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Bulletin of Indonesian Economic Studies
ISSN: 0007-4918 (Print) 1472-7234 (Online) Journal homepage: http://www.tandfonline.com/loi/cbie20
Anti-Poverty Programs in Indonesia
Anne Daly & George Fane
To cite this article: Anne Daly & George Fane (2002) Anti-Poverty Programs in Indonesia,
Bulletin of Indonesian Economic Studies, 38:3, 309-329, DOI: 10.1080/00074910215535
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Date: 19 January 2016, At: 20:27
Bulletin of Indonesian Economic Studies, Vol. 38, No. 3, 2002: 309–29
ANTI-POVERTY PROGRAMS IN INDONESIA
Anne Daly
University of Canberra
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George Fane*
Australian National University
Between 1994/95 and 1997/98, Indonesia’s spending on anti-poverty programs grew
from 0.1% to 0.3% of GDP. The introduction of the ‘social safety net’ raised antipoverty spending to 1.4% of GDP in 1998/99 and changed its main focus from job
creation schemes, financed mainly by loans and grants to small firms and community groups, to in-kind subsidies for rice, public health care, scholarships for children in poor families and grants to schools in poor areas. The most accurately targeted
program was health care, which covered twice as many people in the two poorest
deciles as in the remaining eight. For most other programs, this targeting ratio was
only about 1.5. We argue that the education and health care programs were the most
successful, and doubt that the rice subsidy, job creation and loans schemes were
worthwhile.
INTRODUCTION
This paper has three objectives: to describe Indonesia’s main anti-poverty
programs and summarise government
spending on them, to survey research on
the extent to which they have reached
their target groups and to draw policy
conclusions. The third objective is much
the most difficult, and the policy conclusions we draw in the final section are
correspondingly tentative.
We define ‘anti-poverty programs’ to
be those whose benefits are specifically
targeted at the poor. We draw the line
between ‘targeted at the poor’ and ‘not
targeted at the poor’ in such a way that
Indonesia’s anti-poverty programs are
those that were part of the ‘social safety
net’ (SSN) introduced in 1998, the similar programs that preceded the SSN on
a much smaller scale, and those that replaced it in 2001.
Programs that benefit the poor can
take any of the following forms:
(1) cash transfer schemes in which
the net receipts are phased out as income rises;
(2) benefits in kind of rationed and
subsidised amounts of ‘essential’
goods to people below some specified
poverty line (‘essential’ goods are
those that make up a relatively large
proportion of the total consumption
of the poor, such as kerosene, rice,
health care and primary education);
(3) job creation schemes for unskilled workers;
(4) universally available price subsidies, with no rationing, for essential
goods.
In industrial countries, cash transfers
(type 1) are often used to implement the
most important social welfare programs—such as unemployment and
sickness benefits, age and disability pensions and child support. However, cash
transfers are usually of little or no im-
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© 2002 Indonesia Project ANU
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310
portance in most developing countries,
which lack both the bureaucratic apparatus to administer such blanket coverage schemes and the revenues to pay for
them. Instead, developing countries often use government agencies, stateowned firms, or government controlled
clinics and schools to provide essential
goods. If benefits in kind are restricted
to the poor (type 2), then the programs
come within our definition of antipoverty programs; however, if the quantities that each household is allowed to
buy are not phased out as income rises
(type 4), the schemes are outside our
definition of anti-poverty programs.
Examples of this latter type include the
Indonesian government’s fuel price subsidies and its provision of universal free,
or highly subsidised, health care and
basic education.
Job creation schemes (type 3) differ
from pure price subsidies (type 4) by
raising the price of something that the
poor typically sell (unskilled labour),
rather than reducing the price of things
that they typically buy. Besides raising
the incomes of the poor, these schemes
usually improve public infrastructure in
poor areas. One can debate whether job
creation schemes are targeted to the
poor, or are universally available to all
sellers of unskilled labour, many of
whom are members of families above
the poverty line. We classify Indonesia’s
job creation schemes as anti-poverty
programs because attempts were made
to locate them in poor areas and to employ mainly poor people. Job creation
schemes and rationed and targeted benefits in kind therefore provide the main
examples of anti-poverty programs in
Indonesia.
Table 1 gives a summary of government spending by type of anti-poverty
program, as defined above, and table 2
shows the size of the programs relative
to total government anti-poverty spend-
Anne Daly and George Fane
ing. The individual schemes are identified in the body of table 1 and in the
notes to it. The most important individual schemes are briefly described in
the next section. The section that follows
it summarises the development of antipoverty programs and Indonesia’s successes and failures in reducing poverty.
We then summarise research on the targeting of the main schemes and finally
draw policy conclusions.
INDONESIA’S MAIN
ANTI-POVERTY SCHEMES
Cash Transfers
The only time Indonesia has used cash
transfers was in October–December 2000
when, in partial fulfilment of conditions
stipulated in its January 2000 letter of
intent to the IMF, the government reduced domestic fuel price subsidies and
partially compensated the poor by allocating Rp 800 billion from the resulting
budgetary savings to finance three antipoverty programs, one of which aimed
to provide the poorest 6.7 million families with Rp 30,000 per month (SMERU
2001). Data previously gathered by the
National Fam ily Planning Agency
(BKKBN) were used to try to define and
identify eligible households, but the program proved very difficult to administer and was discontinued after three
months.
Rationed and Targeted
Benefits in Kind
Rice. In terms of expenditure, the most
important of Indonesia’s targeted
schemes providing rationed benefits in
kind is the subsidised rice program
OPK (Operasi Pasar Khusus, Special
Market Operations), which was introduced partly in response to the economic crisis and partly in response to
the drought that affected many parts of
eastern Indonesia in 1997–98. It was
therefore targeted at poor villages and
Anti-poverty Programs in Indonesia
311
TABLE 1 Expenditure on Anti-poverty Programs as a Percentage of Total Central Government
Expenditure, 1994/95–2000 a
94/95
95/96
96/97
97/98
98/99
99/00
Cash transfers
0.11
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Benefits in kind
Subsidised rice (OPK)
Health care & nutrition
Education
Job creation (including
infrastructure & loans)
0.61
IDT
0.59
KDP
UPP
PDM–DKE
Village & urban infrastructure
Labour intensive (PK)
Loan schemes
0.02
Other
Total
0.61
Memo items
Total anti-poverty
programs (Rp trillion)
Total anti-poverty
programs (% of GDP)
2000b
1.37
0.61
0.49
0.69
0.16
0.33
0.34
0.36
1.21
0.53
1.27
0.13
5.73
3.70
0.97
1.06
5.14
3.14
1.16
0.84
2.96
1.22
0.99
0.75
3.94
1.87
2.58
0.22
0.33
0.04
0.40
0.51
1.96
1.16
0.61
1.01
0.46
0.49
9.67
0.48
0.12
7.01
0.29
0.28
0.24
0.43
0.22
0.92
0.20
5.65
1.54
1.98
14.24
13.95
10.35
0.28
0.29
1.39
1.23
1.05
0.33
0.26
0.61
0.43
0.43
0.53
1.37
1.70
0.43
1.07
0.11
0.23
a
A brief indication of the programs included under each heading is given below. Full details
(including explanations of the acronyms used) can be obtained from a spreadsheet available
at: http://economics.anu.edu.au/staff/fane/fane.html (go to: ‘poverty’, and double click
on: ‘Daly & Fane, tables 1 and 2’).
Cash transfers are those under the fuel subsidy replacement program.
IDT, KDP and UPP: defined in text.
PDM–DKE: Regional Empowerment
Program to Alleviate the Crisis (a village credit
scheme).
Village and urban infrastructure: P3DT; P2MPD; and the village infrastructure program
under the fuel subsidy replacement program.
Labour intensive: three PK (padat karya) programs; two programs to allevia te
unemployment; and the program to alleviate the drought and manpower situation.
Loan schemes: four programs financed through Bank Rakyat Indonesia; two financed by
Bank Indonesia; one financed by BKSN; the TPSP–KUD program financed by the Ministry
of Cooperatives; and the micro-finance facility under the fuel subsidy replacement program.
Other: PEMD; and three programs to improve food production under the SSN.
b
Up to and including 1999/2000, Indonesia’s fiscal year ran from 1 April to 31 March. The
fiscal year 2000 was a transitional one that ran from 1 April to 31 December. As of 2001, the
Indonesian fiscal year coincides with the calendar year.
Sources: National budget data: see table 4; other data: Bappenas (National Planning Agency).
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312
to those in drought affected areas. The
rice was acquired centrally by the national logistics agency (Bulog) and transported to distribution points throughout
the country. The government originally
intended that each of the 8 million
households in the poorest group, as indicated by BKKBN data, should receive
10 kilograms of medium quality rice per
month at Rp 1,000/kg, when the market price was Rp 2,500–3,000/kg (Sumarto, Suryahadi and Widyanti 2001).
The benefit per household was therefore
about Rp 15,000–20,000 per month. This
is about 5% of the total expenditure of a
household of four people at the official
poverty line.1 The target allocation per
household was later doubled to 20 kg
per month and the entitlement was extended to include the 9.4 million households in the second poorest group, as
indicated by the BKKBN data. In April
2000 the allocation was changed again,
to between 10 and 20 kg per household
per month. In practice, as described
later, coverage and allocation per household were well below these targets.
Scholarships and School Grants. The
recession of the late 1980s had been associated with a decline in school enrolments and there was official concern in
1998 that this should not be repeated.
Therefore, before the beginning of the
school year in late August 1998, the
government, the World Bank and the
ADB (Asian Development Bank), assisted by other external donors including AusAID (the Australian Agency for
International Development), hastily assembled the Scholarships and Grants
Program (SGP), which was designed to
prevent a fall in school enrolments. The
external donors made their contributions conditional on the government
not reducing its own real spending on
education.
The program aimed to provide scholarships for 6% of pupils in the senior
Anne Daly and George Fane
three grades of primary school, for 17%
of those in lower secondary school and
for 10% of those in upper secondary
school. The actual coverage achieved in
1998/99 was much lower than these targets.2 The monthly value of the scholarships was Rp 10,000 for primary
students, Rp 20,000 for lower secondary students and Rp 25,000 for upper
secondary students.
