making government work for the poor -the case of indonesia

PUBLIC ADMINISTRATION: CONCEPTS ANDPUBLIC ADMINISTRATION: CONCEPTS AND PRACTICE

IX. MAKING GOVERNMENTIX. MAKING GOVERNMENT WORK FOR THE POOR

THE CASE OF INDONESIA

Graduate School of Asia and Pacific StudiesUniversity of Waseda, Tokyo-JAPAN

2008

CONTENTS

POVERTY IN INDONESIAPOVERTY IN INDONESIASALIENT FEATURES OF POVERTY IN INDONESIATHREE WAYS TO FIGHT POVERTYTHREE WAYS TO FIGHT POVERTYMAKING ECONOMIC GROWTH WORK FOR THE POORMAKING SERVICES WORK FOR THE POORMAKING PUBLIC EXPENDITURE WORK FOR THE POORSOCIAL PROTECTION SYSTEMMAKING GOVERNMENT WORK FOR THE PEOPLEMONITORING AND ASSESSMENTCONCLUSIONCONCLUSION

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POVERTY IN INDONESIAPOVERTY IN INDONESIA

40.1

40

45

26.9

28.6

33.3

30

35 Crisis

Povert

17.817.8

17.6*

16.016.717.418.2

23.4

13.715.1

17.4

21.6

15

20

25

ty Headcount (%

)

11.34*

5

10

15

0

1976 1978 1980 1981 1984 1987 1990 1993 1996* 1999 2002 2003 2004 2005** 2006

* Revised Method


THE CHALLENGE OF REDUCING POVERTY REMAINS ONE OF THE COUNTRY’S MOST PRESSING ISSUES THE NUMBER OF PEOPLE PRESSING ISSUES. THE NUMBER OF PEOPLE LIVING BELOW US$2-A-DAY IN INDONESIA COMES CLOSE TO EQUALING ALL THOSE LIVING COMES CLOSE TO EQUALING ALL THOSE LIVING ON OR BELOW US$2-A-DAY IN ALL OF THE REST OF EAST ASIA BESIDES CHINA.


ANALYSIS INDICATES THAT THERE IS LITTLE THAT DISTINGUISHES THE POOR FROM THE NEAR-POOR, SUGGESTING THAT POVERTY REDUCTION STRATEGIES SHOULD FOCUS ON IMPROVING THE WELFARE OF THE LOWEST TWO IMPROVING THE WELFARE OF THE LOWEST TWO QUINTILE GROUPS.


INDONESIA CAN LEARN FROM ITS OWN PAST ECONOMIC GROWTH, GOVERNMENT POLICIES AND SOCIAL PROGRAMS INDONESIA HAS HAD REMARKABLE SUCCESSPROGRAMS. INDONESIA HAS HAD REMARKABLE SUCCESS IN REDUCING POVERTY SINCE THE 1970S. THE PERIOD FROM THE LATE 1970S TO THE MID-1990S IS CONSIDERED ONE OF THE MOST ‘PRO POOR GROWTH’CONSIDERED ONE OF THE MOST ‘PRO-POOR GROWTH’ EPISODES IN THE ECONOMIC HISTORY OF ANY COUNTRY, WITH POVERTY DECLINING BY HALF.COUNTRY, WITH POVERTY DECLINING BY HALF.

(WORLD BANK, 2006)


IN ADDITION TO THE MILLENNIUM IN ADDITION TO THE MILLENNIUM DEVELOPMENT GOALS (MDGS) FOR 2015, IN ITS MEDIUM-TERM PLAN THE GOVERNMENT HAS MEDIUM TERM PLAN THE GOVERNMENT HAS LAID OUT ITS OWN KEY POVERTY REDUCTION OBJECTIVES FOR 2009. THIS INCLUDES AN AMBITIOUS TARGET OF REDUCING THE POVERTY HEADCOUNT RATE FROM 18.2 PERCENT IN 2002 TO 8 2 PERCENT BY 2009 TO 8.2 PERCENT BY 2009.


Poverty definitions and measures

Poverty headcount index (Po): This is the share of the population whoseconsumption is below the poverty line. The headcount index, sometimes referred toas the ‘poverty incidence’, is the most popular poverty measure. However, thisas the poverty incidence, is the most popular poverty measure. However, thismeasure fails to differentiate between sub-groups of the poor and does not indicatethe extent of poverty. It remains unchanged even if a poor person becomes poorer orbetter off, provided that they remain below the poverty line. Therefore, in order tod l h i d t di f t it i i t t t l t thdevelop a comprehensive understanding of poverty, it is important to complement theheadcount index with the other two poverty measures of Foster, Green andThorbecke (FGT).

Poverty gap index (P1): The mean aggregate consumption shortfall relative to theo e ty gap de ( ) e ea agg egate co su pt o s o t a e at e to t epoverty line across the whole population, with a zero value assigned to those abovethe poverty line. The poverty gap can provide an indication of how many resourceswould be needed to alleviate poverty through cash transfers perfectly targeted to the

Thi i d b tt d ib th d th f th t b t d t i di t thpoor. This index better describes the depth of the poverty but does not indicate theseverity of poverty. However, it does not change if a transfer is made from a poorperson to someone who is even poorer.


POVERTY DEFINITION AND MEASURESPOVERTY DEFINITION AND MEASURES

Poverty severity index (P2): This measure gives more weight to the very poor byy y ( ) g g y p ytaking the square of the distance from poverty line. It is calculated by squaring therelative shortfall of per capita consumption to the poverty line and then averagingacross population while assigning zero values to those above the poverty line. Whena transfer is made from a poor person to someone who is poorer this registers aa transfer is made from a poor person to someone who is poorer, this registers adecrease in aggregate poverty.

US$1 and US$2 PPP per day poverty measures: To compare poverty acrosscountries, the World Bank uses estimates of consumption converted into US dollars, pusing purchasing power parity (PPP) rates rather than exchange rates. The PPPexchange rate shows the numbers of units of a country’s currency needed to buy inthat country the same amount of goods and services that US$1 would buy in the US.These exchange rates are computed based on prices and quantities for each countryThese exchange rates are computed based on prices and quantities for each countrycollected in benchmark surveys, which are usually undertaken every five years. Chenand Ravallion (2001) present an update on world poverty using a US$1-a-day povertyline. According to their calculations, in 1993 the US$1-a-day PPP poverty line wasg , $ y p yequivalent to Rp 20,811-a-month (US$2). The PPP poverty lines are adjusted overtime by relative rates of inflation, using consumer price index (CPI) data. So in 2006,the US$1 PPP poverty line is equivalent to Rp 97,218 per person per month while theUS$2 PPP poverty line is equivalent to Rp 194 439 per person per month


US$2 PPP poverty line is equivalent to Rp 194,439 per person per month.

SALIENT FEATURES OF POVERTY IN INDONESIAIN INDONESIA

POVERTY IN INDONESIA HAS THREE SALIENT FEATURES.

FIRST, MANY HOUSEHOLDS ARE CLUSTERED FIRST, MANY HOUSEHOLDS ARE CLUSTERED AROUND THE NATIONAL INCOME POVERTY LINE OF ABOUT PPP US$1.55-A-DAY, MAKING EVEN MANY OF THE NON-POOR VULNERABLE TO POVERTY. SECOND THE INCOME POVERTY MEASURE DOES SECOND, THE INCOME POVERTY MEASURE DOES NOT CAPTURE THE TRUE EXTENT OF POVERTY IN INDONESIA; MANY WHO MAY NOT BE ‘INCOME POOR’ COULD BE CLASSIFIED AS POOR ON THE BASIS OF COULD BE CLASSIFIED AS POOR ON THE BASIS OF THEIR LACK OF ACCESS TO BASIC SERVICES AND POOR HUMAN DEVELOPMENT OUTCOMES. THIRD, GIVEN THE VAST SIZE OF AND VARYING ,CONDITIONS IN THE INDONESIAN ARCHIPELAGO, REGIONAL DISPARITIES ARE A FUNDAMENTAL FEATURE OF POVERTY IN THE COUNTRY.


