With the most optimistic estimate putting Indonesia's economic growth next year at 5 percent and the most pessimistic one forecasting as low as 2.5 percent -- far below the 6 percent target as set in the 2009 state budget -- we should brace ourselves for more economic hardships.
The wave of massive worker layoffs announced by several companies last month -- as our economy began feeling the pinch of the global economic downturn and financial turmoil -- should raise great concerns because the worst seems yet to come. In addition to the unemployment rate of about 11 percent there are an estimated 40 million workers grossly underemployed.
Yet even more worrisome, Finance Minister Sri Mulyani Indrawati said Tuesday that the most severe impact of the recession in the developed economies would hit the country in the first half of next year.
With nearly 45 percent or 102 million of the country's 227 million people living on between US$1-2/day and 70 percent of its 105 million labor force working in the informal sector, it is quite easy to imagine the large number of people highly vulnerable to absolute poverty.
Worse still, we do not as of yet have a comprehensive social security system to protect the poor and near poor in the sharp economic downturn predicted for next year.
There are Asabri, which provides pension and health care for military members and the police, Askes (health care for civil servants), Taspen which provides pensions for civil servants and Jamsostek which manages old-age income support and health insurance -- but only for workers in the formal sector.
But all these separate social and insurance schemes, beside providing only limited service and funds, cover only around 30 percent of the people. The majority of the population remains without any form of social protection program.
The 2009 state budget beginning in January does not stipulate what was known between 1998 and 2005 as crisis-era safety net programs because we didn't expect any economic debacle to the magnitude of the 1998 economic and political crisis.
During the height of the crisis the government implemented a broad social safety net, but this scheme was designed only as temporary income-support programs for the poor and near poor covering direct cash transfers, public employment program in labor intensive works and health and educational aid.
However, given the high vulnerability of the estimated 100 million near poor to falling into absolute poverty and the high risk of massive worker layoffs by export-oriented companies, the government is well advised to design income-support programs as preparation for next year's worst case scenario economic situation.
The 2009 state budget law allows the government to allocate new spending not stated in the budget, to shift spending allocations between programs or government agencies, to withdraw standby loans from bilateral or multilateral creditors and issue bonds of a higher value than stipulated in the budget under certain conditions.
One of the prerequisites for such contingency measures -- that economic growth falls one percentage point below the 6 percent target -- will most likely occur.
As the government will no longer need to provide huge sums for fuel and electricity subsidies, which over the past three years have accounted for more than 50 percent of all subsidy spending, it has broad fiscal space for large spending on social safety net programs to cushion the impact of the economic downturn from the poor and near poor as well as laid-off workers.
The Central Statistics Agency already has a fairly reliable geographical map of poverty pockets across the country and has constantly updated its computerized data bank on poor families and their characteristics.
The government also has built up experience in managing targeted income-support programs such as the distribution of subsidized rice, conditional cash transfers, free health services and educational scholarships for the poor.
Certainly, even under the worst-case scenario, our economic condition will most likely remain much better than that during the crisis of 10 years ago.
What is most urgently needed in anticipation of a big wave of layoffs is public employment programs in labor intensive projects in rural and urban areas such as roads, irrigation systems, telecommunications, electricity transmission and distribution lines and rural infrastructure. These programs should be the focus of the pump priming next year.
Certainly these public employment programs are only temporary and will be implemented on top of other poverty-alleviation programs, including the nationwide Community Empowerment Programs in rural and urban areas which were launched in 2006.
But our economy will greatly benefit from more efficient infrastructure when eventual strong recovery within one or two years requires capacity expansion in almost all sectors.
