOCATION
FUNDS (DAU) ARE ALLOCATED TO PAY FOR STAFF AND THE
CURRENT FORMULA MEANS THAT IF REGIONAL
GOVERNMENTS REDUCE THEIR STAFF NUMBERS, THEIR
GRANTS WILL ALSO BE REDUCED, RESULTING IN A STRONG
DISINCENTIVE FOR THESE GOVERNMENTS TO CUT THEIR
STAFF.


THE BASICS OF BETTER STAFFING

OVERSTAFFING IN FRONTLINE INSTITUTIONS CAN PARTIALLY BE
DEALT WITH BY MOVING EXCESS PERSONNEL TEMPORARILY TO A
‘POOL OF STAFF IN WAITING’. ‘POOL’ STAFF CAN RE-APPLY FOR
POSITIONS ONCE A RE ORGANIZATION HAS BEEN COMPLETED AND
RE-ORGANIZATION
CLEAR JOB DESCRIPTIONS ARE IN PLACE. IF SKILL-SETS MATCH AND
STAFF ARE TRAINABLE, EMPLOYEES CAN RETURN TO THE MAINSTREAM
OF THE ORGANIZATION. THOSE WITHOUT POTENTIAL FOR RE-
DEPLOYMENT CAN BE LEFT IN THE ‘POOL’ OR ENCOURAGED TO SEEK
OPPORTUNITIES OUTSIDE GOVERNMENT. IF VOLUNTARY DEPARTURES
DO NOT OCCUR, IT IS STILL BETTER TO KEEP SUCH STAFF IN A ‘POOL’.
ENSURE THAT RECRUITMENT AND PROMOTION ARE OPEN AND
TRANSPARENT, AND BASED ON CLEAR JOB DESCRIPTIONS.
ALTHOUGH CANDIDATES PUT FORWARD FOR PROMOTION STILL HAVE TO
FULFILL CERTAIN RANK CRITERIA, THE GOVERNMENT CAN USE
SPECIALIZED COMPANIES TO CARRY OUT TESTS AND ASSESSMENTS OF
CANDIDATES FOR RECRUITMENT AND PROMOTION TO RAISE
PROFESSIONALISM.
PROFESSIONALISM THE DRAFTING OF CLEAR JOB DESCRIPTIONS FOR
THOSE RECRUITED OR PROMOTED IS ALSO IMPORTANT BECAUSE IT
CLARIFIES AND SPECIFIES THEIR TASKS, ENABLES PERFORMANCE
EVALUATION AND INTRODUCES PERFORMANCE-BASED INCENTIVE
SCHEMES.


S
SET PROPER TERMS AND CO
O S O S O CONTRACT S
CONDITIONS FOR CO C STAFF. CONTRACTING
CO C G
IS AT PRESENT USED TO HIRE A LARGE NUMBER OF LOW-SKILLED STAFF IN
SUPPORT FUNCTIONS, BUT IF USED WISELY IT CAN ALSO BE USED TO IMPROVE
THE SKILLS OF THE CIVIL SERVICE. THIS WILL EASE THE CONSTRAINTS POSED BY
THE RIGID CIVIL-SERVICE RULES. CONTRACT EMPLOYMENT CAN ALSO INTRODUCE
AN ELEMENT OF FLEXIBILITY WITHIN THE LOCAL HUMAN-RESOURCES PLANNING
SYSTEM.
PLAN THE USE OF HUMAN RESOURCES WISELY. BUILDING A DATABASE FOR
HUMAN-RESOURCE PLANNING AND MANAGEMENT IS THE BASIS FOR PLANNING OF
ORGANIZATIONAL AND PERSONNEL REFORMS. A MODERN DATABASE IS A
TRANSPARENT AND ALTERNATIVE HUMAN-RESOURCE PLANNING AND MANAGEMENT
TOOL AND IT WILL ENABLE REGIONS TO DO MORE INDEPENDENT AND TAILORED
PLANNING OF PERSONNEL ACTIONS.
DEVELOP PREDICTABLE INCENTIVES FOR GOOD PERFORMANCE AND
SANCTIONS FOR BAD PERFORMANCE. WHILE SCHEMES TO ENFORCE
PERFORMANCE
ATTENDANCE AND DISCIPLINE ABOUND IN FRONTLINE INSTITUTIONS,
GOVERNMENT SHOULD ADD PERFORMANCE-BASED INCENTIVES EITHER ON A
GROUP OR INDIVIDUAL BASIS. REVAMPING POLICIES SO THAT THE PROVISION OF
TRAINING OPPORTUNITIES AND MONETARY REWARDS PROMOTE GOOD
PERFORMANCE AND A REGIME OF SANCTIONS DETER BAD PERFORMANCE WOULD
GO A LONG WAY TOWARDS PROVIDING BETTER SERVICES. SUCH A SYSTEM
SHOULD BE TRANSPARENT AND MONITORED CLOSELY.