INCOME POVERTY

WHILE NATIONAL POVERTY RATES MAY BE CLOSE TO PRE-CRISIS LEVELS, THIS STILL MEANS THAT ABOUT 40 MILLION PEOPLE ARE LIVING BELOW ABOUT 40 MILLION PEOPLE ARE LIVING BELOW THE NATIONAL POVERTY LINE. MOREOVER, ALTHOUGH INDONESIA IS NOW A MIDDLE-INCOME COUNTRY THE SHARE OF THOSE INCOME COUNTRY, THE SHARE OF THOSE LIVING ON LESS THAN US$2-A-DAY IS SIMILAR TO THAT OF THE REGION’S LOW-INCOME COUNTRIES SUCH AS VIETNAM SUCH AS VIETNAM.


FORTY-TWO PERCENT OF INDONESIA’S POPULATION LIVES ON BETWEEN US$1- AND US$2-A-DAY (2004)BETWEEN US$1- AND US$2-A-DAY (2004)

GSAPS-2008 www.ginandjar.com 12(WORLD BANK, 2006)

THIS ALSO MEANS THAT THE VULNERABILITY TO THIS ALSO MEANS THAT THE VULNERABILITY TO FALLING INTO POVERTY IS PARTICULARLY HIGH: WHILE ONLY 16.7 PERCENT OF INDONESIANS WHILE ONLY 16.7 PERCENT OF INDONESIANS SURVEYED WERE POOR IN 2004, MORE THAN 59 PERCENT HAD BEEN POOR AT SOME TIME DURING THE YEAR PRECEDING THE SURVEY. RECENT DATA ALSO INDICATE A HIGH DEGREE OF MOVEMENT IN AND OUT OF POVERTY OVER OF MOVEMENT IN AND OUT OF POVERTY OVER TIME: OVER 38 PERCENT OF POOR HOUSE HOLDS IN 2004 WERE NOT POOR IN 2003. HOLDS IN 2004 WERE NOT POOR IN 2003.


NON-INCOME POVERTYNON-INCOME POVERTY

NON-INCOME POVERTY IS A MORE SERIOUS PROBLEM THAN INCOME POVERTY. WHEN ONE ACKNOWLEDGES ALL DIMENSIONS OF HUMAN WELL-BEING—ADEQUATE CONSUMPTION, WELL BEING ADEQUATE CONSUMPTION, REDUCED VULNERABILITY, EDUCATION, HEALTH AND ACCESS TO BASIC INFRASTRUCTURE—THEN ALMOST HALF OF ALL INDONESIANS THEN ALMOST HALF OF ALL INDONESIANS WOULD BE CONSIDERED TO HAVE EXPERIENCED AT LEAST ONE TYPE OF POVERTY.


INDONESIA HAS MADE GOOD PROGRESS IN PAST YEARS ON SOME HUMAN CAPITAL OUTCOMES. THERE HAVE BEEN NOTABLE IMPROVEMENTS IN THERE HAVE BEEN NOTABLE IMPROVEMENTS IN EDUCATIONAL ATTAINMENT AT THE PRIMARY SCHOOL LEVEL; BASIC HEALTHCARE COVERAGE (PARTICULARLY IN BIRTH ATTENDANCE AND (PARTICULARLY IN BIRTH ATTENDANCE AND IMMUNIZATION); AND DRAMATIC REDUCTIONS IN CHILD MORTALITY. BUT IN SOME MDG-RELATED INDICATORS INDONESIA HAS FAILED TO MAKE SIGNIFICANT PROGRESS AND LAGS BEHIND OTHER COUNTRIES IN THE REGIONCOUNTRIES IN THE REGION.


REGIONAL DISPARITIESREGIONAL DISPARITIES

REGIONAL DISPARITIES IN POVERTY ARE CONSIDERABLE. WIDE REGIONAL DIFFERENCES CHARACTERIZE INDONESIA WIDE REGIONAL DIFFERENCES CHARACTERIZE INDONESIA, SOME OF WHICH ARE REFLECTED IN DISPARITIES BETWEEN RURAL AND URBAN AREAS. RURAL HOUSEHOLDS ACCOUNT FOR ABOUT 57 PERCENT OF THE POOR IN INDONESIA AND ALSO FREQUENTLY LACK ACCESS TO BASIC INFRASTRUCTURE SERVICES: ONLY ABOUT 50 PERCENT OF THE RURAL POOR HAVE ACCESS TO AN IMPROVED SOURCE OF WATER COMPARED WITH 80 PERCENT IMPROVED SOURCE OF WATER, COMPARED WITH 80 PERCENT FOR THE URBAN POOR. BUT IMPORTANTLY, ACROSS THE VAST INDONESIAN ARCHIPELAGO, IT IS ALSO REFLECTED IN BROAD SWATHES OF

G O O O O S OC S OREGIONAL POVERTY, IN ADDITION TO SMALLER POCKETS OF POVERTY WITHIN REGIONS. FOR EXAMPLE, THE POVERTY RATE IS 15.7 PERCENT IN JAVA/BALI AND 38.7 PERCENT IN MORE REMOTE PAPUA.


REMOTE PAPUA.

SERVICES ARE ALSO UNEQUALLY DISTRIBUTED ACROSS SERVICES ARE ALSO UNEQUALLY DISTRIBUTED ACROSS REGIONS, WITH AN UNDERSUPPLY OF FACILITIES IN REMOTE AREAS. IN JAVA THE AVERAGE DISTANCE OF A HOUSEHOLD TO THE NEAREST PUBLIC HEALTH CLINIC IS 4 KILOMETERS TO THE NEAREST PUBLIC HEALTH CLINIC IS 4 KILOMETERS, WHEREAS IN PAPUA IT IS 32 KILOMETERS. WHILE 66 PERCENT OF THE POOREST QUINTILE IN JAVA/BALI HAVE ACCESS TO IMPROVED WATER, IT IS 35 PERCENT FOR ,KALIMANTAN AND ONLY 9 PERCENT FOR PAPUA. ANOTHER CHALLENGE IS THAT ALTHOUGH POVERTY INCIDENCE IS FAR HIGHER IN EASTERN INDONESIA AND IN MORE REMOTE AREAS, MOST OF INDONESIA’S POOR LIVE IN THE DENSELY POPULATED WESTERN REGIONS OF THE ARCHIPELAGO. FOR EXAMPLE, WHILE THE POVERTY INCIDENCE IN JAVA/BALI IS RELATIVELY LOW THE ISLAND IS INCIDENCE IN JAVA/BALI IS RELATIVELY LOW, THE ISLAND IS HOME TO 57 PERCENT OF INDONESIA’S TOTAL POOR, COMPARED WITH PAPUA, WHICH ONLY HAS 3 PERCENT OF THE POOR


THE POOR.

THREE WAYS TO FIGHT POVERTY

AN ANALYSIS OF POVERTY AND ITS DETERMINANTS IN

THREE WAYS TO FIGHT POVERTY

AN ANALYSIS OF POVERTY AND ITS DETERMINANTS IN INDONESIA, AS WELL OF INDONESIA’S HISTORY IN REDUCING POVERTY TO DATE, POINTS TO THREE WAYS TO FIGHT POVERTY THE THREE MEANS FORWAYS TO FIGHT POVERTY. THE THREE MEANS FOR HELPING PEOPLE LIFT THEMSELVES OUT OF POVERTY ARE ECONOMIC GROWTH, SOCIAL SERVICES, AND PUBLIC EXPENDITURESPUBLIC EXPENDITURES. EACH OF THESE PRONGS ADDRESSES ONE OR MORE OF THE THREE DEFINING FEATURES OF POVERTY INOF THE THREE DEFINING FEATURES OF POVERTY IN INDONESIA: VULNERABILITY, MULTIDIMENSIONALITY, AND REGIONAL DISPARITIES. IN OTHER WORDS AN EFFECTIVE POVERTYIN OTHER WORDS, AN EFFECTIVE POVERTY REDUCTION STRATEGY FOR INDONESIA HAS THREE COMPONENTS:


AN APPROACH FOR ADDRESSING INDONESIA’S POVERTY PROBLEMS

Vulnerability Dimension of Indonesian poverty Multidimensionality

Regional disparities

AN APPROACH FOR ADDRESSING INDONESIA S POVERTY PROBLEMS

poverty Multidimensionality disparities

Economic growth ○ •

Social services • ○Social services • ○

Public expenditure • ○ ○

Note: ● Indicates principal link between thematic area and the aspect of poverty; ○ indicates an important linkage.

