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Record-low poverty reduction rate calls for more robust policies
Indonesia's record low poverty reduction rate should serve as a wake-up call to the government that economic growth has been both slow and unevenly distributed, experts have said
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span>Indonesia's record low poverty reduction rate should serve as a wake-up call to the government that economic growth has been both slow and unevenly distributed, experts have said.
Institute for Development of Economics and Finance (Indef) researcher Rusli Abdullah said in Jakarta on Thursday that the country’s economic growth in recent years had not been high enough to go the last mile in poverty reduction.
He compiled data revealing that the poverty rate had only decreased 1.74 percent between 2014 and 2019, the slowest rate in the last 40 years. The data sends the message that the lower the number, the more difficult poverty reduction will be, Rusli said.
“That’s why there needs to be vastly different policies than the previous ones,” said Rusli. “If poverty increases, we risk facing social unrest.”
A lack of robust economic growth has hampered efforts to lift people out of poverty, with the number of poor recorded at 24.79 million people, or 9.22 percent of the population, as of September 2019, Statistics Indonesia (BPS) data published on Jan. 15 show.
In the broader context, the World Bank estimates that almost a quarter of the population of the developing East Asia and Pacific region lives below the upper-middle-income poverty line of US$5.50 a day. This includes nearly 7 million more people than the bank projected in April 2019, when regional growth was looking more robust.
Weakening global demand and heightened uncertainty around the continuing United States-China trade tensions has led to a decline in exports and investment growth, according to the October 2019 edition of the World Bank’s East Asia and Pacific Economic Update titled Weathering Growing Risks.
“As growth slows, so does the rate of poverty reduction,” the World Bank’s vice president for East Asia and the Pacific, Victoria Kwakwa, said in a press statement.
National Team for Accelerated Poverty Reduction ad-interim executive secretary Bambang Widianto said the economic slowdown had also affected poverty reduction efforts in Indonesia. The country’s growth rate of about 5 percent over the past several years had failed to create more and better jobs for the poor, he said.
However, Bambang added that the decline in the poverty reduction rate into single digits was “fine”, as it showed that poverty alleviation efforts were now targeting the chronically poor, a more difficult segment of society to address. The chronically poor are generally defined by scholars as people who have remained persistently poor for a long period of time.
The government has also raised its poverty line over the last decade to better reflect increasing standards of living, which has made the poverty reduction rate appear slower. If authorities used the measurements from last year or two years ago, the poverty rate would probably be 8 percent, Bambang said, below the current 9.22 percent.
Instead, he argued that inequality was the main challenge to reducing poverty moving forward. “The government has realized that we can’t make do with the current level of inequality. Inequality needs to be reduced at a faster rate,” Bambang said.
The government has promoted social programs aimed at the poor, such as the Family Hope Program, village funds, the Indonesia Smart Card (KIP) and the noncash food assistance program. As a result, the Gini ratio has been decreasing, although it remains relatively high, Bambang said.
Both Indef and the SMERU Research Institute have shed light on the flaws in programs that Bambang mentioned.
A recent SMERU study showed that social assistance, while effective in addressing poverty, has had a limited impact in closing the income gap. Analysis of pro-poor programs from the Indonesia Smart Program to the KIP also showed similar results despite potential long-term benefits.
The rural poverty reduction rate of around 2 to 5 percent is “not much different” compared to 2015 when the government rolled out the village fund program, Indef researcher Riza Annisa Pujarama said. BPS data also showed that rural poverty had decreased at a slower rate than in urban areas over the last few decades.
Riza said village funds had been ineffective as the funds had mostly been used to build infrastructure, whereas little had been allocated to economic empowerment. Instead, she suggested that the government should either help boost agricultural productivity or improve access to new sectors aside from agriculture to bolster poverty reduction in rural regions.
Many Indonesians still engage in traditional agriculture and are trapped in low-paid and relatively unproductive activities, struggling to get enough food with their children prone to stunting, according to a report published in October by the Asian Development Bank, the International Food Policy Research Institute and the National
Development Planning Agency.
“It's time to allocate part of the village funds to economic empowerment programs to give a kick to poverty reduction efforts,” said Riza.
