Why Indonesia needs a new social policy?

The Jakarta Post ,  Jakarta   |  Mon, 06/25/2007 10:07 AM  |  Opinion

Binny Buchori, Jakarta

It has been 10 years since Indonesia was hit by economic crisis.

Despite the government's claim the Indonesian economy has recovered and the country now enjoys a stable exchange rate, increasing economic growth and a decreasing budget deficit -- Indonesia still holds a low rank in most social indicators.

The 2005 Human Development Report shows the Indonesian Human Development Index at no 110, well below Thailand and the Philippines which are at number 73 and 64 respectively.

Despite commendable efforts by the government to reduce unemployment and poverty, Indonesia continues to struggle against massive unemployment and deteriorating infrastructure, as well as the outbreak of dengue fever, evian flu and tuberculosis.

The question is: Why is Indonesia so far behind its neighboring countries? And why it is the slowest Asian country to recover from a financial crisis?

Government policies show there are two approaches to the problem: Focussing on economic growth and maintaining macro stability through tight fiscal policy -- and developing partial ad-hoc social policy to tackle poverty through a social safety net program.

In the first approach the economic policy concentrates on how the economy could grow with very little cost. It concentrates on how government spending could become efficient by reducing subsidies and fostering privatization.

But the poverty reduction program including the social safety net deals with the problem of poverty in an ad-hoc manner.

In short, there is a disconnect between economic policy and social policy.

The economy may look robust and stable, but it fails to secure the welfare of the people. There are at least three reasons why we should worry about this approach.

The economic policy concentrates too much on the stability of the monetary and pays little attention on the real sector.

There hasn't been enough investment in the real sector. It remains stagnant and does not create employment -- so we experience stability and growth that does not have a multiplier effect.

Secondly, the policy does not pay attention to institutions that can promote public welfare and improve human development, including education and health institutions.

This is seen in the Law on Social Security, the very slow reform under the Ministry of Social Affairs and Ministry of Labor and Transmigration.

The absence of attention in these sectors, in the medium and long term, would result in a lowering of the quality of human resources in Indonesia -- more low-skilled workers and shorter life-expectancy.

Thirdly, there is a belief social issues should be seen as secondary. In this paradigm, social policy is regarded and treated as an inefficient investment because it does not contribute to direct economic growth -- it is not regarded as a medium or long-term investment.

What is concerning is the deterioration in health services and education.

Increasing poverty has not prompted the government or its politicians to think about or develop new social policies.

In the current campaign for the next Jakarta governor, for example, the competing campaign issues are not poverty reduction or employment creation -- the focus is on the candidate.

The issue of poverty has not incentivised candidates to bring a new social policy to their constituencies.

The development and enforcement of social policies takes technical skill and the creation of a political consensus through various stakeholders -- especially from political parties.

The government needs to work on the details of the policy and must develop a political consensus.

New Social policy which would guarantee human development can become a platform for the government to obtain support from the parliamentarians.

Ignoring the need to develop a social policy would ensure Indonesia becomes a country without highly skilled people. It will ensure unequal access to education and health services. And Indonesia will remain in the lowest ranks of social indicators.

What is needed is a comprehensive policy and approach to tackle the issue of people's welfare -- one that is not limited to sectoral social issues.

For Indonesia to improve human development, it needs to have an affordable education system, accessible health facilities, workers insurance for those working in formal and informal sectors and good infrastructure.

Indonesia does not need temporary, ad-hoc projects that only solve short-term partial poverty issues.

This cannot be done without the existence of a social policy that addresses the issues of public welfare in a comprehensive manner.

Indonesia requires a social policy which would encompass the financial side of people's welfare, the institutionalization of the policy and the enforcement of the policy through the issuance of related laws and regulations.

For the policy to operate, it needs to be institutionalized, and in some cases it may mean creating new institutions to implement the policy and deliver the services.

Finally, law and regulations need to be enforced and developed.

Such a policy would need coherence between macro economy and public welfare.

Generous public spending, which would lead to a more flexible fiscal policy, would be needed.

Developed countries invested in their human development by allocating generous social spending.

Developed countries that belong to the Organization of Economic Cooperation and Development (OECD) spend six percent of their Gross Domestic Product on education and training.

Indonesia spends 3 percent of its GDP on education, health, food and security.

The Indonesian Human Development Report 2004, published by UNDP, National Development Planing Agency (Bappenas) and the Central Bureau of Statistics (BPS) recommends Indonesia double its social spending from three percent to six percent.

Implementing this recommendation could become the first step toward a more comprehensive social policy.

The government should double its spending on social sectors, and parliamentarians should support this move.

This would reduce poverty and lay a strong foundation for human development.

The writer is executive director for NGO Perkumpulan PraKarsa -- a group focused on research and capacity building. On June 27-28 2007 Perkumpulan PraKarsa is set to organize a nation-wide conference on reducing poverty in Indonesia through the promotion of a comprehensive social policy framework.

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