(WORLD BANK, 2006)


MAKING ECONOMIC GROWTH WORK FOR THE POORFOR THE POOR

FOR INDONESIA, GROWTH THAT BENEFITS THE POOR HAS BEEN, AND WILL CONTINUE TO BE, THE MAIN ROUTE TO POVERTY REDUCTION. FROM THE 1970S THROUGH TO THE LATE 1990S, GROWTH WAS RAPID AND IT REACHED THE POOR GROWTH WAS RAPID AND IT REACHED THE POOR. EACH PERCENTAGE POINT INCREASE IN AVERAGE EXPENDITURE RESULTED IN A 0 3 PERCENT EXPENDITURE RESULTED IN A 0.3 PERCENT REDUCTION IN THE POVERTY HEADCOUNT. EVEN SINCE THE CRISIS, GROWTH HAS BEEN THE ,PRIMARY DETERMINANT OF POVERTY REDUCTION.


HOWEVER GROWTH WILL NEED TO ACCELERATE AND HOWEVER GROWTH WILL NEED TO ACCELERATE AND BENEFIT THE POOR MORE IF INDONESIA IS TO MEET ITS POVERTY REDUCTION TARGETS. IF THE CURRENT RATE AND PATTERN OF GROWTH CONTINUES, RATE AND PATTERN OF GROWTH CONTINUES, INDONESIA WILL NOT MEET ITS POVERTY REDUCTION TARGET OF 8.2 PERCENT BY 2009. IN FACT, IF THE CURRENT PATTERN OF GROWTH CONTINUES, THE CURRENT PATTERN OF GROWTH CONTINUES, THE MEDIUM-TERM POVERTY REDUCTION TARGET WILL NOT BE MET EVEN IF GROWTH WERE ACCELERATED TO THE PROJECTED RATE OF 6.2 PERCENT. PROJECTED RATE OF 6.2 PERCENT. TO MEET THE POVERTY TARGET, GROWTH MUST BECOME MORE PRO-POOR. FOR EXAMPLE, IF THE INCOMES OF THE POOR GROW AT THE SAME RATE AS INCOMES OF THE POOR GROW AT THE SAME RATE AS THOSE OF THE RICH THEN THE MEDIUM-TERM TARGET CAN BE BROADLY MET.


MAKING GROWTH WORK FOR THE POOR WILL REQUIRE GETTING THE POOR ONTO EFFECTIVE PATHWAYS OUT OF POVERTY THIS WILL MEAN PATHWAYS OUT OF POVERTY. THIS WILL MEAN HARNESSING THE STRUCTURAL TRANSFORMATION THAT IS ONGOING IN INDONESIA—ALBEIT AT A SIGNIFICANTLY SLOWER RATE THAN PRE-CRISIS.


THIS TRANSFORMATION IS CHARACTERIZED BY THIS TRANSFORMATION IS CHARACTERIZED BY TWO PHENOMENA.

THERE IS AN ONGOING SHIFT FROM MORE RURAL-BASED TO MORE URBAN-BASED ACTIVITIES. INDONESIA HAS EXPERIENCED RAPID URBANIZATION INDONESIA HAS EXPERIENCED RAPID URBANIZATION, WITH THE POPULATION OF INDONESIA’S CITIES NEARLY TREBLING IN 25 YEARS. THIS HAS STIMULATED A SHIFT FROM RURAL TO MORE URBAN-BASED A SHIFT FROM RURAL TO MORE URBAN-BASED ACTIVITIES, EVEN WHEN HOUSEHOLDS HAVE NOT IN FACT CHANGED LOCATION (SOME 35 TO 40 PERCENT OF URBANIZATION) URBAN MARKETS ARE THUS OF URBANIZATION). URBAN MARKETS ARE THUS BECOMING INCREASINGLY IMPORTANT FOR BOTH THE RURAL AND THE URBAN POOR.


THERE HAS BEEN A MARKED SHIFT FROM FARM TO MORE NON-FARM ACTIVITIES. IN RURAL AREAS IN PARTICULAR, THIS HAS MEANT SUBSTANTIAL GROWTH PARTICULAR, THIS HAS MEANT SUBSTANTIAL GROWTH IN THE SHARE OF EMPLOYMENT IN RURAL (OR PREVIOUSLY RURAL) NON-FARM ENTERPRISES (4 PERCENT PER YEAR BETWEEN 1993 AND 2002) THIS PERCENT PER YEAR BETWEEN 1993 AND 2002). THIS TRANSFORMATION SUGGESTS TWO IMPORTANT PATHWAYS THAT HOUSEHOLDS HAVE TAKEN OUT OF POVERTY IN INDONESIA POVERTY IN INDONESIA.


THE FIRST PATHWAY: IMPROVED AGRICULTURAL PRODUCTIVITY. THIS COULD COME FROM INCREASING PRODUCTIVITY IN SMALL-SCALE AGRICULTURE OR AN INCREASED SHIFT TO COMMERCIAL FARMING. AGRICULTURAL PRODUCTIVITY GAINS FROM THE GREEN REVOLUTION WERE ONE OF THE MAIN DRIVERS OF GROWTH IN THE THREE DECADES COMMENCING WITH THE 1970S. MORE RECENTLY HIGH WORLD COMMODITY PRICES HAVE MORE RECENTLY, HIGH WORLD COMMODITY PRICES HAVE SUSTAINED OUTPUT GROWTH, WHILE THE SHIFT OF LABOR OUT OF THE SECTOR HAS MAINTAINED THE GROWTH OF LABOR PRODUCTIVITY IN AGRICULTURE AS A RESULT LABOR PRODUCTIVITY IN AGRICULTURE. AS A RESULT, RECENT POVERTY DIAGNOSTICS SHOW THAT INCREASES IN AGRICULTURAL INCOMES CONTINUE TO BE AN IMPORTANT DRIVER OF REDUCTIONS IN POVERTY PANEL DATA BETWEEN DRIVER OF REDUCTIONS IN POVERTY. PANEL DATA BETWEEN 1993 AND 2000 SHOW THAT 40 PERCENT OF AGRICULTURAL WORKERS IN RURAL AREAS ESCAPED POVERTY WHILE STAYING IN RURAL AGRICULTURE


STAYING IN RURAL AGRICULTURE.

THE SECOND PATHWAY: INCREASING NON-FARM THE SECOND PATHWAY: INCREASING NON-FARM PRODUCTIVITY. THE TRANSITION THROUGH RURAL NON-FARM ENTERPRISES IS AN IMPORTANT STEPPING-STONE TO MOVING OUT OF POVERTY EITHER BY CONNECTING RURAL MOVING OUT OF POVERTY, EITHER BY CONNECTING RURAL ENTERPRISES TO URBAN GROWTH PROCESSES OR, IMPORTANTLY, BY THESE ENTERPRISES IN THE RURAL FRINGE BEING SUBSUMED INTO URBAN AREAS. BETWEEN FRINGE BEING SUBSUMED INTO URBAN AREAS. BETWEEN 1993 AND 2002, THE EMPLOYMENT SHARE OF NON-POOR WORKERS IN RURAL NON-FARM EMPLOYMENT INCREASED BY 6.7 PERCENTAGE POINTS, SUGGESTING THAT INCREASING ,NON-AGRICULTURAL PRODUCTIVITY IN RURAL AREAS WAS AN IMPORTANT PATHWAY OUT OF POVERTY. MOREOVER, MANY OF THESE ‘RURAL’ AREAS WERE URBAN BY THE END OF THE PERIOD, SHOWING THE COMPLEMENTARY ROLES OF URBANIZATION AND PRODUCTIVITY ENHANCEMENTS.


THE GOVERNMENT CAN CONTRIBUTE TO INCREASINGTHE GOVERNMENT CAN CONTRIBUTE TO INCREASING PRODUCTIVITY THROUGH: 1) BOOSTING INVESTMENT IN KEY INFRASTRUCTURE, NOTABLY ) ,

FARM-TO-MARKET ROADS AND IRRIGATION, WHILE WIDENING LOCAL WATER MANAGEMENT;

2) ENCOURAGING AND SUPPORTING DIVERSIFICATION INTO2) ENCOURAGING AND SUPPORTING DIVERSIFICATION INTO HIGHER VALUE-ADDED CROPS;

3) WORKING WITH THE PRIVATE SECTOR TO ENSURE THAT EXPORTS MEET WORLD STANDARDS;

4) BOOSTING EXPENDITURE ON AGRICULTURAL RESEARCH; AND 5) REDESIGNING THE DECENTRALIZED EXTENSION SERVICE TO5) REDESIGNING THE DECENTRALIZED EXTENSION SERVICE TO

ALLOW FOR GREATER INVOLVEMENT OF THE PRIVATE SECTOR AND CIVIL SOCIETY.