CITIZEN AND CIVIL SOCIETY VOICE

INVOLVING END-USERS AND POOR CITIZENS IN DEVELOPMENT
EFFORTS IS CRITICAL, AS IT IMPROVES ACCOUNTABILITY AND THE
LIKELIHOOD THAT INTERVENTIONS WILL BE DESIGNED TO MEET
DEMAND. THE ROLE OF COMMUNITIES IN POVERTY REDUCTION
PROGRAMS CAN VARY BOTH IN TERMS OF THE DEGREE OF THEIR
INVOLVEMENT AND THE STAGE AT WHICH THEY BECOME INVOLVED
IN THE PROCESS (PROJECT IDENTIFICATION, PLANNING, BUDGETING
AND PROGRAMMING, MONITORING, DELIVERY AND
IMPLEMENTATION).
LOCAL GOVERNMENTS CAN SUPPORT USERS TO BECOME INVOLVED
IN SERVICE DELIVERY BY PROMOTING THEIR PARTICIPATION IN THE
ACTUAL DECISION-MAKING OVER THEIR PARTICIPATION,AND BY
APPROPRIATELY ASSIGNING RESOURCES TO COMMUNITIES OR TO
PARTNERSHIPS BETWEEN PROVIDERS AND COMMUNITIES.


CURRENTLY, THE PARADIGM OF AN AUTHORITARIAN
STATE WITH UPWARD ACCOUNTABILITY STILL REMAINS
STRONG: CITIZENS HAVE A VOICE, BUT LACK THE
POWER TO ENFORCE THE ACCOUNTABILITY OF LAW-
MAKERS,
MAKERS OR TACKLE THE BUREAUCRACY. OVERSIGHT BY
BUREAUCRACY
AN ACTIVE CIVIL SOCIETY AND POLITICAL
REPRESENTATIVES IS ESSENTIAL, BUT IS CURRENTLY
MISSING IN THE TRIANGLE OF POLICY MAKER
POLICY-MAKER–
PROVIDER–CITIZEN ACCOUNTABILITY.


CIVIL-SOCIETY ORGANIZATIONS HAVE DEVELOPED
CONSIDERABLY SINCE DECENTRALIZATION, AND CORRUPTION
WATCHDOGS AND CONSUMER ASSOCIATIONS ARE EMERGING
THAT WILL INCREASINGLY ACT AS A CHECK ON GOVERNMENT
BEHAVIOR. HOWEVER, A GREAT DEAL OF SCOPE EXISTS FOR
FURTHER EMPOWERING CIVIL SOCIETY AND THE PUBLIC.
PUBLIC
THE EXPERIENCE WITH THE SUB-DISTRICT (KECAMATAN)
DEVELOPMENT PROGRAM (KDP) SUGGESTS THAT
EMPOWERING COMMUNITIES TO MONITOR DEVELOPMENT
PERFORMANCE AND FACILITATING THIS PROCESS THROUGH
CIVIL SOCIETY AND MEDIA COVERAGE HAVE HELPED
MODERATE CORRUPTION.
CORRUPTION


THREE FACTORS IMPACT UPON THE ABILITY OF CITIZENS TO
EFFECTIVELY EXERCISE THEIR VOICE. FIRST, THE DEGREE TO
WHICH CITIZENS ARE INVOLVED IN AND INFLUENCE
PLANNING AND BUDGETING BY THEIR LOCAL GOVERNMENTS;
SECOND, GIVING COMMUNITIES THE POWER TO DELIVER
SOME SERVICES THEMSELVES (FOR EXAMPLE, SMALL-SCALE
EXAMPLE SMALL SCALE
INFRASTRUCTURE); AND THIRD, THE PROVISION OF
VOUCHERS TO THE POOR SO THAT THEY ARE FINANCIALLY
EMPOWERED TO MAKE CHOICES.


COMPETITIVE PRESSURES

THE PRIVATE SECTOR CAN BOTH PROVIDE COMPETITION TO THE PUBLIC
SECTOR,
SECTOR AND ALSO DELIVER SOME SERVICES MORE EFFICIENTLY AND
EFFECTIVELY THAN PUBLIC SERVICE PROVIDERS. MUCH OF THE
DIALOGUE REGARDING GOVERNMENT SERVICES AND ADMINISTRATION
FOCUSES UPON HOW TO IMPROVE EFFICIENCY AND EFFECTIVENESS
THROUGH INTERNAL REFORMS. HOWEVER, EQUAL ATTENTION SHOULD
BE PAID TO USE OF THE PRIVATE SECTOR.
THE PRIVATE SECTOR IS NOT ONLY MORE COST EFFECTIVE IN
DELIVERING SERVICES IN SOME CASES, BUT THE MERE EXISTENCE OF
CASES
PRIVATE SECTOR COMPETITION CAN, UNDER THE RIGHT CONDITIONS,
STIMULATE THE PUBLIC SECTOR TO DELIVER HIGHER QUALITY SERVICES
TO CITIZENS. IN ADDITION, THERE ARE SOME TASKS THAT THE PUBLIC
SECTOR CAN SUBCONTRACT TO THE PRIVATE SECTOR, AS THESE TASKS
DO NOT FALL WITHIN THE CORE RESPONSIBILITIES AND/OR
COMPETENCIES OF THE PUBLIC SECTOR.