Data on poverty from the Central Statistics Agency (BPS, Badan Pusat Statistik) were used to identify relatively poor
districts and municipalities. The central
government decided how many scholarships and school grants each district
and municipality would receive, and the
allocation of scholarships to particular
children was made at the level of individual schools, by committees that consisted of the school principal and
representatives of the local community,
parents and students. The actual allocation of money was done from the central government to the student’s family
through the post office network.
Block grants that could be spent on
books, materials, minor renovations, assisting poor children or waiving formal
and informal school fees were allocated
to schools in poor areas. Subdistrict governments selected the primary schools
and district governments selected the
lower and upper secondary schools. The
aim of the program was to provide
grants to 60% of schools at each level.
At the primary school level the annual
block grants per school were Rp 2 million; for lower and upper secondary
schools they were Rp 4 million and
Rp 10 million, respectively.
Health Care. Like the education program, the health care program that was
introduced as part of the social safety
net in 1998 included a mix of direct funding to individual households and block
grants to service providers, such as hospitals, clinics and family planning ser-
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Anti-poverty Programs in Indonesia
vices (World Bank 2000). Health care
cards that entitled holders to free health
care from designated providers were
allocated to districts on the basis of the
BKKBN estimates of the number of very
poor or poor households in the district.
Local officials made the final allocations
to households. A separate nutrition program, which operated from 1998 until
2000, provided supplementary food and
vitamins for infants and pregnant
women.
Schemes to Create Jobs for
Unskilled Workers
Indonesia’s first anti-poverty program
was the IDT program (Inpres Desa
Tertinggal, Presidential Instruction for
Underdeveloped Villages), which commenced in the financial year 1994/95
and ended at the close of 1997/98. It
provided selected poor villages with
Rp 20 million (then about $9,000) each
per year. The selected villages were responsible for distributing this amount
among groups of poor people, who
were invited to submit proposals for
using the funds. The allocations to villages were grants that did not have to
be repaid, but the allocations from villages to groups whose proposals were
successful were supposed to be revolving loans. However, according to BPS
data cited by Alatas (2000), only 60%
of the recipients repaid any part of the
funds received.
About one-third of all villages were
selected according to criteria that included the quality of village infrastructure, housing and the environment,
average ownership of livestock and consumer durables, the availability of electricity, school enrolment rates and
indicators of health and infant mortality.
Alatas (2000) found that the selection of
villages accorded almost perfectly with
the criteria specified in the design of the
program.3
313
Alatas argues that the guidelines on
the use of funds were so vague that the
program amounted to a mixture of cash
grants and loans for any income generating purpose—and the loans were effectively grants in the many cases in which
the funds were not repaid. The IDT program is classified here as a job creation
scheme, since it was supposed to help
poor people ‘by creating and expanding
productive job opportunities through
promotion of various development activities’ (Presidential Instruction No. 5/
1993, cited and translated in Alatas 2000).
By comparing villages that received
IDT funds with similar ones that did
not, Alatas concluded that the main
effects of the scheme were to raise
household expenditure, raise the employment of women in rural areas, raise
the employment of children (aged 10 to
18 years) and raise the proportion of
spouses of household heads who were
self-employed.
A scheme with some similarities to
the IDT scheme, in that it also supports
development spending at the village
level, is the Kecamatan Development
Program (KDP), introduced in 1998/99
and financed by a World Bank loan. It
has two components: the first provides
grants for the development of infrastructure; the second provides loans for business activities. Each village can submit
up to two proposals, and the choice of
successful proposals is made at the subdistrict level. Where a village puts up
two proposals, one must be from the
village women. Each subdistrict committee can choose its preferred mix of
infrastructure and business activities.
Village implementation of the infrastructure projects is supported by technical assistance from the subdistrict
level, and there is an explicit requirement for the continued maintenance of
the investment. The loans for business
activities are made to groups at market
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314
rates and are supposed to be repaid
within 18 months (National Management Consultants 2000). The KDP has
an urban equivalent, the urban poverty
program (UPP), which provides credit
for small and medium enterprises and
funds for community-based infrastructure development in poor urban areas.
Additional job creation and infrastructure development schemes were
developed in response to the crisis. In
some cases, known as padat karya
(labour-intensive) programs, lowskilled workers were employed to build
or repair public infrastructure. Of the
employees of these programs, 81%
were male, and 64% of them were employed to repair roads (Sumarto, Suryahadi and Widyanti 2001: notes 24 and
25). In other cases, the government provided grants to local communities to finance loans to community groups, or
to small and medium enterprises, to
fund labour-intensive projects. We refer to all these schemes, and not just the
padat karya programs, as ‘job creation
schemes’.
In 1998/99 there was a rapid proliferation of job creation schemes, as
government ministries seized the opportunity to tap the budget to finance
schemes that they could control. Separate schemes were created to provide
employment in villages, in forestry, for
women, for urban services, for roads
and for irrigation. This chaotic situation
was tidied up in 1999/2000, when the
number of separate schemes was reduced to two—the Public Works Sector
Padat Karya Program and the Special
Initiative for Unemployed Women (Sumarto, Suryahadi and Widyanti 2001:
note 14).
Using information on local conditions—for example, the existence of a
drought—and aggregate data on poverty
rates and infrastructure needs, the central government allocated funds for job
Anne Daly and George Fane
creation schemes to the districts, which
distributed them to the subdistricts. Particular projects were then selected from
proposals made at the village level. The
criteria that individuals had to satisfy to
qualify for inclusion in these programs
were less precise than those for the other
crisis programs. Individuals wishing to
work on a job creation scheme were expected to have some independent evidence that they were poor, unemployed
and in need of assistance under the program—for example, a letter from their
village head.
POVERTY REDUCTION
AND THE DEVELOPMENT
OF ANTI-POVERTY PROGRAMS
Three Phases of
Program Development
There have been three phases in the development of Indonesia’s anti-poverty
programs: the pre-crisis period, the crisis, and the subsequent period of slow
recovery. In the pre-crisis period, Indonesia spent very little on anti-poverty
programs, although their importance
gradually increased between their introduction in 1994/95 and 1997/98, when
total spending on them still accounted
for only 0.3% of GDP. The importance
of these programs increased abruptly in
1998, when the SSN was introduced in
response to fears that the economic crisis might cause poverty to climb back to
the levels of the 1980s, or even the 1970s.4
These fears turned out to have been exaggerated, and total spending on antipoverty programs has been reduced
subsequently, although it still far exceeds the pre-crisis level.
Table 2 shows that the relative importance of the different types of antipoverty programs varied in the three
phases. Job creation schemes accounted
for more than three-quarters of all
spending on anti-poverty programs in
the period before the crisis. In response
Anti-poverty Programs in Indonesia
315
TABLE 2 Shares of Individual Programs in Total Anti-poverty Spending a
(%)
1994/95
–1997/98
1998/99
–1999/2000
2000 b
1994/95
–2000
0.0
0.0
1.9
0.5
Benefits in kind
Subsidised rice (OPK)
Health care & nutrition
Education
22.8
0.0
9.7
13.2
66.2
41.5
13.3
11.4
52.4
21.6
17.6
13.2
57.9
32.0
13.9
12.1
Job creation (including
infrastructure & loans)
IDT
KDP
UPP
PDM–DKE
Village & urban infrastructure
Labour intensive (PK)
Loan schemes
Other
77.2
29.9
0.0
0.0
0.0
22.0
0.0
25.3
0.0
33.8
0.0
3.4
0.3
8.8
6.7
5.3
5.8
3.4
45.6
0.0
5.1
4.9
4.2
7.7
4.0
16.3
3.5
41.6
3.4
3.4
1.4
6.7
8.7
4.4
10.5
3.0
100.0
100.0
100.0
100.0
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Cash transfers
Total
a
See table 1, note a.
b
See table 1, note b.
Source: Bappenas.
to the crisis, each broad type of antipoverty program received an increased
share of total budget allocations, but the
importance of the jobs, infrastructure
and loans schemes declined relative to
that of benefits in kind and, in particular, relative to the newly introduced
scheme to sell rice at subsidised prices
to poor families. This scheme became
the largest single program, accounting
on its own for over 40% of total spending on anti-poverty programs in 1997/
98 and 1998/99. In the post-crisis recovery period, the subsidised rice scheme
has declined in importance relative to
the health care, education and infrastructure schemes, and the relative importance of job creation schemes has
recovered, though their share in total
spending on anti-poverty programs is
still much lower than before the crisis.
Cash transfers have always been of negligible importance and were abolished
entirely in 2001.
The SSN involved targeted, rationed
provision of subsidised amounts of
food, health care and education, and job
creation schemes. It was designed and
financed by the government in conjunction with the main external donors—
namely, the aid agencies of foreign
governments, such as USAID (United
States Agency for International Development) and AusAID, and the multilateral lending agencies, such as the
World Bank and the ADB.
The SSN programs have a number of
common elements that reflect the speed
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316
with which they had to be developed
and the objectives of the external donors.
The lack of alternative comprehensive information—household expenditure data
are available only for sample surveys of
the population—forced the administrators of the SSN programs to use BKKBN
criteria and data to decide which households were poor. According to these criteria, a household was in the poorest
group (keluarga pra-sejahtera, sometimes
translated as ‘pre-prosperous family’) if
it failed to meet all five of the following
conditions: (1) all household members
are able to practise their religious principles; (2) all household members are
able to eat at least twice a day; (3) all
household members have different sets
of clothing for home and work or school;
(4) the largest floor area of the house is
not earth; and (5) the household has access to modern medical assistance for
sick children and to family planning services (Sumarto, Suryahadi and Widyanti
2001). These criteria were subsequently
expanded so that the poorest group also
included families that consumed protein
only once a week, families with children
who dropped out of school for economic
reasons, and families headed by unemployed adults. Community groups and
village leaders were allowed some scope
in adjusting coverage, particularly in
situations where the BKKBN data were
thought to be deficient. For example,
the BKKBN database covered only
households with married couples and
excluded households with a single or
widowed head (Kusumastuti et al.
1998). Coverage was also considered inadequate in many urban areas because
of high levels of migration during this
period and the incomplete registration
of households in locations to which
they had just moved.