ENCOURAGE THE DEVELOPMENT OF THE PRIVATE SECTOR

DURING THE 1980s, THE PRIVATE SECTOR EXPANDED GREATLY, CONTRIBUTING SIGNIFICANTLY TO GROWTH.HOWEVER THE GROWTH OF THE PRIVATE SECTORS WAS NOT SUPPORTED BY A STRONG LEGAL SYSTEM TO PROVIDE THE CERTAINTY AND STRUCTURE FOR PRIVATE-SECTOR CONFIDENCE (HOFMAN ET AL, 2004). APART FROM A CHRONICALLY INEFFECTIVE JUDICIARY (AND THUS APART FROM A CHRONICALLY INEFFECTIVE JUDICIARY (AND THUS ANY LEGAL RECOURSE), THE BASIC LEGAL FRAMEWORK DATING BACK TO THE COLONIAL PERIOD GAVE INADEQUATE PROVISIONS TO PROMOTE BUSINESS CONFIDENCE AND A LACK OF COOPERATION PROMOTE BUSINESS CONFIDENCE, AND A LACK OF COOPERATION BETWEEN RESPONSIBLE INSTITUTIONS LED TO POOR SEQUENCING OF UPDATED REGULATIONS AND LEGAL CODES FOR ECONOMIC ACTIVITY.


THIS WEAK ENABLING ENVIRONMENT HAD (AND CONTINUES TO HAVE) PROFOUND LONG-TERM CONTINUES TO HAVE) PROFOUND LONG TERM IMPACTS ON INVESTOR CONFIDENCE AND THE SUSTAINABILITY OF PRIVATE-SECTOR INVESTMENT IN A NUMBER OF SECTORS VITAL TO CONTINUED GROWTH.


A STRATEGY TO HELP THE POOR TAKE ADVANTAGE OF ECONOMIC GROWTH.

FIRST MAINTAIN MACROECONOMIC STABILITY KEY FIRST, MAINTAIN MACROECONOMIC STABILITY. KEY TO THIS ARE ENSURING LOW INFLATION AND A STABLE AND COMPETITIVE EXCHANGE RATE. COUNTRIES THAT HAVE HAD MORE MACROECONOMIC SHOCKS EXPERIENCE SLOWER GROWTH AND POVERTY REDUCTION THAN THOSE GROWTH AND POVERTY REDUCTION THAN THOSE WITH BETTER MACROECONOMIC MANAGEMENT (WORLD BANK, 2005A). INDONESIA KNOWS BETTER THAN MOST COUNTRIES THE DREADFUL POVERTY THAN MOST COUNTRIES THE DREADFUL POVERTY IMPACT OF MACROECONOMIC CRISES.


SECOND, CONNECTING THE POOR TO OPPORTUNITIES FOR GROWTH. BETTER ACCESS TO OPPORTUNITIES FOR GROWTH. BETTER ACCESS TO ROADS, TELECOMMUNICATIONS, CREDIT AND FORMAL SECTOR EMPLOYMENT ARE ASSOCIATED WITH SIGNIFICANTLY LOWER POVERTY THE WITH SIGNIFICANTLY LOWER POVERTY. THE BENEFIT OF BEING ‘CONNECTED’ IS LARGE, PARTICULARLY IN THE CASE OF FORMAL SECTOR EMPLOYMENT OUTSIDE OF AGRICULTURE EMPLOYMENT OUTSIDE OF AGRICULTURE.


THIRD, INVEST IN THE CAPABILITIES OF THE POOR. ,PART OF THE STRATEGY FOR GROWTH MUST BE TO INVEST IN THE POOR SO THAT THEY ARE WELL PREPARED TO BENEFIT FROM THE OPPORTUNITIES FOR PREPARED TO BENEFIT FROM THE OPPORTUNITIES FOR INCOME GROWTH THAT PRESENT THEMSELVES. IN BOTH RURAL AND URBAN AREAS, HIGHER LEVELS OF EDUCATION OF HOUSEHOLD HEADS ARE ASSOCIATED EDUCATION OF HOUSEHOLD HEADS ARE ASSOCIATED WITH HIGHER LEVELS OF CONSUMPTION. INVESTING IN EDUCATION FOR THE POOR WILL BOOST THE CAPABILITY OF THE POOR TO PARTICIPATE IN CAPABILITY OF THE POOR TO PARTICIPATE IN GROWTH. FOURTH, IMPROVE THE ECONOMIC AND BUSINESS CLIMATE AND ENVIRONTMENT TO ENABLE THE GROWTH OF A STRONG AND COMPETITIVE PRIVATE SECTOR


S C O

MAKING SERVICES WORK FOR THE POORPOOR

MAKING SERVICES WORK FOR THE POOR REQUIRES IMPROVING INSTITUTIONAL ACCOUNTABILITY SYSTEMS AND INTRODUCING INCENTIVES TO IMPROVE SERVICE DELIVERY IN ORDER TO IMPROVE HUMAN DEVELOPMENT OUTCOMES. CURRENTLY, POOR SERVICE DELIVERY LIES AT THE CENTER OF WEAK HUMAN DEVELOPMENT OUTCOMES OR NONWEAK HUMAN DEVELOPMENT OUTCOMES, OR NON-INCOME ‘MULTIDIMENSIONAL’ POVERTY, SUCH AS POOR QUALITY OF HEALTH AND EDUCATIONAL CARE. CCO G O S C OACCORDING TO SURVEY DATA, 44 PERCENT OF

HOUSEHOLDS IN THE POOREST QUINTILE WITH CHILDREN ENROLLED IN SCHOOL REPORTED DIFFICULTIES IN FINANCING JUNIOR SECONDARY DIFFICULTIES IN FINANCING JUNIOR SECONDARY EDUCATION.


EDUCATIONEDUCATION

THE POOR PAY 7.2 PERCENT OF THEIR TOTAL EXPENDITURE FOR EACH ENROLLED STUDENT AT JUNIOR SECONDARY LEVEL. ON THE DEMAND SIDE, TO ADDRESS THIS ISSUE THE GOVERNMENT SHOULD CO S OG S O G S SCONSIDER PROGRAMS OF TARGETED TRANSFERS, SUCH AS SCHOLARSHIPS OR CONDITIONAL CASH TRANSFERS LINKED TO ATTENDANCE TO JUNIOR SECONDARY SCHOOL (AND VOCATIONAL SCHOOLS) SECONDARY SCHOOL (AND VOCATIONAL SCHOOLS). JUNIOR SECONDARY SCHOOL CAPACITY IN INDONESIA PROVIDES LEARNING OPPORTUNITIES ON AVERAGE TO ONLY SOME 84 PERCENT OF ON AVERAGE TO ONLY SOME 84 PERCENT OF POTENTIAL STUDENTS IN THE 13 TO 15 AGE GROUP.


THE OTHER AREA OF FOCUS IS IMPROVED ACCESS THE OTHER AREA OF FOCUS IS IMPROVED ACCESS OF THE POOR TO SERVICES TO REDUCE REGIONAL DISPARITIES IN HUMAN DEVELOPMENT INDICATORS. THE VARIABILITY IN ACCESS TO SERVICES ACROSS THE VARIABILITY IN ACCESS TO SERVICES ACROSS THE COUNTRY IS A FUNDAMENTAL DRIVER OF REGIONAL INEQUALITIES IN POVERTY-RELATED OUTCOMES OUTCOMES. WHILE IN SOME REGIONS, SUCH AS CENTRAL JAVA, SCHOOL CAPACITY EXCEEDS 100 PERCENT, IN EAST NUSA TENGGARA AND SOUTH SUMATRA THE AVERAGE COVERAGE OF SCHOOL CAPACITY IS BELOW 60 PERCENT OF THE NUMBER OF POTENTIAL STUDENTS, INDICATING A LOWER DEGREE OF ACCESS.


