World Bank Releases Report Assessing Indonesia's Social Assistance Programs

Impoverished citizens in Medan, North Sumatra, receive financial aid as part of the Family Hope Program (PKH) in this 2015 file photo. (Antara Photo/Irsan Mulyadi)

By : Tabita Diela | on 9:41 PM November 16, 2017
Category : Business, Economy

Jakarta. Indonesia's multi-year efforts to reduce poverty and inequality need a strategy update to further expand coverage, effectiveness and accelerate results, according to a report by the World Bank published on Wednesday (15/11).

The report, titled "Towards a Comprehensive, Integrated and Effective Social Assistance System in Indonesia," reassesses both the strengths and weaknesses of the country's social assistance programs and proposes possible reform options.

The report is an update of the bank's 2012 report titled "Protecting Poor and Vulnerable Households in Indonesia."

"It is encouraging to see Indonesia's efforts to intensify social assistance reforms will help the country continue to move forward on the path of poverty and inequality reduction," Rodrigo A. Chaves, World Bank country director for Indonesia, said in a statement.

"Continued reforms will ensure that the poorest families can receive more comprehensive coverage."

The World Bank noted that Indonesia has been committed to developing social assistance programs with some achievements in the sector, including the reallocation of fuel subsidies to direct assistance to poor and vulnerable families; expansion of the conditional cash transfer program – also known as the Family Hope Program (PKH) – to the 10 million poorest families by the end of 2017 from 6 million last year and 3.5 million in 2015.

Despite these efforts, the government is facing slowing poverty reduction and rising inequality.

The report noted that the average annual reduction in the headcount poverty rate has slowed to 0.6 of a percentage point from 2014 to 2017, to reach 10.6 percent as of March this year. That compares with a 0.5 percentage point between 2011 and 2014 and 1.2 percentage points between 2007 and 2010.

Meanwhile, inequality is also on the rise. The report notes that the Gini coefficient rose by about 6 percentage points in the 2005-2012 period and declined by 1.7 points to 39.3 Gini points by March 2017. A zero value represents absolute equality, while a value of 100 represents absolute inequality.

The ultimate recommendation is to establish a "one system" integrated social assistance framework in the next four years that will bring all institutions, agencies and initiatives providing social assistance to share common standards and procedures. The report also recommends more flexible planning to provide benefits at times when they are needed and improved monitoring and evaluation to promote evidence-based implementation.

"Improvements within existing programs will lead to a more effective system. Reforms such as these require time and experimentation to fully evolve, but given the achievements of recent years, we are confident of greater and lasting results in the near future," said Pablo Acosta, Changqing Sun and Juul Pinxten, the lead authors of the report.

President Joko "Jokowi" Widodo has set a target to reduce the poverty rate to around 9.5 percent in 2018, compared with this year's 10.6 percent. According to the government's financial note, efforts to reduce poverty will include continuing with existing programs, providing basic infrastructure, as well as helping micro, small and medium businesses to reach their markets and receive funding.

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