In designing the SSN, the donors
tried to promote ‘good governance’ and
‘empowerment’. The latter term is
Anne Daly and George Fane
World Bank jargon for involving local
community organisations in implementing programs, rather than relying
entirely on local government bureaucracies. The SSN Adjustment Loan negotiated between the government of
Indonesia and the World Bank illustrates the design features demanded by
the donors.5 A condition of the loan was
that each of the programs supported by
it should have
(i) internal monitoring and operational
controls including monthly reports to
the oversight group and control team;
(ii) independent verification of program performance and monitoring reports; (iii) campaigns to reach the grass
roots level with information about the
program design, budget and channel
for complaints; (iv) a complaint resolution mechanism that would be supervised by the control team; and (v) civil
society involvement at every level of
monitoring (Filmer et al. 1999: 2).
To evaluate the SSN, the external donors set up two monitoring units, the
Central Independent Monitoring Unit
(CIMU) and the Social Monitoring and
Early Response Unit (SMERU). We
summarise the main findings of these
units in the next section.
The SSN was wound up at the end
of 2000, partly because Indonesia had
begun to recover from the worst effects
of the crisis, and partly because the government and the main external donors
were dissatisfied with the design of
some of the programs. Although the
share of total government spending allocated to all anti-poverty programs
certainly fell between 1998/ 99 and
2000, the magnitude of the fall is probably exaggerated by table 1. Part of the
reduction recorded in table 1 was the
result of Indonesia’s new decentralisa tion policies: with the passage of Laws
22 and 25 of 1999, many of the expenditures that were formerly administered
by the central government, including
Anti-poverty Programs in Indonesia
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most of the SSN programs, became the
responsibility of district and municipal
governments. 6 There seems to be no
way of knowing how much is now being spent on anti-poverty programs at
the local government level, because
even the central government ministries
do not have comprehensive data on
this. This is an important area for future research.
Indonesia’s Performance
in Reducing Poverty
Studies of poverty trends in Indonesia
are unanimous in finding large falls in
poverty incidence during the New Order period, but disagree about their extent and the rate at which poverty
incidence fell. Booth (1993: 59) reports
that, according to a poverty line devised
by Professor Hendra Esmara, the national headcount poverty rate (that is,
the proportion of people living in households whose average per capita income
is below the poverty line) fell from 47.4%
in 1970 to 45.2% in 1976, and then to
34.4% in 1987. BPS has produced estimates of national poverty incidence
from 1976 onwards. Relative to the BPS
poverty line, the headcount poverty rate
was lower than that found by Esmara
and fell much more dramatically between 1976, when it was 40.1% relative
to the BPS line, and 1987, when it was
only 17.4% according to BPS (Booth
1999: table 6). Poverty continued to fall
in the early and mid 1990s, and by February 1996 was estimated to be only 11%
relative to the BPS poverty line (Booth
1999: table 6).
There were corresponding improvements in other social indicators in the
first three decades of the New Order
regime. Almost universal entry into primary education was achieved in the
early 1980s, and the net enrolment rate
has been maintained at about 95% at the
primary level since then (Jones, Hagul
317
and Damayanti 2000). Life expectancy
at birth rose from 55 years in 1980 to 65
years in 1997, and the estimated proportion of children dying before reaching
their fifth birthday fell from 125 per
1,000 for those born in 1980 to 52 per
1,000 for those born in 1998 (World Bank
2001: 276).
The surveys conducted since the crisis all confirm that poverty rose sharply.
The special mini survey of household expenditure carried out by BPS in December 1998 suggested that the headcount
poverty rate was then 24%. However,
much of the apparent rise was due to an
increase in the poverty line. Relative to
the former poverty line, the headcount
rate rose from 11% in 1996 to 17% in
1998. Relative to the new poverty line,
the rate rose from 18% in 1996 to 24% in
1998 and then fell slightly to 23% in 1999.
Measured poverty after the onset of the
crisis may have slightly overstated real
poverty because the anti-poverty programs that provided benefits in kind—
subsidised rice, school grants and
subsidised health care and nutrition—
would not have affected the expenditure-based measures of poverty, even
though they reduced real poverty, because their benefits were not included
in measured expenditure. 7
EVALUATION OF THE
SSN PROGRAMS
Comprehensive studies of the coverage
and targeting performance of the SSN
programs have been undertaken by researchers at SMERU. Table 3 summarises
some of their principal findings. Two
measures of ‘targeting’ are presented: the
ratio of a program’s coverage of the poorest 20% of the population—as measured
by household expenditure surveys—to
its coverage of the remaining 80% of the
population, and the ratio of its coverage
of the poorest 20% of the population to
its coverage of the richest 20%.8 Since the
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318
Anne Daly and George Fane
BKKBN poverty criteria are only fairly
weakly correlated with low expenditure, it is not surprising that the programs turned out not to have been
targeted very accurately to those in the
bottom 20% of the distribution of expenditure.9 And since random errors in
the survey data on expenditure would
make even a perfectly targeted scheme
appear to contain a random element,
the estimated targeting performance of
the schemes probably understates their
true performance.
come within villages are small, or
where the official criteria are poor measures of poverty, this is an appropriate
strategy. Another reason for not selling
all the rice just to the households that
met the official criteria is that it was
often difficult for poor households to
accumulate the Rp 20,000 needed to
purchase their monthly allocation. In
such cases, some rice remained unsold,
and some was sold to those who could
afford it but were outside the original
target group (Kusumastuti et al. 1998).
Subsidised Rice
As described above, the objective of this
program in 1999/2000 was to provide
20 kg of subsidised rice per month to the
17.4 million households in the two poorest BKKBN groups. In the event, about
10 million households in total actually
received subsidised rice in 1999/2000
(National Coordinating Team for Social
Safety Net Programs 2001), and not all
of them were in the two poorest groups.
The SMERU estimates summarised in
table 3 indicate that only 53% of those
in the bottom 20% of the expenditure
distribution received subsidised OPK
rice, and those in this poorest 20% were
only 40% more likely to benefit from the
scheme than the rest of the population.
Nevertheless, the last column in table 3
shows that the scheme was relatively accurately targeted away from households
in the richest 20% of the population.
Among the problems encountered in
the distribution process were those related to delays in distribution to remote
areas. Another reason why the target
households typically received less than
their full monthly allocations of subsidised rice was that many village communities insisted on allocating some
rice to every household, rather than
providing all the benefits to those that
met the official criteria (Kusumastuti et
al. 1998). Where the differences in in-
Education
In the first year, problems in the administration of the SGP were encountered
in remote areas, where the cost of collecting the scholarship was high, and
occasionally exceeded its total value. In
addition, local post offices complained
of congestion. However, Hardjono
(1999: 30–1) concluded that in the small
region of West Java covered by her survey, the administration of the SGP was
relatively effective. A survey of 355 primary and lower secondary schools in 22
provinces conducted by CIMU found
that 41% of the first tranche and 70% of
the third tranche for the 1998/99 school
year were collected from the post offices
by the schools rather than by the students themselves (CIMU 2000a). In subsequent years, this initially informal
practice was officially sanctioned.
In some cases, local committees decided to share the scholarships among
students rather than give them to selected poor students for the duration of
their schooling at a particular institution.
In other cases, some or all of the money
was retained by the school to pay off
debts, replace fees or cover ongoing
costs. In these cases, the scholarships
therefore acted like a block grant. Nevertheless, the CIMU survey found that
the majority of primary and lower secondary students directly received over
Anti-poverty Programs in Indonesia
319
TABLE 3 Coverage and Targeting of Anti-poverty Programs, August 1998 to February 1999 a
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Program
Coverage of Group by Program (%)
Subsidised rice
Primary scholarships
Lower secondary scholarships
Upper secondary scholarships
Health care
Nutrition
Job creation
Poorest
20% of
Potential
Group
Poorest
40% of
Potential
Group
Whole of
Potential
Group
(1)
(2)
52.6
5.8
12.2
5.4
10.6
16.5
8.3
49.4
5.3
11.2
5.2
8.9
16.6
7.6
Targeting Ratios
(3)
Coverage
of Poorest
20%/
Coverage
of Remaining 80%
(4)
Coverage
of Poorest
20%/
Coverage
of Richest
20%
(5)
40.1
4.0
8.5
3.8
6.4
15.9
5.6
1.4
1.6
1.6
1.6
2.0
1.0
1.7
2.2
2.8
2.5
2.8
3.4
1.2
3.3
a
Column (4) = [4 x column (1)]/[5 x column (3) – column (1)].
Coverage of the richest 20% = column (1)/column (5).
Coverage = number covered/size of potentially eligible group. The definitions of the number
covered and the size of the potentially eligible group vary from scheme to scheme and are
given below for the national coverage estimates in column (3). The definitions for the other
expenditure quintiles are exactly analogous.
Size of ‘potentially eligible’ group:
Subsidised rice and job creation programmes: all 50.4 million Indonesian households.
Scholarships: the number of children in the relevant type of school—29.7 million children
enrolled in primary school; 10.4 million in lower secondary school; and 6.4 million in upper
secondary school.
Health care: the 27.6 million individuals estimated to have visited a health care provider
in the three months prior to the survey.
Nutrition: the 20.0 million individuals in the group ‘pregnant women and children under
three years old’.
Number covered:
Subsidised rice and job creation schemes: the number of households in which any member
had received any benefits under the relevant scheme in the six months prior to the survey.
Scholarships: the number of children that had received a scholarship in the 1998/99
academic year.
Health care: the number of individuals seeking treatment in the three months prior to the
survey who had used a health card to obtain free treatment.
Nutrition: the number of individuals who had obtained benefits under the program in the
six months prior to the survey.
Source: Sumarto, Suryahadi and Widyanti (2001: appendix table 2). Their estimates are
derived from the special module on the SSN that was included in the National SocioEconomic Survey (Susenas) conducted in February 1999 and that covered the preceding
six months.
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320
two-thirds of their annual scholarship
entitlement. There was, however, considerable regional variation in these outcomes.
Since school fees had contributed to
the high dropout rates of children from
poor families in the late 1980s, government schools were directed not to charge
fees for the 1998/99 academic year. Although the government did not directly
provide funds to replace the fees that
were supposed to be waived (CIMU
2000b: 5), the SGP block grants helped
to compensate for fees in those schools
that received these grants.