MONITORING AND ASSESSMENT
TO REDUCE POVERTY MORE EFFECTIVELY, IT IS NECESSARY TO
EFFECTIVELY
BUILD MORE KNOWLEDGE AND INFORMATION ON THE NATURE
AND DETERMINANTS OF POVERTY AND THEN DEVELOP
POLICIES AND PROGRAMS THAT RESPOND TO EMPIRICAL
EVIDENCE.
EVIDENCE
TO DATE, THE GOVERNMENT HAS ASSESSED POVERTY
THROUGH ANNUAL HOUSEHOLD SURVEYS THAT HAVE
PROVIDED VERY SOUND QUANTITATIVE DATA AT THE
NATIONAL LEVEL. INDONESIA HAS BEEN SUCCESSFUL IN
COLLECTING GOOD QUALITY MONETARY INDICATORS, AND
HAS ALSO DEVELOPED SOME USEFUL NON-MONETARY
INDICATORS OF POVERTY ACROSS THE REGIONS THROUGH
THE SUSENAS HOUSEHOLD SURVEY. THE NATIONAL SOCIO-
ECONOMIC SURVEY (SURVEI SOSIAL EKONOMI NASIONAL, OR
SUSENAS),
SUSENAS) INITIATED IN 1963-64.
1963 64
BUT THEY NEED TO BE IMPROVED.


THE CHALLENGES

• For some important non-monetary indicators, such as infant mortality, maternal
mortality and nutritional status, data compiled by the Indonesian Demographic and
Health Survey (DHS) are not collected on an annual basis and in most cases are only
aggregated at the national level.
level
• Regional coverage of data is lacking. Unfortunately, most household surveys are
only reliable at the regional/provincial level, but program design and budget allocations
(including the DAK) require a more precise definition (below the kabupaten level) of
where the poor reside.
• Quantitative data are not supported by systematic qualitative assessment.
Indonesia has some experience in participatory poverty assessment. However, this is far
from widespread and is not mainstreamed at the local levels of government or in national
approaches to poverty assessment.
• Routine and administrative data at the district/municipal level are lacking. The
lacking
regional branches (Kanwil/Kandep) of the central government that previously collected
and reported these data no longer exist. While some districts now collect data, these are
not necessarily fed into national-level information systems.
• Data collection efforts are not well coordinated across departments. There is no
system to coordinate the collection of data by the BPS and line ministries. Incentives tend
to foster independent data collection efforts (for example, data associated with individual
programs or projects) and there are gaps in the development of the sorts of poverty
diagnostics that are needed.


RECOMMENDATIONS

1. MAKE BETTER USE OF EXISTING AND EMERGING
DATA SOURCES TO BOTH BETTER UNDERSTAND
POVERTY AND PROGRAM IMPACT
2. LINK MONITORING FINDINGS MORE EFFECTIVELY
WITH FEEDBACK TO, AND DESIGN OF, SECTORAL
PROGRAMS AND FOR USE BY LOCAL GOVERNMENTS


CONCLUSION

FIRST, AS IT GROWS, INDONESIA’S ECONOMY
IS BEING TRANSFORMED FROM ONE WITH
AGRICULTURE AS ITS MAINSTAY TO ONE THAT
WILL RELY MORE ON SERVICES AND
INDUSTRY. THE PRIORITY FOR MAKING THIS
GROWTH WORK FOR THE POOR IS A
FRIENDLIER RURAL INVESTMENT CLIMATE
CLIMATE.


SECOND, AS DEMOCRACY TAKES HOLD, THE
GOVERNMENT IS BEING TRANSFORMED FROM ONE
WHERE SOCIAL SERVICES WERE DELIVERED
CENTRALLY TO ONE THAT WILL RELY MORE ON
LOCAL GOVERNMENTS. THE PRIORITY FOR MAKING
SERVICES WORK FOR THE POOR IS STRONGER
CAPACITY OF LOCAL GOVERNMENTS AND BETTER
INCENTIVES FOR SERVICE PROVIDERS.


THIRD AS INDONESIA INTEGRATES
THIRD,
INTERNATIONALLY, ITS SYSTEM OF SOCIAL
PROTECTION NEEDS TO BE MODERNIZED SO THAT
INDONESIA IS BOTH SOCIALLY EQUITABLE AND
ECONOMICALLY COMPETITIVE.
FOURTH, THE PRIORITY FOR MAKING PUBLIC
,
EXPENDITURE WORK FOR THE POOR IS TO SHIFT
FROM INTERVENING IN MARKETS FOR COMMODITIES
THAT THE POOR CONSUME (SUCH AS FUEL AND
RICE) TO PROVIDING TARGETED INCOME SUPPORT
TO POOR HOUSEHOLDS, AND USING THE FISCAL
SPACE TO IMPROVE CRITICAL SERVICES SUCH AS
EDUCATION, HEALTH, SAFE WATER, AND
SANITATION.


MAKING GOVERNMENT WORK FOR THE POOR -THE CASE OF INDONESIA

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MAKING GOVERNMENT WORK FOR THE POOR -THE CASE OF INDONESIA