AND THE AVERAGE DISTANCE TO JUNIOR AND THE AVERAGE DISTANCE TO JUNIOR SECONDARY SCHOOLS IN JAVA IS 1.9 KM WHILE IN PAPUA THE AVERAGE DISTANCE IS 16.6 KM (PODES, 2005) OF THE JUNIOR SECONDARY SCHOOLS 2005). OF THE JUNIOR SECONDARY SCHOOLS AVAILABLE, A MINISTRY SURVEY IN 2004 FOUND 27.3 PERCENT OF THEIR CLASSROOMS TO BE DAMAGED IN SOME WAY MORE JUNIOR SECONDARY DAMAGED IN SOME WAY. MORE JUNIOR SECONDARY CLASSROOMS AND SCHOOLS NEED TO BE MADE AVAILABLE, AND ONE WAY THIS CAN BE ACHIEVED IS BY CONVERTING PRIMARY SCHOOLS WHERE THERE IS EXCESS SUPPLY.


PRIMARY HEALTH CAREPRIMARY HEALTH CARE

BETTER PRIMARY HEALTHCARE REQUIRES BETTER INCENTIVES FOR BOTH THE POOR AND FOR INCENTIVES FOR BOTH THE POOR AND FOR PROVIDERS. CHAUDHURY, ET AL (2005) FOUND THAT ABSENTEEISM AMONG HEALTH WORKERS IN INDONESIA IS 40 PERCENT, EVEN HIGHER THAN IN BANGLADESH AND UGANDA. ONLY 30 PERCENT OF PRIMARY HEALTH CLINICS ONLY 30 PERCENT OF PRIMARY HEALTH CLINICS VISITED HAD COMPLETE STOCKS OF MEDICINES. FOR HIGHER-LEVEL HEALTHCARE, AFFORDABILITY IS AN ISSUE AND TARGETED PROGRAMS WOULD MAKE ISSUE AND TARGETED PROGRAMS WOULD MAKE SENSE, SUCH AS A HEALTH INSURANCE PROGRAM.


MATERNAL MORTALITY RATE

PROGRESS IN REDUCING MATERNAL MORTALITY LIES IN INCREASING THE PROPORTION OF BIRTHS ATTENDED BY SKILLED INCREASING THE PROPORTION OF BIRTHS ATTENDED BY SKILLED PROFESSIONALS, INCREASING THE PROPORTION OF INSTITUTIONAL DELIVERIES AND IMPROVING ACCESS TO 24-HOUR OBSTETRIC CARE. CURRENTLY, ONLY 72 PERCENT OF BIRTHS ARE ATTENDED BY SKILLED PERSONNEL IN INDONESIA BIRTHS ARE ATTENDED BY SKILLED PERSONNEL IN INDONESIA NATIONALLY, COMPARED WITH 97 PERCENT IN MALAYSIA AND CHINA AND 99 PERCENT IN THAILAND. INCREASING DELIVERIES WITH SKILLED STAFF IN ATTENDANCE INCREASING DELIVERIES WITH SKILLED STAFF IN ATTENDANCE IN HEALTH CLINICS WILL REQUIRE ACTION ON FOUR FRONTS: INCREASING THE AVAILABILITY OF SKILLED MIDWIVES IN REMOTE AREAS; IMPROVING THE AFFORDABILITY OF CARE BY SKILLED PROFESSIONALS; INCREASING AWARENESS ESPECIALLY SKILLED PROFESSIONALS; INCREASING AWARENESS, ESPECIALLY AMONG WOMEN, OF THE IMPORTANCE OF SKILLED MIDWIFERY AT BIRTH; AND IMPROVING THE QUALITY OF SKILLED BIRTH ATTENDANT SERVICES.


SAFE WATER AND SANITATIONSAFE WATER AND SANITATION

AN ESTIMATED 50 MILLION RURAL POOR ARE NOT CONNECTED TO PIPED WATER AND OF THAT NUMBER SIX MILLION PAY HIGHER RATES (IN EXCESS OF THOSE CHARGED THE STATE WATER UTILITY COMPANY). FOR RURAL AREAS, THE EXISTING COMMUNITY MANAGEMENT SUPPLY MODEL THAT HAS BEEN SHOWN TO WORK SHOULD BE EXPANDED. BEEN SHOWN TO WORK SHOULD BE EXPANDED. THIS CURRENTLY COVERS 25-30 PERCENT OF THE RURAL POPULATION, BUT COULD BE EXPANDED TO COVER THE 50 MILLION PEOPLE CURRENTLY COVER THE 50 MILLION PEOPLE CURRENTLY WITHOUT ADEQUATE WATER SUPPLY.


CONSIDERATION NEEDS TO BE GIVEN TO CONSIDERATION NEEDS TO BE GIVEN TO DESIGNING APPROPRIATE TARIFF STRUCTURES FOR THE POOR WHO BENEFIT FROM CURRENT CONNECTIONS OR WHO WILL HAVE FUTURE CONNECTIONS, OR WHO WILL HAVE FUTURE CONNECTIONS. THE COVERAGE OF SANITATION SERVICES IN INDONESIA IS THE WORST IN THE REGION, WITH LESS THAN 1 PERCENT OF ALL REGION, WITH LESS THAN 1 PERCENT OF ALL INDONESIANS ACCESSING PIPED SEWERAGE SYSTEMS. SURVEY DATA SHOW THAT 80 PERCENT OF THE SURVEY DATA SHOW THAT 80 PERCENT OF THE RURAL POOR AND 59 PERCENT OF THE URBAN POOR HAVE NO ACCESS TO ADEQUATE SANITATION. IT IS ESTIMATED THAT THE COST OF POOR SANITATION IS ABOUT 2.6 PERCENT OF GDP, WHILE PUBLIC SPENDING ON WATER AND SANITATION TOGETHER IS LESS THAN 0.2 PERCENT OF GDP.


FUNCTIONAL RESPONSIBILITIESFUNCTIONAL RESPONSIBILITIES

THE LACK OF CLARITY OF RESPONSIBILITIES IS PARALYZING SERVICE DELIVERY THE FINANCING AND PROVISION OF SERVICE DELIVERY. THE FINANCING AND PROVISION OF SERVICES IS BASED ON BUREAUCRATIC INSTRUCTIONS, PROVIDING RELATIVELY LITTLE ACTUAL AUTONOMY TO EITHER PROVIDERS OR BENEFICIARIES. EITHER PROVIDERS OR BENEFICIARIES. A TYPICAL GOVERNMENT HEALTH CLINIC HAS EIGHT SOURCES OF CASH INCOME AND 34 OPERATIONAL BUDGETS, MANY OF WHICH ARE PROVIDED IN KIND BY THE BUDGETS, MANY OF WHICH ARE PROVIDED IN KIND BY THE CENTRAL OR LOCAL GOVERNMENT. THE CENTRAL GOVERNMENT SHOULD LIMIT ITS ROLE TO POLICY-MAKING, STAFFING ISSUES, INFORMATION AND O C G, S G SSU S, O ODEVELOPING CORE NATIONAL SERVICE-DELIVERY STANDARDS.


PROVINCIAL LEVEL GOVERNMENTS SHOULD FOCUS PROVINCIAL LEVEL GOVERNMENTS SHOULD FOCUS ON FIXING REGIONAL STANDARDS, BUILDING CAPACITY AT THE DISTRICT LEVEL AND IMPLEMENTING CROSS-DISTRICT SERVICES, WHILE AT THE DISTRICT LEVEL LOCAL GOVERNMENTS SHOULD BE RESPONSIBLE FOR PLANNING AND BUDGETING, AND ENSURING IMPLEMENTATION OF SERVICE DELIVERY.COMMUNITIES SHOULD BE EMPOWERED TO PROVIDE COMMUNITIES SHOULD BE EMPOWERED TO PROVIDE FEEDBACK TO SERVICE PROVIDERS, POSSIBLY EVEN MANAGING THEIR OWN TARGETED PROGRAMS AND HELPING TO BUILD/ MAINTAIN LOCAL HELPING TO BUILD/ MAINTAIN LOCAL INFRASTRUCTURE.