The SGP has been cited by both
SMERU and the World Bank as one of
the most successful of the SSN programs, and total school enrolments did
not fall. The age-specific school enrolment ratio for 7–12 year olds remained
constant at just over 95% between 1997
and 1999, while the corresponding ratios for 13–15 year olds and 16–18 year
olds rose slightly over the same period,
from 77% and 49% to 79% and 51%, respectively (BPS 1999: 53).10 However,
these increases are modest relative to the
13.5% increase in total government
spending on education (at constant
1996/97 prices) between 1997/98 and
1999/2000 shown in table 4.
Lanjouw et al. (2001) use data from
the Susenas (National Socio-Economic
Surveys) for 1995–98 to estimate the
marginal impact on households in each
expenditure quintile of public spending
at the primary, lower secondary and
upper secondary levels. They find that
additional expenditure on primary education is particularly beneficial for
households in the poorest quintile.
However, additional government expenditure on lower and upper secondary education provides relatively larger
benefits to richer households. These results suggest that by preventing a cut in
expenditure on primary education at the
Anne Daly and George Fane
time of the crisis, the SGP helped alleviate the effects of the crisis on poverty,
but that the subsidies it provided to
lower and upper secondary education
had smaller effects on poverty.
Concern has been expressed because
the scholarship program did not reach
the very poor children who were not
enrolled in any school, or those who
attended low quality private schools
that were excluded from the program
(Jones, Hagul and Damayanti 2000).
There is also survey evidence that the
aggregate picture may disguise different results for particular groups. For
example, there is some evidence that
dropout rates rose among poor urban
teenagers following the crisis (Filmer
et al. 1999; Jones, Hagul and Damayanti
2000).
The targeting scores reported in
table 3 suggest that the SGP was better
targeted than the subsidised rice and nutrition programs, but not as well targeted as the health care or job creation
programs. Cameron (2000) reports similar overall targeting results using the 100
Villages Survey. However, her measure
of targeting relates to households containing students who received a scholarship, not to the scholarship status of
an individual student. Her measure for
targeting will therefore overestimate the
number of individuals receiving scholarships. Her estimates imply that the
targeting improved with level of education, whereas table 3 implies that at
each level of education the poorest 20%
of students (measured according to average expenditure per household member) were 60% more likely to receive
scholarships than the richest 80%. 11
There is an important sense in which
both the table 3 targeting estimates and
those of Cameron exaggerate the targeting performance of scholarships at the
secondary school level, and particularly
at the upper secondary level: both sets
Anti-poverty Programs in Indonesia
321
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TABLE 4 Total Budgetary Spending on Education, and Spending on Education under Antipoverty Programs, 1995/96 to 1999/2000
Expenditures (Rp trillion) b
Anti-poverty program
spending on education
Total anti-poverty programs
Education, routine budget
Education, development budget
Education, total budget
Education, total budget, 1996/97
prices
Shares (%)
Education anti-poverty
as % education budget
Education budget
as % of total budget
Education budget
as % of GDP
a
95/96 a
96/97
97/98
98/99
1999/
2000
n.a.
1.07
3.64
1.81
5.44
0.30
1.54
4.22
2.14
6.35
0.36
1.98
5.18
2.09
7.27
1.56
14.24
5.67
1.98
7.65
1.67
13.95
7.49
7.21
14.70
77.2
108.3
21.1
50.0
32.3
5.79
6.35
6.50
4.15
7.38
5.1
n.a.
4.72
4.95
20.33
11.35
6.97
7.01
7.19
5.20
7.39
1.16
1.14
1.05
0.75
1.30
Growth
96/97–
99/00
(% p.a.)
n.a. = not available.
b
Anti-poverty program spending on education is defined as in table 1 and derived from the
sources given there. CPI data are from the CEIC Ltd (Hong Kong) Asia Database. Budgetary
spending on education excludes spending on religious schools by the Ministry of Religion
and Home Affairs.
Sources: Budgetary data on education were taken from National Ministry of Education (2000:
157, table 81).
of estimates refer to coverage of children
in school, not to coverage of all children
in the relevant age group. Since children
from poor families are much less likely
than those from richer families to be
enrolled in secondary school, it may well
be that, relative to all children in the relevant age group, the scholarships at
upper secondary level were targeted
towards rich families and away from
poor ones.
Cameron also estimated regressions
using the 100 Villages Survey to explain
the probability of a child dropping out
of school between August and December 1998 as a function of scholarship
availability and a set of control variables that included the ages and gender of the child and the socio-economic
characteristics of its household. For
each of the three levels of schooling
(primary, lower secondary and upper
secondary), she estimated one regression that included a village-specific effect and another that did not include
such an effect. In five of the six resulting regressions, the estimated effect of
the scholarship program on the prob-
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322
ability of dropouts was not statistically
significant, and in the sixth case—the
regression with village-specific effects
for lower secondary school students—
the estimated coefficient implied that
being in a household in which some
child received a scholarship reduced
the probability (evaluated at the sample
mean) of dropping out at the lower secondary level by 3.5 percentage points.
In the 100 Villages Survey, 13.6% of
lower secondary students were in
households that received scholarships,
but according to the Susenas data in
table 3 the coverage at this level was
only 8.5%. However, Cameron’s seemingly low estimates of the effects of the
SGP on retention rates relate only to
dropouts in the course of a school year.
Using her data set it is impossible to estimate the presumably much larger effect of the offer of a scholarship on the
probability of re-enrolment at the start
of a school year.
Retention rates are not the only relevant criteria for assessing the SGP.
Jones, Hagul and Damayanti (2000)
emphasise the positive implications of
the program for quality of education.
Increased funds for schools allowed
them to maintain facilities and to reduce
the fees for children who were not offered scholarships. There is also evidence that this injection of funds enabled
schools to be more generous with students who were unable to pay their
school fees than had been the case in the
late 1980s, when some schools excluded
students who were unable to pay (Jones,
Hagul and Damayanti 2000).
Health Care
The subsidised health care program for
poor households that was introduced
in 1998 was not subject to the same extensive and systematic reviews as the
education program. The World Bank
report on health care programs (World
Anne Daly and George Fane
Bank 2000) reported difficulties in allocating funds, inadequate publicity for
the program among beneficiaries and
health care providers, and unnecessarily complex administrative procedures.
Against these negative assessments,
there is evidence from some surveys
and field visits that the program helped
to improve ante-natal and post-natal
care and raised the availability of resources in a health care system that was
facing extreme difficulties as a result of
the economic crisis.
Available evidence suggests that the
free health care service scheme achieved
a higher coverage rate among the poor
and was more closely targeted to poor
households than the nutrition program.
SMERU’s analysis of the 100 Village
Survey and the Susenas data shows that
the poorest 20% of households were
twice as likely to receive free health care
treatment as the non-poor. Lanjouw et
al. (2001) estimate that households in the
poorest quintile of the expenditure distribution receive a share of the benefits
from public expenditure on primary
health care that is equal to their share in
total household expenditure, but that the
poorest households share less than proportionately in public expenditure on
hospitals.
The rate of participation in the nutrition program, however, was almost
equal for poor and non-poor households
(16.5% of poor households compared
with 15.9% of all households, according
to the Susenas data).
Job Creation and
Infrastructure Development
The job creation schemes were intended
to induce self-selection of poor unskilled
workers by paying no more than minimum wages. Sumarto and Suryahadi
(2001: 13) estimate that the average wage
of workers in these schemes was 54%
below the average daily wage in the con-
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Anti-poverty Programs in Indonesia
struction sector and 4% below that in the
foodcrop sector.
However, estimates of the targeting
performance of the job creation
schemes are mixed. According to table
3, the coverage of the poorest 20% (by
expenditure) exceeded that of all other
households by 70%, and exceeded that
of the richest 20% of households by a
factor of 3.3. Similar results were found
from the 100 Village Survey. Hardjono
(1999: 23) gives a different and much
less favourable picture of padat karya
programs, on the basis of a small but
very detailed survey in April and May
1999 of a single area of 22 hamlets on
the northern coastal plain of West Java.
In this sample, only 5% of participants
in padat karya schemes belonged to
households in the poorest quintile,
whereas 34% belonged to households
in the middle quintile and 16% to
households in the richest quintile.
Hardjono reports that villagers were
cynical about these schemes on the
ground that employees were allegedly
selected on the basis of their connections with village authorities or contractors. She also reports that: ‘It so
happened that in one hamlet padat karya
work was in progress on the day when
the survey was conducted. The small
road that was being “improved” led to
the lurah’s (village headman[’s]) house’
(Hardjono 1999: 23). 12
Even the table 3 estimates of the targeting of the job creation schemes are
much less impressive than the targeting
achieved by Argentina’s Trabajar Program, in which 80% of the employees
were drawn from the poorest 20% of
households (Jalan and Ravallion 1999).
Nevertheless, they are still better than
the estimates of targeting achieved by
any SSN scheme other than the health
care program. However, we believe that
the table 3 estimates exaggerate the extent to which the benefits of the job cre-
323
ation schemes go to the poor. Even if
Hardjono’s sample was highly atypical—which we doubt—and even if most
of the employees were unskilled workers in households below the poverty
line, the benefits to unskilled workers
would still only be a small fraction of
the budgetary outlays by the government, given plausible estimates of the
elasticities of supply and demand for
unskilled labour. Suppose, for illustrative purposes, that the elasticities of supply and demand for unskilled labour are
three and minus one, respectively. Under these assumptions, the direct benefit of job creation schemes to unskilled
workers would be only a quarter of the
total budgetary cost of the schemes.13 If
the elasticities are larger than those assumed above for illustrative purposes,
the benefits to unskilled workers would
be an even smaller fraction of the budgetary cost of the programs. It is widely
argued that the supply of unskilled
labour is indeed very elastic in developing countries; and the demand is
probably also very elastic, since the global markets for manufactured goods
produced by internationally mobile
capital and unskilled labour have become increasingly competitive and integrated. Of course, there are additional
benefits to the poor from the infrastructure built or repaired by the job creation
schemes. However, if the purpose is to
provide infrastructure, tendering among
specialist firms that compete on the basis
of price, quality and efficiency is more
efficient than ad hoc programs with multiple goals. Finally, to be efficient, the
provision of infrastructure must be
planned well in advance, and projects
carefully selected using cost–benefit criteria. In contrast, job creation schemes
are often expanded, or contracted, according to short-term expediency—as
happened in Indonesia in the wak
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Anti-Poverty Programs in Indonesia
Anne Daly & George Fane
To cite this article: Anne Daly & George Fane (2002) Anti-Poverty Programs in Indonesia,
Bulletin of Indonesian Economic Studies, 38:3, 309-329, DOI: 10.1080/00074910215535
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Bulletin of Indonesian Economic Studies, Vol. 38, No. 3, 2002: 309–29
ANTI-POVERTY PROGRAMS IN INDONESIA
Anne Daly
University of Canberra
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George Fane*
Australian National University
Between 1994/95 and 1997/98, Indonesia’s spending on anti-poverty programs grew
from 0.1% to 0.3% of GDP. The introduction of the ‘social safety net’ raised antipoverty spending to 1.4% of GDP in 1998/99 and changed its main focus from job
creation schemes, financed mainly by loans and grants to small firms and community groups, to in-kind subsidies for rice, public health care, scholarships for children in poor families and grants to schools in poor areas. The most accurately targeted
program was health care, which covered twice as many people in the two poorest
deciles as in the remaining eight. For most other programs, this targeting ratio was
only about 1.5. We argue that the education and health care programs were the most
successful, and doubt that the rice subsidy, job creation and loans schemes were
worthwhile.
