The findings of what the World Bank claims to be the most comprehensive analysis of poverty in Indonesia ever made could provide valuable input for the government to improve the action programs under its new poverty-alleviation strategy, which was introduced last September.
The 350-page report, Making the New Indonesia Work for the Poor, and the 95-page Making Services Work for the Poor, which were unveiled during a national poverty conference Thursday, map out in detail the magnitude, the nature, the causes and the geographical distribution of poverty, and propose the best pathways out of the poverty trap.
The magnitude of the poverty problem in the country is already quite well known. The aggregate figures were announced by the Central Statistics Agency early last September, when it revealed that the number of those living in poverty had increased by 11.25 percent, or 3.95 million, to 39 million, or 17.5 percent of the total population between February 2005 and March 2006. This was the highest incidence of poverty since 2003.
The World Bank reports disclosed that almost 45 percent of Indonesia's 220 million people survive on daily expenditures of between US$1 and $2, and 69 percent of the poor live in rural areas, 64 percent work in agriculture, 75 percent work in the informal sector and 55 percent have less than a primary education. Yet more burdensome is that 48 percent of poor households have more than five dependents. What a poverty trap.
But most important now is how to incorporate the findings of these reports and translate them into action programs.
Coordinating Minister for the People's Welfare Aburizal Bakrie elaborated at the press conference on the government's poverty-reduction strategy, which integrates the Subdistrict Development Project for the rural poor and the Urban Poverty Alleviation Project into a national Community Empowerment Program. The new program will begin to be implemented next year in 50,000 rural and urban villages in 48 cities and regencies in seven provinces.
The main characteristics of the two projects in the Community Empowerment Program are the empowerment and involvement of poor people in conceiving programs, transparent budget rules, processes and procedures, good governance practices and increased accountability. Villagers will be encouraged to take an active part in the planning and decision-making process to allocate funds for their self-defined development needs, such as infrastructure, health, water, education.
In essence, the fundamental goals of the poverty reduction strategy are to increase the opportunities available to poor families, reduce their vulnerability to unfavorable external events and empower them to address their own specific problems.
But this is easier said than done because the three pathways out of poverty recommended by the reports -- high, broad-based growth, adequate access to social services and targeting public spending to the poor -- are daunting tasks. This is especially true with Indonesia's vibrant democracy and decentralized administration, where a long process of consultations is needed to agree on grassroots projects and local administrations have yet to build adequate institutional capacity to manage public expenditures.
High growth means an economic expansion of more than 6 percent a year, compared to 5.6 percent last year and about 5.7 percent this year, with rising real wages, expanding employment and low inflation. Broad-based growth requires improved agricultural and non-agricultural (off-farm) productivity, which in turn calls for the diversification of crops into higher value-added commodities, high-yield seeds, technical extension services, better rural-investment climate, labor-intensive projects, extensive microcredit financing and rural infrastructure.
Adequate access to such basic services as health, education and sanitation is also pivotal for empowering the poor to make use of the opportunities created by economic growth. Targeting public spending to the poor means shifting away from government market intervention efforts such as price subsidies and other protectionist trade policies to providing targeted income-support to poor households, such as the cash transfers to the poor made since last year after the doubling of fuel prices.
At the end of the day though, given the fiscal constraints the government will continue to face the next three to five years due to its heavy debt service burden, the poor will have to rely mainly on themselves.
The government, however, can make an immediate impact on the poor by ensuring that they have a fair chance in the markets for the various factors of production -- their labor, their land, loans and access to natural resources.
