I

ndonesia has witnessed a long history of anti-poverty policies and programs. However, the number of people in absolute poverty remains stubbornly high, exacerbated by deepening multiple deprivations.

Under the new administration of President Joko '€œJokowi'€ Widodo, efforts are being made to expand poverty reduction through multiple cash transfers. Swift progress is being seen in dismantling the fuel subsidies (with big assistance from falling oil prices). It is said that a significant amount of these savings will be used to finance infrastructure and cash-transfer programs.

Like their predecessors, these cash-transfer programs will eventually benefit the bottom 25 percent of the population covering some 15.5 million households '€” '€œthe largest such program in the world'€, the Economist wrote. Likewise, the new path-breaking Village Law intends to further empower local communities, building upon the participatory principles of the long-standing and country-wide community empowerment program (PNPM).

But, are cash transfers and local infrastructure-development programs enough to facilitate sustained and secure poverty reduction? We think not. The poor also need productive assets, improved skills, social networks and better terms of trade, among other things, to gradually climb out of poverty.

Cash transfers may have helped families cope with the economic shocks in the short-term, but whether they provide long-term protection has been removed remains a question. Preliminary findings from a forthcoming World Bank study in Indonesia show that transfer levels of social-assistance programs are too low to sustainably support poor households in meeting their needs and to help them achieve long-term human development outcomes. Thus, cash transfers are necessary but are not sufficient.

Various government and development agencies are also wondering about successful exit policies that can help poor households graduate from social-protection programs, after more than a decade of experience with cash transfers.

Hence, as cash-transfer programs expand and mature in Indonesia, the new administration could learn from global experiences by designing a similar graduation policy, without waiting 10 years.

A successful graduation policy, which would complement cash transfers, should be based on the sustainable-livelihood principle with a dual focus on '€” 1) diversifying existing livelihood opportunities by improving ownership of productive assets and encouraging micro-entrepreneurship; and 2) enhancing incomes by moving up the value chain of their livelihoods, especially agriculture.

Global evidence suggests that multi-sectoral programs that enable accumulation of assets, remove capital constraints, provide technical training and build social networks can accelerate the diversification of existing livelihoods of poor households.

The PNPM Revolving Loan Fund and the microloan program (KUR) have tried to achieve some of these objectives but have been riddled with such problems as poor reach, inadequate beneficiary support, lack of market linkages etc.

New programs should learn from this decade-long experience and take a bolder approach.

A few recent successful initiatives from India, Bangladesh, Nicaragua, and Uganda have some valuable lessons for Indonesia. In Andhra Pradesh, India, large-scale community-based livelihood program has enabled long-term productive asset accumulation and a sustained increase in consumption among poor households.

A few other successful programs have tried to combine social-protection programs, especially cash transfers, with other productive-enhancement activities. In Uganda, an evaluation program that offered supervision, cash grants, business training, advice and stronger social networks saw microenterprise ownership and incomes double in just 16 months.

Mexico'€™s Progressa (now called Prospera), the world'€™s oldest cash-transfer program has also started a productivity-enhancement component to help participant households enhance their productivity.

All these '€œgood practice'€ initiatives have one thing in common: reducing capital constraints (through cash transfers, or loans) is necessary but rarely sufficient for long-term poverty reduction. Hence, the new administration would benefit by devising a policy complementing the cash transfers with a focus on accumulation of assets.

Policymakers should also focus on agriculture again with an emphasis on small and marginal famers. The terms of trade are not very favorable for these poor households and policies to encourage '€œforward'€ and '€œbackward'€ linkages should be formulated.

These poor farming households also need technical skills, access to cheap capital and social networks to improve their productivity. Broader systems for capital development need to be built by expanding access to financial services such as savings, credit, insurance etc.

But should the government provide these services or should market forces play an enabling role? Both are needed. Any future policies should also involve the '€œpeople'€™s sector'€ or the communities, by '€œco-production'€ partnerships between all stakeholders.

For best practices of community participation, Indonesia needs to look no further, given its rich past of community participation, which will be further reinforced through the new landmark Village Law.

Cash transfers and local infrastructure-development programs are useful in the fight to eliminate extreme poverty, but are rarely sufficient for secure and long-term poverty reduction.

Thus, Indonesia needs new policies that will adopt a graduation approach to assist the poor accumulate assets and gain a bigger share of the rural economy.