INTRODUCTION
This paper has three objectives: to describe Indonesia’s main anti-poverty
programs and summarise government
spending on them, to survey research on
the extent to which they have reached
their target groups and to draw policy
conclusions. The third objective is much
the most difficult, and the policy conclusions we draw in the final section are
correspondingly tentative.
We define ‘anti-poverty programs’ to
be those whose benefits are specifically
targeted at the poor. We draw the line
between ‘targeted at the poor’ and ‘not
targeted at the poor’ in such a way that
Indonesia’s anti-poverty programs are
those that were part of the ‘social safety
net’ (SSN) introduced in 1998, the similar programs that preceded the SSN on
a much smaller scale, and those that replaced it in 2001.
Programs that benefit the poor can
take any of the following forms:
(1) cash transfer schemes in which
the net receipts are phased out as income rises;
(2) benefits in kind of rationed and
subsidised amounts of ‘essential’
goods to people below some specified
poverty line (‘essential’ goods are
those that make up a relatively large
proportion of the total consumption
of the poor, such as kerosene, rice,
health care and primary education);
(3) job creation schemes for unskilled workers;
(4) universally available price subsidies, with no rationing, for essential
goods.
In industrial countries, cash transfers
(type 1) are often used to implement the
most important social welfare programs—such as unemployment and
sickness benefits, age and disability pensions and child support. However, cash
transfers are usually of little or no im-
ISSN 0007-4918 print/ISSN 1472-7234 online/02/030309-21
© 2002 Indonesia Project ANU
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310
portance in most developing countries,
which lack both the bureaucratic apparatus to administer such blanket coverage schemes and the revenues to pay for
them. Instead, developing countries often use government agencies, stateowned firms, or government controlled
clinics and schools to provide essential
goods. If benefits in kind are restricted
to the poor (type 2), then the programs
come within our definition of antipoverty programs; however, if the quantities that each household is allowed to
buy are not phased out as income rises
(type 4), the schemes are outside our
definition of anti-poverty programs.
Examples of this latter type include the
Indonesian government’s fuel price subsidies and its provision of universal free,
or highly subsidised, health care and
basic education.
Job creation schemes (type 3) differ
from pure price subsidies (type 4) by
raising the price of something that the
poor typically sell (unskilled labour),
rather than reducing the price of things
that they typically buy. Besides raising
the incomes of the poor, these schemes
usually improve public infrastructure in
poor areas. One can debate whether job
creation schemes are targeted to the
poor, or are universally available to all
sellers of unskilled labour, many of
whom are members of families above
the poverty line. We classify Indonesia’s
job creation schemes as anti-poverty
programs because attempts were made
to locate them in poor areas and to employ mainly poor people. Job creation
schemes and rationed and targeted benefits in kind therefore provide the main
examples of anti-poverty programs in
Indonesia.
Table 1 gives a summary of government spending by type of anti-poverty
program, as defined above, and table 2
shows the size of the programs relative
to total government anti-poverty spend-
Anne Daly and George Fane
ing. The individual schemes are identified in the body of table 1 and in the
notes to it. The most important individual schemes are briefly described in
the next section. The section that follows
it summarises the development of antipoverty programs and Indonesia’s successes and failures in reducing poverty.
We then summarise research on the targeting of the main schemes and finally
draw policy conclusions.
INDONESIA’S MAIN
ANTI-POVERTY SCHEMES
Cash Transfers
The only time Indonesia has used cash
transfers was in October–December 2000
when, in partial fulfilment of conditions
stipulated in its January 2000 letter of
intent to the IMF, the government reduced domestic fuel price subsidies and
partially compensated the poor by allocating Rp 800 billion from the resulting
budgetary savings to finance three antipoverty programs, one of which aimed
to provide the poorest 6.7 million families with Rp 30,000 per month (SMERU
2001). Data previously gathered by the
National Fam ily Planning Agency
(BKKBN) were used to try to define and
identify eligible households, but the program proved very difficult to administer and was discontinued after three
months.
Rationed and Targeted
Benefits in Kind
Rice. In terms of expenditure, the most
important of Indonesia’s targeted
schemes providing rationed benefits in
kind is the subsidised rice program
OPK (Operasi Pasar Khusus, Special
Market Operations), which was introduced partly in response to the economic crisis and partly in response to
the drought that affected many parts of
eastern Indonesia in 1997–98. It was
therefore targeted at poor villages and
Anti-poverty Programs in Indonesia
311
TABLE 1 Expenditure on Anti-poverty Programs as a Percentage of Total Central Government
Expenditure, 1994/95–2000 a
94/95
95/96
96/97
97/98
98/99
99/00
Cash transfers
0.11
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Benefits in kind
Subsidised rice (OPK)
Health care & nutrition
Education
Job creation (including
infrastructure & loans)
0.61
IDT
0.59
KDP
UPP
PDM–DKE
Village & urban infrastructure
Labour intensive (PK)
Loan schemes
0.02
Other
Total
0.61
Memo items
Total anti-poverty
programs (Rp trillion)
Total anti-poverty
programs (% of GDP)
2000b
1.37
0.61
0.49
0.69
0.16
0.33
0.34
0.36
1.21
0.53
1.27
0.13
5.73
3.70
0.97
1.06
5.14
3.14
1.16
0.84
2.96
1.22
0.99
0.75
3.94
1.87
2.58
0.22
0.33
0.04
0.40
0.51
1.96
1.16
0.61
1.01
0.46
0.49
9.67
0.48
0.12
7.01
0.29
0.28
0.24
0.43
0.22
0.92
0.20
5.65
1.54
1.98
14.24
13.95
10.35
0.28
0.29
1.39
1.23
1.05
0.33
0.26
0.61
0.43
0.43
0.53
1.37
1.70
0.43
1.07
0.11
0.23
a
A brief indication of the programs included under each heading is given below. Full details
(including explanations of the acronyms used) can be obtained from a spreadsheet available
at: http://economics.anu.edu.au/staff/fane/fane.html (go to: ‘poverty’, and double click
on: ‘Daly & Fane, tables 1 and 2’).
Cash transfers are those under the fuel subsidy replacement program.
IDT, KDP and UPP: defined in text.
PDM–DKE: Regional Empowerment
Program to Alleviate the Crisis (a village credit
scheme).
Village and urban infrastructure: P3DT; P2MPD; and the village infrastructure program
under the fuel subsidy replacement program.
Labour intensive: three PK (padat karya) programs; two programs to allevia te
unemployment; and the program to alleviate the drought and manpower situation.
Loan schemes: four programs financed through Bank Rakyat Indonesia; two financed by
Bank Indonesia; one financed by BKSN; the TPSP–KUD program financed by the Ministry
of Cooperatives; and the micro-finance facility under the fuel subsidy replacement program.
Other: PEMD; and three programs to improve food production under the SSN.
b
Up to and including 1999/2000, Indonesia’s fiscal year ran from 1 April to 31 March. The
fiscal year 2000 was a transitional one that ran from 1 April to 31 December. As of 2001, the
Indonesian fiscal year coincides with the calendar year.
Sources: National budget data: see table 4; other data: Bappenas (National Planning Agency).
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312
to those in drought affected areas. The
rice was acquired centrally by the national logistics agency (Bulog) and transported to distribution points throughout
the country. The government originally
intended that each of the 8 million
households in the poorest group, as indicated by BKKBN data, should receive
10 kilograms of medium quality rice per
month at Rp 1,000/kg, when the market price was Rp 2,500–3,000/kg (Sumarto, Suryahadi and Widyanti 2001).
The benefit per household was therefore
about Rp 15,000–20,000 per month. This
is about 5% of the total expenditure of a
household of four people at the official
poverty line.1 The target allocation per
household was later doubled to 20 kg
per month and the entitlement was extended to include the 9.4 million households in the second poorest group, as
indicated by the BKKBN data. In April
2000 the allocation was changed again,
to between 10 and 20 kg per household
per month. In practice, as described
later, coverage and allocation per household were well below these targets.
Scholarships and School Grants. The
recession of the late 1980s had been associated with a decline in school enrolments and there was official concern in
1998 that this should not be repeated.
Therefore, before the beginning of the
school year in late August 1998, the
government, the World Bank and the
ADB (Asian Development Bank), assisted by other external donors including AusAID (the Australian Agency for
International Development), hastily assembled the Scholarships and Grants
Program (SGP), which was designed to
prevent a fall in school enrolments. The
external donors made their contributions conditional on the government
not reducing its own real spending on
education.
The program aimed to provide scholarships for 6% of pupils in the senior
Anne Daly and George Fane
three grades of primary school, for 17%
of those in lower secondary school and
for 10% of those in upper secondary
school. The actual coverage achieved in
1998/99 was much lower than these targets.2 The monthly value of the scholarships was Rp 10,000 for primary
students, Rp 20,000 for lower secondary students and Rp 25,000 for upper
secondary students.