IMPROVE CIVIL SERVICE IN SOCIAL SECTORS

WHILE CIVIL SERVICE REFORM IS NOT EASY, IT IS A VITAL COMPONENT TO ‘UNSTICKING’ SERVICE DELIVERY DELIVERY. A RECENT STUDY INVOLVED MAKING SURPRISE VISITS ON MORE THAN 100 PRIMARY SCHOOLS AND HEALTH CENTERS IN INDONESIA. THE STUDY FOUND ABSENTEEISM RATES OF 10 PERCENT AMONG TEACHERS AND 40 PERCENT AMONG HEALTH WORKERS.


INDONESIA HAD THE HIGHEST HEALTH-WORKER INDONESIA HAD THE HIGHEST HEALTH-WORKER ABSENTEEISM RATE OF ALL THE COUNTRIES INCLUDED IN GLOBAL STUDY. NOT ONLY DOES HIGH ABSENTEEISM REDUCE QUALITY BUT IT ALSO ABSENTEEISM REDUCE QUALITY, BUT IT ALSO REDUCES THE DEMAND FOR PUBLIC HEALTH SERVICES. CREATING MORE ROBUST AND PREDICTABLE INCENTIVES FOR STAFF WILL ALSO HELP, AS HAS BEEN PROVEN IN THE CASE OF SOME FRONTLINE BEEN PROVEN IN THE CASE OF SOME FRONTLINE SERVICE PROVIDERS.


STRONGER INCENTIVES FOR SERVICE STRONGER INCENTIVES FOR SERVICE PROVIDERS

THE PROVISION OF CLEAR PREDICTABLE REWARDS AND THE PROVISION OF CLEAR, PREDICTABLE REWARDS AND SANCTIONS IS NECESSARY TO PROVIDE A FRAMEWORK THAT WILL SYSTEMATICALLY PROMOTE GOOD BEHAVIOR AND OUTCOMES BY SERVICE PROVIDERS INCENTIVES AND OUTCOMES BY SERVICE PROVIDERS. INCENTIVES CAN TAKE THE FORM OF PERFORMANCE CONTRACTS OR INCENTIVE PAYMENTS FOR GOOD RESULTS. ONE SPECIFIC OPTION IS TO PILOT THE USE OF SERVICE AGREEMENTS—A CONTRACT BETWEEN A PUBLIC SERVICE PROVIDER AND LOCAL GOVERNMENT THAT SPECIFIES THE PROVIDER AND LOCAL GOVERNMENT THAT SPECIFIES THE SERVICES THAT WILL BE DELIVERED, AND THE RESOURCES THAT WILL BE PROVIDED TO DO SO.


IN ADDITION, LOCAL GOVERNMENTS CAN WORK WITH IN ADDITION, LOCAL GOVERNMENTS CAN WORK WITH PRIVATE PROVIDERS AS PARTNERS IN DELIVERING GOOD QUALITY SERVICES TO THE POOR. FOR EXAMPLE, ALMOST 60 PERCENT OF ALL HEALTHCARE VISITS WERE ALMOST 60 PERCENT OF ALL HEALTHCARE VISITS WERE TO PRIVATE FACILITIES OR PROVIDERS IN 2004. THE POOR USE PRIVATE SERVICES NOT ONLY BECAUSE THEY ARE OFTEN CHEAPER, BUT THEY ARE PERCEIVED TO BE OF HIGHER QUALITY. MANY LOCAL GOVERNMENTS ARE WORKING CREATIVELY TO PROVIDE INCENTIVES FOR IMPROVED EDUCATIONAL OUTCOMES AND HEALTHCARE.


MAKING PUBLIC EXPENDITURE WORK FOR THE POORWORK FOR THE POOR

TO DATE, PUBLIC EXPENDITURE HAS NOT ALWAYS BEEN SUCCESSFUL AT EFFECTIVELY ADDRESSINGBEEN SUCCESSFUL AT EFFECTIVELY ADDRESSING THE CONSTRAINTS THAT STILL HINDER THE POOR AND KEEP THEM MIRED IN POVERTY. PUBLIC SPENDING THAT CAN HAVE A DIRECT IMPACT BY BOOSTING INCOME LEVELS WILL HAVE A COMMENSURATE IMPACT ON POVERTY. ONE PRIORITY THAT STANDS OUT IS THE SCALING-UP OF COMMUNITY DRIVEN DEVELOPMENTOF COMMUNITY DRIVEN DEVELOPMENT (CDD).


WHILE THE CDD APPROACH WILL ALLOW FOR A BROAD FOCUS IN ADDRESSING WIDESPREAD BROAD FOCUS IN ADDRESSING WIDESPREAD VULNERABILITY, IT WILL ALSO BE VITAL TO USE PUBLIC EXPENDITURE TO TARGET THE VERY OO S O G S OPOOREST, WHO LAG BEHIND IN TERMS OF THE

NON-INCOME, MULTIDIMENSIONAL ASPECTS OF POVERTY POVERTY.


ON EXAMPLE IS THE RURAL ROADS PROGRAMON EXAMPLE IS THE RURAL ROADS PROGRAM. ACCESS TO INFRASTRUCTURE AND ROADS IS SHOWN TO BE A KEY CORRELATE OF POVERTY.

HAVING ALL-YEAR PASSABLE ROADS IS ASSOCIATED WITH HIGHER EXPENDITURE LEVELS IN BOTH URBAN (7.7 PERCENT HIGHER) AND RURAL (3.1 PERCENT HIGHER) AREAS. THE LESS WELL CONNECTED REGIONS OF EASTERN INDONESIA WILL SEE PARTICULARLY STRONG GAINS FROM IMPROVED CONNECTIONS. THE CRITICAL IMPORTANCE OF INFRASTRUCTURE IS ALSO REFLECTED IN RESPONSES FROM SMALL RURAL ENTERPRISES. IN A FIRM-LEVEL SURVEY, ROAD ACCESS, THE COST OF TRANSPORTATION AND THE QUALITY OF ROADS ALL FEATURETRANSPORTATION AND THE QUALITY OF ROADS ALL FEATURE STRONGLY IN THE TOP CONCERNS OF RURAL ENTERPRISES SURVEYED.


IMPROVING THE QUALITY OF ROADS WOULD BE ASSOCIATED WITH A RISE IN THE AVERAGE PROPORTION OF INCOME IN A VILLAGE COMING FROM NON-FARM ENTERPRISE INCOME AND NON-FARM SALARIES AND WAGES BY 33 PERCENTAGE POINTS. YET, ONLY 61 PERCENT OF POOR HOUSEHOLDS HAVE ACCESS TO ALL YEAR PASSABLE ROADS (WHILE 76 PERCENT OF TO ALL-YEAR PASSABLE ROADS (WHILE 76 PERCENT OF NON-POOR HOUSEHOLD ACCESS THESE ROADS).


SOCIAL PROTECTION SYSTEMSOCIAL PROTECTION SYSTEM

THERE IS A NEED TO ESTABLISH A COHERENT AND COORDINATED SOCIAL PROTECTION SYSTEM THATCOORDINATED SOCIAL PROTECTION SYSTEM THAT EFFECTIVELY AUGMENTS THE SET OF OPTIONS HOUSEHOLDS HAVE TO MANAGE SHOCKS AND HELPSHOUSEHOLDS HAVE TO MANAGE SHOCKS AND HELPS IN THE BROADER POLICY DRIVE TO ELIMINATE POVERTY.


SIMILAR TO MANY LOWER-INCOME COUNTRIES, INDONESIA LACKS A STRUCTURED AND COHERENTINDONESIA LACKS A STRUCTURED AND COHERENT SOCIAL PROTECTION SYSTEM. EAST ASIA IN GENERAL AND INDONESIA IN PARTICULAR RELY LESS ON SOCIALAND INDONESIA IN PARTICULAR RELY LESS ON SOCIAL PROTECTION INSTRUMENTS RELATIVE TO OTHER COMPARABLE COUNTRIES.


FROM THE CRISIS TO 2005, INDONESIA’S SOCIAL PROTECTION SYSTEM WAS CHARACTERIZED PRIMARILY BY (I) CRISIS-ERA SAFETY NET PROGRAMS; AND (II) LARGE COMMODITY PRICE SUBSIDIES AND TRANSFERS, PARTICULARLY THROUGH RICE AND FUEL PRODUCTSPARTICULARLY THROUGH RICE AND FUEL PRODUCTS. UNIVERSAL COMMODITY PRICE SUBSIDIES MAY BE CONSIDERED A ‘FIRST GENERATION’ SOCIAL PROTECTION APPROACH, HAVING BEEN THE INSTRUMENT OF CHOICE USED BY MANY DEVELOPING COUNTRIES IN THE 1960s AND 1970s1960s AND 1970s.