Data on poverty from the Central Statistics Agency (BPS, Badan Pusat Statistik) were used to identify relatively poor
districts and municipalities. The central
government decided how many scholarships and school grants each district
and municipality would receive, and the
allocation of scholarships to particular
children was made at the level of individual schools, by committees that consisted of the school principal and
representatives of the local community,
parents and students. The actual allocation of money was done from the central government to the student’s family
through the post office network.
Block grants that could be spent on
books, materials, minor renovations, assisting poor children or waiving formal
and informal school fees were allocated
to schools in poor areas. Subdistrict governments selected the primary schools
and district governments selected the
lower and upper secondary schools. The
aim of the program was to provide
grants to 60% of schools at each level.
At the primary school level the annual
block grants per school were Rp 2 million; for lower and upper secondary
schools they were Rp 4 million and
Rp 10 million, respectively.
Health Care. Like the education program, the health care program that was
introduced as part of the social safety
net in 1998 included a mix of direct funding to individual households and block
grants to service providers, such as hospitals, clinics and family planning ser-
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Anti-poverty Programs in Indonesia
vices (World Bank 2000). Health care
cards that entitled holders to free health
care from designated providers were
allocated to districts on the basis of the
BKKBN estimates of the number of very
poor or poor households in the district.
Local officials made the final allocations
to households. A separate nutrition program, which operated from 1998 until
2000, provided supplementary food and
vitamins for infants and pregnant
women.
Schemes to Create Jobs for
Unskilled Workers
Indonesia’s first anti-poverty program
was the IDT program (Inpres Desa
Tertinggal, Presidential Instruction for
Underdeveloped Villages), which commenced in the financial year 1994/95
and ended at the close of 1997/98. It
provided selected poor villages with
Rp 20 million (then about $9,000) each
per year. The selected villages were responsible for distributing this amount
among groups of poor people, who
were invited to submit proposals for
using the funds. The allocations to villages were grants that did not have to
be repaid, but the allocations from villages to groups whose proposals were
successful were supposed to be revolving loans. However, according to BPS
data cited by Alatas (2000), only 60%
of the recipients repaid any part of the
funds received.
About one-third of all villages were
selected according to criteria that included the quality of village infrastructure, housing and the environment,
average ownership of livestock and consumer durables, the availability of electricity, school enrolment rates and
indicators of health and infant mortality.
Alatas (2000) found that the selection of
villages accorded almost perfectly with
the criteria specified in the design of the
program.3
313
Alatas argues that the guidelines on
the use of funds were so vague that the
program amounted to a mixture of cash
grants and loans for any income generating purpose—and the loans were effectively grants in the many cases in which
the funds were not repaid. The IDT program is classified here as a job creation
scheme, since it was supposed to help
poor people ‘by creating and expanding
productive job opportunities through
promotion of various development activities’ (Presidential Instruction No. 5/
1993, cited and translated in Alatas 2000).
By comparing villages that received
IDT funds with similar ones that did
not, Alatas concluded that the main
effects of the scheme were to raise
household expenditure, raise the employment of women in rural areas, raise
the employment of children (aged 10 to
18 years) and raise the proportion of
spouses of household heads who were
self-employed.
A scheme with some similarities to
the IDT scheme, in that it also supports
development spending at the village
level, is the Kecamatan Development
Program (KDP), introduced in 1998/99
and financed by a World Bank loan. It
has two components: the first provides
grants for the development of infrastructure; the second provides loans for business activities. Each village can submit
up to two proposals, and the choice of
successful proposals is made at the subdistrict level. Where a village puts up
two proposals, one must be from the
village women. Each subdistrict committee can choose its preferred mix of
infrastructure and business activities.
Village implementation of the infrastructure projects is supported by technical assistance from the subdistrict
level, and there is an explicit requirement for the continued maintenance of
the investment. The loans for business
activities are made to groups at market
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314
rates and are supposed to be repaid
within 18 months (National Management Consultants 2000). The KDP has
an urban equivalent, the urban poverty
program (UPP), which provides credit
for small and medium enterprises and
funds for community-based infrastructure development in poor urban areas.
Additional job creation and infrastructure development schemes were
developed in response to the crisis. In
some cases, known as padat karya
(labour-intensive) programs, lowskilled workers were employed to build
or repair public infrastructure. Of the
employees of these programs, 81%
were male, and 64% of them were employed to repair roads (Sumarto, Suryahadi and Widyanti 2001: notes 24 and
25). In other cases, the government provided grants to local communities to finance loans to community groups, or
to small and medium enterprises, to
fund labour-intensive projects. We refer to all these schemes, and not just the
padat karya programs, as ‘job creation
schemes’.
In 1998/99 there was a rapid proliferation of job creation schemes, as
government ministries seized the opportunity to tap the budget to finance
schemes that they could control. Separate schemes were created to provide
employment in villages, in forestry, for
women, for urban services, for roads
and for irrigation. This chaotic situation
was tidied up in 1999/2000, when the
number of separate schemes was reduced to two—the Public Works Sector
Padat Karya Program and the Special
Initiative for Unemployed Women (Sumarto, Suryahadi and Widyanti 2001:
note 14).
Using information on local conditions—for example, the existence of a
drought—and aggregate data on poverty
rates and infrastructure needs, the central government allocated funds for job
Anne Daly and George Fane
creation schemes to the districts, which
distributed them to the subdistricts. Particular projects were then selected from
proposals made at the village level. The
criteria that individuals had to satisfy to
qualify for inclusion in these programs
were less precise than those for the other
crisis programs. Individuals wishing to
work on a job creation scheme were expected to have some independent evidence that they were poor, unemployed
and in need of assistance under the program—for example, a letter from their
village head.
POVERTY REDUCTION
AND THE DEVELOPMENT
OF ANTI-POVERTY PROGRAMS
Three Phases of
Program Development
There have been three phases in the development of Indonesia’s anti-poverty
programs: the pre-crisis period, the crisis, and the subsequent period of slow
recovery. In the pre-crisis period, Indonesia spent very little on anti-poverty
programs, although their importance
gradually increased between their introduction in 1994/95 and 1997/98, when
total spending on them still accounted
for only 0.3% of GDP. The importance
of these programs increased abruptly in
1998, when the SSN was introduced in
response to fears that the economic crisis might cause poverty to climb back to
the levels of the 1980s, or even the 1970s.4
These fears turned out to have been exaggerated, and total spending on antipoverty programs has been reduced
subsequently, although it still far exceeds the pre-crisis level.
Table 2 shows that the relative importance of the different types of antipoverty programs varied in the three
phases. Job creation schemes accounted
for more than three-quarters of all
spending on anti-poverty programs in
the period before the crisis. In response
Anti-poverty Programs in Indonesia
315
TABLE 2 Shares of Individual Programs in Total Anti-poverty Spending a
(%)
1994/95
–1997/98
1998/99
–1999/2000
2000 b
1994/95
–2000
0.0
0.0
1.9
0.5
Benefits in kind
Subsidised rice (OPK)
Health care & nutrition
Education
22.8
0.0
9.7
13.2
66.2
41.5
13.3
11.4
52.4
21.6
17.6
13.2
57.9
32.0
13.9
12.1
Job creation (including
infrastructure & loans)
IDT
KDP
UPP
PDM–DKE
Village & urban infrastructure
Labour intensive (PK)
Loan schemes
Other
77.2
29.9
0.0
0.0
0.0
22.0
0.0
25.3
0.0
33.8
0.0
3.4
0.3
8.8
6.7
5.3
5.8
3.4
45.6
0.0
5.1
4.9
4.2
7.7
4.0
16.3
3.5
41.6
3.4
3.4
1.4
6.7
8.7
4.4
10.5
3.0
100.0
100.0
100.0
100.0
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Cash transfers
Total
a
See table 1, note a.
b
See table 1, note b.
Source: Bappenas.
to the crisis, each broad type of antipoverty program received an increased
share of total budget allocations, but the
importance of the jobs, infrastructure
and loans schemes declined relative to
that of benefits in kind and, in particular, relative to the newly introduced
scheme to sell rice at subsidised prices
to poor families. This scheme became
the largest single program, accounting
on its own for over 40% of total spending on anti-poverty programs in 1997/
98 and 1998/99. In the post-crisis recovery period, the subsidised rice scheme
has declined in importance relative to
the health care, education and infrastructure schemes, and the relative importance of job creation schemes has
recovered, though their share in total
spending on anti-poverty programs is
still much lower than before the crisis.
Cash transfers have always been of negligible importance and were abolished
entirely in 2001.
The SSN involved targeted, rationed
provision of subsidised amounts of
food, health care and education, and job
creation schemes. It was designed and
financed by the government in conjunction with the main external donors—
namely, the aid agencies of foreign
governments, such as USAID (United
States Agency for International Development) and AusAID, and the multilateral lending agencies, such as the
World Bank and the ADB.
The SSN programs have a number of
common elements that reflect the speed
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316
with which they had to be developed
and the objectives of the external donors.
The lack of alternative comprehensive information—household expenditure data
are available only for sample surveys of
the population—forced the administrators of the SSN programs to use BKKBN
criteria and data to decide which households were poor. According to these criteria, a household was in the poorest
group (keluarga pra-sejahtera, sometimes
translated as ‘pre-prosperous family’) if
it failed to meet all five of the following
conditions: (1) all household members
are able to practise their religious principles; (2) all household members are
able to eat at least twice a day; (3) all
household members have different sets
of clothing for home and work or school;
(4) the largest floor area of the house is
not earth; and (5) the household has access to modern medical assistance for
sick children and to family planning services (Sumarto, Suryahadi and Widyanti
2001). These criteria were subsequently
expanded so that the poorest group also
included families that consumed protein
only once a week, families with children
who dropped out of school for economic
reasons, and families headed by unemployed adults. Community groups and
village leaders were allowed some scope
in adjusting coverage, particularly in
situations where the BKKBN data were
thought to be deficient. For example,
the BKKBN database covered only
households with married couples and
excluded households with a single or
widowed head (Kusumastuti et al.
1998). Coverage was also considered inadequate in many urban areas because
of high levels of migration during this
period and the incomplete registration
of households in locations to which
they had just moved.
In designing the SSN, the donors
tried to promote ‘good governance’ and
‘empowerment’. The latter term is
Anne Daly and George Fane
World Bank jargon for involving local
community organisations in implementing programs, rather than relying
entirely on local government bureaucracies. The SSN Adjustment Loan negotiated between the government of
Indonesia and the World Bank illustrates the design features demanded by
the donors.5 A condition of the loan was
that each of the programs supported by
it should have
(i) internal monitoring and operational
controls including monthly reports to
the oversight group and control team;
(ii) independent verification of program performance and monitoring reports; (iii) campaigns to reach the grass
roots level with information about the
program design, budget and channel
for complaints; (iv) a complaint resolution mechanism that would be supervised by the control team; and (v) civil
society involvement at every level of
monitoring (Filmer et al. 1999: 2).
To evaluate the SSN, the external donors set up two monitoring units, the
Central Independent Monitoring Unit
(CIMU) and the Social Monitoring and
Early Response Unit (SMERU). We
summarise the main findings of these
units in the next section.
The SSN was wound up at the end
of 2000, partly because Indonesia had
begun to recover from the worst effects
of the crisis, and partly because the government and the main external donors
were dissatisfied with the design of
some of the programs. Although the
share of total government spending allocated to all anti-poverty programs
certainly fell between 1998/ 99 and
2000, the magnitude of the fall is probably exaggerated by table 1. Part of the
reduction recorded in table 1 was the
result of Indonesia’s new decentralisa tion policies: with the passage of Laws
22 and 25 of 1999, many of the expenditures that were formerly administered
by the central government, including
Anti-poverty Programs in Indonesia
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most of the SSN programs, became the
responsibility of district and municipal
governments. 6 There seems to be no
way of knowing how much is now being spent on anti-poverty programs at
the local government level, because
even the central government ministries
do not have comprehensive data on
this. This is an important area for future research.
Indonesia’s Performance
in Reducing Poverty
Studies of poverty trends in Indonesia
are unanimous in finding large falls in
poverty incidence during the New Order period, but disagree about their extent and the rate at which poverty
incidence fell. Booth (1993: 59) reports
that, according to a poverty line devised
by Professor Hendra Esmara, the national headcount poverty rate (that is,
the proportion of people living in households whose average per capita income
is below the poverty line) fell from 47.4%
in 1970 to 45.2% in 1976, and then to
34.4% in 1987. BPS has produced estimates of national poverty incidence
from 1976 onwards. Relative to the BPS
poverty line, the headcount poverty rate
was lower than that found by Esmara
and fell much more dramatically between 1976, when it was 40.1% relative
to the BPS line, and 1987, when it was
only 17.4% according to BPS (Booth
1999: table 6). Poverty continued to fall
in the early and mid 1990s, and by February 1996 was estimated to be only 11%
relative to the BPS poverty line (Booth
1999: table 6).
There were corresponding improvements in other social indicators in the
first three decades of the New Order
regime. Almost universal entry into primary education was achieved in the
early 1980s, and the net enrolment rate
has been maintained at about 95% at the
primary level since then (Jones, Hagul
317
and Damayanti 2000). Life expectancy
at birth rose from 55 years in 1980 to 65
years in 1997, and the estimated proportion of children dying before reaching
their fifth birthday fell from 125 per
1,000 for those born in 1980 to 52 per
1,000 for those born in 1998 (World Bank
2001: 276).
The surveys conducted since the crisis all confirm that poverty rose sharply.
The special mini survey of household expenditure carried out by BPS in December 1998 suggested that the headcount
poverty rate was then 24%. However,
much of the apparent rise was due to an
increase in the poverty line. Relative to
the former poverty line, the headcount
rate rose from 11% in 1996 to 17% in
1998. Relative to the new poverty line,
the rate rose from 18% in 1996 to 24% in
1998 and then fell slightly to 23% in 1999.
Measured poverty after the onset of the
crisis may have slightly overstated real
poverty because the anti-poverty programs that provided benefits in kind—
subsidised rice, school grants and
subsidised health care and nutrition—
would not have affected the expenditure-based measures of poverty, even
though they reduced real poverty, because their benefits were not included
in measured expenditure. 7
EVALUATION OF THE
SSN PROGRAMS
Comprehensive studies of the coverage
and targeting performance of the SSN
programs have been undertaken by researchers at SMERU. Table 3 summarises
some of their principal findings. Two
measures of ‘targeting’ are presented: the
ratio of a program’s coverage of the poorest 20% of the population—as measured
by household expenditure surveys—to
its coverage of the remaining 80% of the
population, and the ratio of its coverage
of the poorest 20% of the population to
its coverage of the richest 20%.8 Since the
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318
Anne Daly and George Fane
BKKBN poverty criteria are only fairly
weakly correlated with low expenditure, it is not surprising that the programs turned out not to have been
targeted very accurately to those in the
bottom 20% of the distribution of expenditure.9 And since random errors in
the survey data on expenditure would
make even a perfectly targeted scheme
appear to contain a random element,
the estimated targeting performance of
the schemes probably understates their
true performance.
come within villages are small, or
where the official criteria are poor measures of poverty, this is an appropriate
strategy. Another reason for not selling
all the rice just to the households that
met the official criteria is that it was
often difficult for poor households to
accumulate the Rp 20,000 needed to
purchase their monthly allocation. In
such cases, some rice remained unsold,
and some was sold to those who could
afford it but were outside the original
target group (Kusumastuti et al. 1998).
Subsidised Rice
As described above, the objective of this
program in 1999/2000 was to provide
20 kg of subsidised rice per month to the
17.4 million households in the two poorest BKKBN groups. In the event, about
10 million households in total actually
received subsidised rice in 1999/2000
(National Coordinating Team for Social
Safety Net Programs 2001), and not all
of them were in the two poorest groups.
The SMERU estimates summarised in
table 3 indicate that only 53% of those
in the bottom 20% of the expenditure
distribution received subsidised OPK
rice, and those in this poorest 20% were
only 40% more likely to benefit from the
scheme than the rest of the population.
Nevertheless, the last column in table 3
shows that the scheme was relatively accurately targeted away from households
in the richest 20% of the population.
Among the problems encountered in
the distribution process were those related to delays in distribution to remote
areas. Another reason why the target
households typically received less than
their full monthly allocations of subsidised rice was that many village communities insisted on allocating some
rice to every household, rather than
providing all the benefits to those that
met the official criteria (Kusumastuti et
al. 1998). Where the differences in in-
Education
In the first year, problems in the administration of the SGP were encountered
in remote areas, where the cost of collecting the scholarship was high, and
occasionally exceeded its total value. In
addition, local post offices complained
of congestion. However, Hardjono
(1999: 30–1) concluded that in the small
region of West Java covered by her survey, the administration of the SGP was
relatively effective. A survey of 355 primary and lower secondary schools in 22
provinces conducted by CIMU found
that 41% of the first tranche and 70% of
the third tranche for the 1998/99 school
year were collected from the post offices
by the schools rather than by the students themselves (CIMU 2000a). In subsequent years, this initially informal
practice was officially sanctioned.
In some cases, local committees decided to share the scholarships among
students rather than give them to selected poor students for the duration of
their schooling at a particular institution.
In other cases, some or all of the money
was retained by the school to pay off
debts, replace fees or cover ongoing
costs. In these cases, the scholarships
therefore acted like a block grant. Nevertheless, the CIMU survey found that
the majority of primary and lower secondary students directly received over
Anti-poverty Programs in Indonesia
319
TABLE 3 Coverage and Targeting of Anti-poverty Programs, August 1998 to February 1999 a
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Program
Coverage of Group by Program (%)
Subsidised rice
Primary scholarships
Lower secondary scholarships
Upper secondary scholarships
Health care
Nutrition
Job creation
Poorest
20% of
Potential
Group
Poorest
40% of
Potential
Group
Whole of
Potential
Group
(1)
(2)
52.6
5.8
12.2
5.4
10.6
16.5
8.3
49.4
5.3
11.2
5.2
8.9
16.6
7.6
Targeting Ratios
(3)
Coverage
of Poorest
20%/
Coverage
of Remaining 80%
(4)
Coverage
of Poorest
20%/
Coverage
of Richest
20%
(5)
40.1
4.0
8.5
3.8
6.4
15.9
5.6
1.4
1.6
1.6
1.6
2.0
1.0
1.7
2.2
2.8
2.5
2.8
3.4
1.2
3.3
a
Column (4) = [4 x column (1)]/[5 x column (3) – column (1)].
Coverage of the richest 20% = column (1)/column (5).
Coverage = number covered/size of potentially eligible group. The definitions of the number
covered and the size of the potentially eligible group vary from scheme to scheme and are
given below for the national coverage estimates in column (3). The definitions for the other
expenditure quintiles are exactly analogous.
Size of ‘potentially eligible’ group:
Subsidised rice and job creation programmes: all 50.4 million Indonesian households.
Scholarships: the number of children in the relevant type of school—29.7 million children
enrolled in primary school; 10.4 million in lower secondary school; and 6.4 million in upper
secondary school.
Health care: the 27.6 million individuals estimated to have visited a health care provider
in the three months prior to the survey.
Nutrition: the 20.0 million individuals in the group ‘pregnant women and children under
three years old’.
Number covered:
Subsidised rice and job creation schemes: the number of households in which any member
had received any benefits under the relevant scheme in the six months prior to the survey.
Scholarships: the number of children that had received a scholarship in the 1998/99
academic year.
Health care: the number of individuals seeking treatment in the three months prior to the
survey who had used a health card to obtain free treatment.
Nutrition: the number of individuals who had obtained benefits under the program in the
six months prior to the survey.
Source: Sumarto, Suryahadi and Widyanti (2001: appendix table 2). Their estimates are
derived from the special module on the SSN that was included in the National SocioEconomic Survey (Susenas) conducted in February 1999 and that covered the preceding
six months.
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320
two-thirds of their annual scholarship
entitlement. There was, however, considerable regional variation in these outcomes.
Since school fees had contributed to
the high dropout rates of children from
poor families in the late 1980s, government schools were directed not to charge
fees for the 1998/99 academic year. Although the government did not directly
provide funds to replace the fees that
were supposed to be waived (CIMU
2000b: 5), the SGP block grants helped
to compensate for fees in those schools
that received these grants.