THE TARGETED PROGRAMS UNDERTAKEN DURING THE CRISIS PERIOD MAY BE CONSIDERED AS AN ATTEMPT AT ‘ ’‘SECOND GENERATION’ TYPE SAFETY NET PROGRAMS. IN INDONESIA SHOULD BE READY TO MOVE TO A ‘THIRD GENERATION’ SYSTEM THAT IS MORE COMPREHENSIVEGENERATION SYSTEM THAT IS MORE COMPREHENSIVE AND MATCHED TO THE ACTUAL RISKS AND VULNERABILITIES FACED BY ITS MORE SUSCEPTIBLE CITIZENS.


S f t N t Obj ti S ifi P

INDONESIA’S CRISIS-ERA SOCIAL SAFETY NETSafety Net Objective Specific Program

Food security Special Market Operation (operasi pasar khusus, or OPK) program: sales of subsidized rice to targeted households, currently known as Raskin.

Employment creation A collection of ‘labor-intensive’ programs executed by various government departments

Education Scholarships to elementary, secondary and upper secondary school students and block grants to selected schoolsand block grants to selected schools

Health Funding for:Medical servicesOperational support for health centersMedicine and imported medical equipmentFamily planning servicesNutritionMidwife servicesMidwife services

Community empowerment Regional Empowerment to Overcome the Impact of Economic Crisis (PDM-DKE): block grants directly to villages for either public works or subsidized credit


Source: Sumarto, Suryahadi and Widyanti, 2004

THE OBJECTIVES OF INDONESIA’S CRISIS-ERA SOCIAL SAFETY NET (JPS) ARE GENERALLY WELL ALIGNED WITH INTERNATIONALLY RECOGNIZED GOALS OF SOCIAL PROTECTIONINTERNATIONALLY RECOGNIZED GOALS OF SOCIAL PROTECTION POLICY: (I) TO ALLEVIATE THE POVERTY OF THE CURRENT POOR, BY RAISING THEIR CONSUMPTION LEVEL; (II) TO PREVENT THE NEAR POOR FROM FALLING INTO POVERTY AND (III) TO HELPNEAR-POOR FROM FALLING INTO POVERTY; AND (III) TO HELP HOUSEHOLDS—BOTH NEAR-POOR AND NON-POOR—MITIGATE THE FALL IN INCOME IN THE WAKE OF SHOCKS. THE THREE OBJECTIVES ARE IN LINE WITH WHAT SOCIAL PROTECTION SYSTEMS ARE COMMONLY EXPECTED TO ACHIEVE. HOWEVER, THE CURRENT STRUCTURE OF THE SAFETY NET FAILSHOWEVER, THE CURRENT STRUCTURE OF THE SAFETY NET FAILS TO DIFFERENTIATE THESE OBJECTIVES.


WHILE THE STRUCTURES OF SOME OF THE COMPONENTWHILE THE STRUCTURES OF SOME OF THE COMPONENT PROGRAMS OF THE SAFETY NET ARE BEST SUITED TO RAISING THE CONSUMPTION OF THE CURRENT POOR, ,THEY DO NOT PERFORM WELL IN KEEPING THE NEAR-POOR OUT OF POVERTY. LOOKING AHEAD, IN EXPLORING OPTIONS FOR A NEW SOCIAL PROTECTION SYSTEMOPTIONS FOR A NEW SOCIAL PROTECTION SYSTEM, ALTHOUGH THE THREE ABOVE ARE ADEQUATE, GREATER CLARITY ON HOW EACH IS BEST PURSUED IS REQUIRED.CLARITY ON HOW EACH IS BEST PURSUED IS REQUIRED.


MAKING GOVERNMENT WORK FOR THE POOR

INDONESIA'S PAST EXPERIENCE SHOWS THAT IT HAS TO MAKE GOVERNMENT WORK FOR THE POOR.HAS TO MAKE GOVERNMENT WORK FOR THE POOR. THE HISTORICAL RECORD HERE IS MIXED AT BEST. ON ONE HAND, HISTORY REINFORCES THE POINT THAT A STRONG CENTRAL GOVERNMENT FULLY COMMIITED TOSTRONG CENTRAL GOVERNMENT FULLY COMMIITED TO POLICIES THAT REDUCE POVERTY AND WITH THE TECHNICAL CAPACITY TO FORMULATE AND IMPLEMENT THESE POLICIES CAN BE KEY TO POVERTY REDUCTION.


ON THE OTHER HAND, HISTORY ALSO TELLS THE STORY OF HOW WEAK ACCOUNTABILITY AND INSTITUTIONAL CAPACITY TO DELIVER SERVICES—AND NOT INVESTING IN SUCHTO DELIVER SERVICES AND NOT INVESTING IN SUCH CAPACITY—CAN ITSELF UNDERMINE DEVELOPMENT. INDEED, POOR GOVERNANCE, CAN CAUSE A COLLAPSE IN THE ENTIRE DEVELOPMENT EFFORTDEVELOPMENT EFFORT. MOREOVER, WEAK ACCOUNTABILITY, CAPACITY, AND INSTITUTIONS AT ALL LEVELS OF GOVERNMENT MAKE THE TASK OF ‘DELIVERING ON POVERTY REDUCTION’—WHETHER IT BE THROUGH GROWTH, SPENDING, SOCIAL PROTECTION-EXTREMELY DIFFICULT.


DESPITE THE STRONG CONNECTIONS THAT WERE DESPITE THE STRONG CONNECTIONS THAT WERE ESTABLISHED BETWEEN THE POOR AND THE COUNTRY’S GROWTH, THE PROCESS WAS STRAINED BY THE DYSFUNCTIONALITY OF GOVERNMENT INSTITUTIONS, ESPECIALLY IN THE SECTORS AND AT LOWER LEVELS OF SECTORS AND AT LOWER LEVELS OF GOVERNMENT.


DECENTRALIZATION CERTAINLY ENHANCES THEDECENTRALIZATION CERTAINLY ENHANCES THE OPPORTUNITY TO IMPROVE GOVERNMENT’S ABILITY TO DELIVER ON POVERTY REDUCTION BY MOVING O O UC O O GDECISION-MAKING POWER CLOSER TO CITIZENS AND ALLOWING EFFORTS TO BE TAILORED TO REGIONAL ISSUESISSUES. BUT, AT LEAST INITIALLY, DECENTRALIZATION ALSO MAKES THE TASK MORE COMPLEX AND INDONESIAMAKES THE TASK MORE COMPLEX AND INDONESIA NEEDS TO WORK ON SORTING OUT THE SPECIFICS OF ITS DECENTRALIZATION FRAMEWORK.


THIS REFORM HAS CREATED ENORMOUS OPPORTUNITIES FOR LOCAL INITIATIVES IN TACKLING LOCAL PROBLEMS, AND DESIGNING DEVELOPMENT STRATEGIES THAT BEST MEET LOCAL NEEDS. SO A KEY QUESTION FOR POVERTY REDUCTION THENSO, A KEY QUESTION FOR POVERTY REDUCTION THEN IS: HOW CAN INDONESIA BETTER MAKE GOVERNMENT WORK FOR THE POOR?GOVERNMENT WORK FOR THE POOR?


GOOD GOVERNANCE IS A CRITICAL INGREDIENT FOR SUCCESSFUL POVERTY REDUCTION IT IS NOT JUSTSUCCESSFUL POVERTY REDUCTION. IT IS NOT JUST THE LEVEL OF SPENDING OR THE FOCUS OF THAT SPENDING THAT DETERMINES IMPACT, BUT ALSO THE WAY GOVERNMENT SPENDS THAT MATTERS: HOW DECISIONS ARE MADE, HOW EFFECTIVELY THE FUNDS MOVE HOW DELIVERY PROCESSES ARE ALIGNED ANDMOVE, HOW DELIVERY PROCESSES ARE ALIGNED AND HOW WELL PROGRAMS ARE MONITORED.