The SGP has been cited by both
SMERU and the World Bank as one of
the most successful of the SSN programs, and total school enrolments did
not fall. The age-specific school enrolment ratio for 7–12 year olds remained
constant at just over 95% between 1997
and 1999, while the corresponding ratios for 13–15 year olds and 16–18 year
olds rose slightly over the same period,
from 77% and 49% to 79% and 51%, respectively (BPS 1999: 53).10 However,
these increases are modest relative to the
13.5% increase in total government
spending on education (at constant
1996/97 prices) between 1997/98 and
1999/2000 shown in table 4.
Lanjouw et al. (2001) use data from
the Susenas (National Socio-Economic
Surveys) for 1995–98 to estimate the
marginal impact on households in each
expenditure quintile of public spending
at the primary, lower secondary and
upper secondary levels. They find that
additional expenditure on primary education is particularly beneficial for
households in the poorest quintile.
However, additional government expenditure on lower and upper secondary education provides relatively larger
benefits to richer households. These results suggest that by preventing a cut in
expenditure on primary education at the
Anne Daly and George Fane
time of the crisis, the SGP helped alleviate the effects of the crisis on poverty,
but that the subsidies it provided to
lower and upper secondary education
had smaller effects on poverty.
Concern has been expressed because
the scholarship program did not reach
the very poor children who were not
enrolled in any school, or those who
attended low quality private schools
that were excluded from the program
(Jones, Hagul and Damayanti 2000).
There is also survey evidence that the
aggregate picture may disguise different results for particular groups. For
example, there is some evidence that
dropout rates rose among poor urban
teenagers following the crisis (Filmer
et al. 1999; Jones, Hagul and Damayanti
2000).
The targeting scores reported in
table 3 suggest that the SGP was better
targeted than the subsidised rice and nutrition programs, but not as well targeted as the health care or job creation
programs. Cameron (2000) reports similar overall targeting results using the 100
Villages Survey. However, her measure
of targeting relates to households containing students who received a scholarship, not to the scholarship status of
an individual student. Her measure for
targeting will therefore overestimate the
number of individuals receiving scholarships. Her estimates imply that the
targeting improved with level of education, whereas table 3 implies that at
each level of education the poorest 20%
of students (measured according to average expenditure per household member) were 60% more likely to receive
scholarships than the richest 80%. 11
There is an important sense in which
both the table 3 targeting estimates and
those of Cameron exaggerate the targeting performance of scholarships at the
secondary school level, and particularly
at the upper secondary level: both sets
Anti-poverty Programs in Indonesia
321
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TABLE 4 Total Budgetary Spending on Education, and Spending on Education under Antipoverty Programs, 1995/96 to 1999/2000
Expenditures (Rp trillion) b
Anti-poverty program
spending on education
Total anti-poverty programs
Education, routine budget
Education, development budget
Education, total budget
Education, total budget, 1996/97
prices
Shares (%)
Education anti-poverty
as % education budget
Education budget
as % of total budget
Education budget
as % of GDP
a
95/96 a
96/97
97/98
98/99
1999/
2000
n.a.
1.07
3.64
1.81
5.44
0.30
1.54
4.22
2.14
6.35
0.36
1.98
5.18
2.09
7.27
1.56
14.24
5.67
1.98
7.65
1.67
13.95
7.49
7.21
14.70
77.2
108.3
21.1
50.0
32.3
5.79
6.35
6.50
4.15
7.38
5.1
n.a.
4.72
4.95
20.33
11.35
6.97
7.01
7.19
5.20
7.39
1.16
1.14
1.05
0.75
1.30
Growth
96/97–
99/00
(% p.a.)
n.a. = not available.
b
Anti-poverty program spending on education is defined as in table 1 and derived from the
sources given there. CPI data are from the CEIC Ltd (Hong Kong) Asia Database. Budgetary
spending on education excludes spending on religious schools by the Ministry of Religion
and Home Affairs.
Sources: Budgetary data on education were taken from National Ministry of Education (2000:
157, table 81).
of estimates refer to coverage of children
in school, not to coverage of all children
in the relevant age group. Since children
from poor families are much less likely
than those from richer families to be
enrolled in secondary school, it may well
be that, relative to all children in the relevant age group, the scholarships at
upper secondary level were targeted
towards rich families and away from
poor ones.
Cameron also estimated regressions
using the 100 Villages Survey to explain
the probability of a child dropping out
of school between August and December 1998 as a function of scholarship
availability and a set of control variables that included the ages and gender of the child and the socio-economic
characteristics of its household. For
each of the three levels of schooling
(primary, lower secondary and upper
secondary), she estimated one regression that included a village-specific effect and another that did not include
such an effect. In five of the six resulting regressions, the estimated effect of
the scholarship program on the prob-
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322
ability of dropouts was not statistically
significant, and in the sixth case—the
regression with village-specific effects
for lower secondary school students—
the estimated coefficient implied that
being in a household in which some
child received a scholarship reduced
the probability (evaluated at the sample
mean) of dropping out at the lower secondary level by 3.5 percentage points.
In the 100 Villages Survey, 13.6% of
lower secondary students were in
households that received scholarships,
but according to the Susenas data in
table 3 the coverage at this level was
only 8.5%. However, Cameron’s seemingly low estimates of the effects of the
SGP on retention rates relate only to
dropouts in the course of a school year.
Using her data set it is impossible to estimate the presumably much larger effect of the offer of a scholarship on the
probability of re-enrolment at the start
of a school year.
Retention rates are not the only relevant criteria for assessing the SGP.
Jones, Hagul and Damayanti (2000)
emphasise the positive implications of
the program for quality of education.
Increased funds for schools allowed
them to maintain facilities and to reduce
the fees for children who were not offered scholarships. There is also evidence that this injection of funds enabled
schools to be more generous with students who were unable to pay their
school fees than had been the case in the
late 1980s, when some schools excluded
students who were unable to pay (Jones,
Hagul and Damayanti 2000).
Health Care
The subsidised health care program for
poor households that was introduced
in 1998 was not subject to the same extensive and systematic reviews as the
education program. The World Bank
report on health care programs (World
Anne Daly and George Fane
Bank 2000) reported difficulties in allocating funds, inadequate publicity for
the program among beneficiaries and
health care providers, and unnecessarily complex administrative procedures.
Against these negative assessments,
there is evidence from some surveys
and field visits that the program helped
to improve ante-natal and post-natal
care and raised the availability of resources in a health care system that was
facing extreme difficulties as a result of
the economic crisis.
Available evidence suggests that the
free health care service scheme achieved
a higher coverage rate among the poor
and was more closely targeted to poor
households than the nutrition program.
SMERU’s analysis of the 100 Village
Survey and the Susenas data shows that
the poorest 20% of households were
twice as likely to receive free health care
treatment as the non-poor. Lanjouw et
al. (2001) estimate that households in the
poorest quintile of the expenditure distribution receive a share of the benefits
from public expenditure on primary
health care that is equal to their share in
total household expenditure, but that the
poorest households share less than proportionately in public expenditure on
hospitals.
The rate of participation in the nutrition program, however, was almost
equal for poor and non-poor households
(16.5% of poor households compared
with 15.9% of all households, according
to the Susenas data).
Job Creation and
Infrastructure Development
The job creation schemes were intended
to induce self-selection of poor unskilled
workers by paying no more than minimum wages. Sumarto and Suryahadi
(2001: 13) estimate that the average wage
of workers in these schemes was 54%
below the average daily wage in the con-
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Anti-poverty Programs in Indonesia
struction sector and 4% below that in the
foodcrop sector.
However, estimates of the targeting
performance of the job creation
schemes are mixed. According to table
3, the coverage of the poorest 20% (by
expenditure) exceeded that of all other
households by 70%, and exceeded that
of the richest 20% of households by a
factor of 3.3. Similar results were found
from the 100 Village Survey. Hardjono
(1999: 23) gives a different and much
less favourable picture of padat karya
programs, on the basis of a small but
very detailed survey in April and May
1999 of a single area of 22 hamlets on
the northern coastal plain of West Java.
In this sample, only 5% of participants
in padat karya schemes belonged to
households in the poorest quintile,
whereas 34% belonged to households
in the middle quintile and 16% to
households in the richest quintile.
Hardjono reports that villagers were
cynical about these schemes on the
ground that employees were allegedly
selected on the basis of their connections with village authorities or contractors. She also reports that: ‘It so
happened that in one hamlet padat karya
work was in progress on the day when
the survey was conducted. The small
road that was being “improved” led to
the lurah’s (village headman[’s]) house’
(Hardjono 1999: 23). 12
Even the table 3 estimates of the targeting of the job creation schemes are
much less impressive than the targeting
achieved by Argentina’s Trabajar Program, in which 80% of the employees
were drawn from the poorest 20% of
households (Jalan and Ravallion 1999).
Nevertheless, they are still better than
the estimates of targeting achieved by
any SSN scheme other than the health
care program. However, we believe that
the table 3 estimates exaggerate the extent to which the benefits of the job cre-
323
ation schemes go to the poor. Even if
Hardjono’s sample was highly atypical—which we doubt—and even if most
of the employees were unskilled workers in households below the poverty
line, the benefits to unskilled workers
would still only be a small fraction of
the budgetary outlays by the government, given plausible estimates of the
elasticities of supply and demand for
unskilled labour. Suppose, for illustrative purposes, that the elasticities of supply and demand for unskilled labour are
three and minus one, respectively. Under these assumptions, the direct benefit of job creation schemes to unskilled
workers would be only a quarter of the
total budgetary cost of the schemes.13 If
the elasticities are larger than those assumed above for illustrative purposes,
the benefits to unskilled workers would
be an even smaller fraction of the budgetary cost of the programs. It is widely
argued that the supply of unskilled
labour is indeed very elastic in developing countries; and the demand is
probably also very elastic, since the global markets for manufactured goods
produced by internationally mobile
capital and unskilled labour have become increasingly competitive and integrated. Of course, there are additional
benefits to the poor from the infrastructure built or repaired by the job creation
schemes. However, if the purpose is to
provide infrastructure, tendering among
specialist firms that compete on the basis
of price, quality and efficiency is more
efficient than ad hoc programs with multiple goals. Finally, to be efficient, the
provision of infrastructure must be
planned well in advance, and projects
carefully selected using cost–benefit criteria. In contrast, job creation schemes
are often expanded, or contracted, according to short-term expediency—as
happened in Indonesia in the wak