Cl it f I ti

THREE KEY AREAS OF GOVERNMENT ACTION

Better align policy, planning, and budgeting systems

Clarity of Functions

Incentives and Skills

systems

Strengthen institutional accountability

Enhance assessment and monitoring of poverty reductionreduction

Information Results Information, Participation

and Consultation

Orientation

POLICY, PLANNING AND BUDGETING SYSTEMSPOLICY, PLANNING AND BUDGETING SYSTEMS

THE ALIGNMENT OF POLICY, PLANNING AND BUDGETING ,SYSTEMS HAS A MAJOR IMPACT UPON POVERTY REDUCTION OUTCOMES. THE SYSTEMS FOR PLANNING AND BUDGETING AT THE NATIONAL LEVEL HAVE FACED CHALLENGES. MOREOVER, SINCE DECENTRALIZATION, IT HAS BECOME MORE COMPLEX TO COORDINATE BOTH THESE PROCESSES AMONG DIFFERENT TIERS OF GOVERNMENT THE RESULT HAS BEEN ADIFFERENT TIERS OF GOVERNMENT. THE RESULT HAS BEEN A LESS PREDICTABLE ENVIRONMENT FOR SECTOR AND LOCAL SPENDING CHARACTERIZED BY AD HOC DECISION-MAKING AND BOTH OVERLAPS AND GAPS IN EFFORTS TO ALLEVIATE POVERTYBOTH OVERLAPS AND GAPS IN EFFORTS TO ALLEVIATE POVERTY.


AT PRESENT THE GEOGRAPHIC ALLOCATION OF REVENUE TOAT PRESENT, THE GEOGRAPHIC ALLOCATION OF REVENUE TO REGIONS IN INDONESIA IS NOT PRO-POOR. ALTHOUGH ABOUT ONE-THIRD OF CENTRAL GOVERNMENT SPENDING IS ALLOCATED GEOGRAPHICALLY ACROSS INDONESIA THROUGHALLOCATED GEOGRAPHICALLY ACROSS INDONESIA THROUGH TRANSFER PAYMENTS TO SUB-NATIONAL GOVERNMENTS, THIS FUNDING IS NOT EFFECTIVELY USED FOR POVERTY.GIVEN THAT 40 PERCENT OF TOTAL PUBLIC SPENDING IS NOW THE RESPONSIBILITY OF SUB-NATIONAL GOVERNMENTS, DISTRICT AND MUNICIPAL SPENDING PATTERNS AND PROCESSES ARE CRITICAL. THE PRO-POOR FOCUS OF PUBLIC SPENDING IN INDONESIA IS CONTINGENT ON THE PERFORMANCE OF LOWER LEVELS OF LOCAL GOVERNMENT, ,AND EXPERIENCE SINCE DECENTRALIZATION PROVIDES SOME SOBERING LESSONS.


TO DATE PLANNING AND BUDGETING AT THE PROVINCIALTO DATE, PLANNING AND BUDGETING AT THE PROVINCIAL AND DISTRICT LEVELS HAVE NOT BEEN AS PRO-POOR AS THEY COULD HAVE BEEN, ALTHOUGH TOTAL SPENDING ON HEALTH AND EDUCATION IN RICHER PROVINCES INCREASED IN THE POST-DECENTRALIZATION PERIOD OF 2000-03. EVIDENCE FROM THE EDUCATION SECTOR, FOR ,EXAMPLE, SUGGESTS THAT INCREASED INEQUALITY IN SPENDING STEMS FROM SUB-NATIONAL SPENDING BECOMING MORE UNEQUALBECOMING MORE UNEQUAL


CLARITY OF FUNCTIONS BETWEEN CENTRAL ANDCLARITY OF FUNCTIONS BETWEEN CENTRAL AND SUB-NATIONAL GOVERNMENT UNITS

MANY OF THE CURRENT ARRANGEMENTS GOVERNING PUBLICMANY OF THE CURRENT ARRANGEMENTS GOVERNING PUBLIC SERVICE PROVISION ARE UNCLEAR ON WHAT PROVIDERS ARE TO DELIVER AND HOW MUCH THEY ARE TO RECEIVE FOR DOING SO. THE FINANCING AND PROVISION OF SERVICES IS BASED ONTHE FINANCING AND PROVISION OF SERVICES IS BASED ON BUREAUCRATIC INSTRUCTIONS, PROVIDING RELATIVELY LITTLE AUTONOMY TO PROVIDERS OR BENEFICIARIES. A TYPICAL GOVERNMENT HEALTH CLINIC (PUSKESMAS) HASA TYPICAL GOVERNMENT HEALTH CLINIC (PUSKESMAS) HAS EIGHT SOURCES OF CASH INCOME AND 34 OPERATIONAL BUDGETS, MANY OF WHICH ARE PROVIDED IN KIND BY THE CENTRAL OR LOCAL GOVERNMENT (WORLD BANK, 2005B). THE ( , )SYSTEM IS CHARACTERIZED BY OVERLAP SAND GAPS, AND IT IS INEVITABLY THE POOREST WHO FALL THROUGH SUCH A COMPLEX SYSTEM.


LACK OF CLARITY REGARDING CENTRAL AND LOCALLACK OF CLARITY REGARDING CENTRAL AND LOCAL FUNCTIONS IMPACTS DIRECTLY UPON THE PROVISION OF EDUCATION AND HEALTH SERVICES. FOR EXAMPLE, TEACHER MANAGEMENT—IN THE FORM OF DECISIONS REGARDING RECRUITMENT, DEPLOYMENT, PERFORMANCE EVALUATION AND PAY—ARE MADE AT DIFFERENT LEVELSEVALUATION, AND PAY—ARE MADE AT DIFFERENT LEVELS OF GOVERNMENT. HIRING DECISIONS ARE NOW DECENTRALIZED, BUT COMPENSATION STANDARDS ARE STILL CENTRALIZED. SIMILARLY, IT IS NOT CLEAR WHO HAS THE AUTHORITY TO OPEN AND CLOSE HEALTH FACILITIESFACILITIES.


THE CONSTRAINTS AT THE SUB-NATIONAL LEVEL ARETHE CONSTRAINTS AT THE SUB NATIONAL LEVEL ARE SIMILAR TO THOSE AT THE NATIONAL LEVEL, ONLY MAGNIFIED DUE TO LOWER CAPACITY AND VARIABLE LEVELS OF LOCAL POLITICAL COMMITMENT. TO THE EXTENT THAT DECENTRALIZED SPENDING IS EXPECTED TO MORE DIRECTLY ADDRESS THE NEEDS OF LOCAL COMMUNITIES, THE PLANNING AND BUDGETING PROCESS AT THE LOCAL LEVEL IS ALL THE MORE IMPORTANTLEVEL IS ALL THE MORE IMPORTANT. STRUCTURAL PROBLEMS WITH DISTRICT/MUNICIPAL LEVEL PLANNING AND BUDGETING SYSTEMS ARE COMPOUNDED BY THE WEAK CAPACITY IN LOCAL GOVERNMENT TO MANAGETHE WEAK CAPACITY IN LOCAL GOVERNMENT TO MANAGE THESE PROCESSES.

1) PLANS AND BUDGETS ARE NOT USUALLY SUPPORTED BY LOCAL-LEVEL POVERTY DIAGNOSTICS AND WHERELOCAL LEVEL POVERTY DIAGNOSTICS AND, WHERE DIAGNOSTICS DO EXIST, THESE ARE NOT USED FOR DECISION-MAKING.


2) PREPARATION OF MEDIUM-TERM PLANS AT THE LOCAL LEVEL HAVE BEEN FREQUENTLY ‘CONTRACTED OUT’ TO UNIVERSITIES OR OTHER ORGANIZATIONS WITH THEUNIVERSITIES OR OTHER ORGANIZATIONS WITH THE RESULT THAT THEY ARE COMPLETED FOR OFFICIAL PURPOSES BUT HAVE LITTLE OWNERSHIP BY GOVERNMENT OFFICIALSGOVERNMENT OFFICIALS.

3) THE DISCONNECT BETWEEN PLANS (PREPARED BY THE LOCAL PLANNING OFFICER) AND BUDGETS (PREPARED BY FINANCE UNITS) IS EQUALLY PROBLEMATIC AT THE LOCAL LEVEL.


INSTITUTIONAL ACCOUNTABILITYINSTITUTIONAL ACCOUNTABILITY

THE CONFUSION OVER FINANCING AND RESPONSIBILITIESTHE CONFUSION OVER FINANCING AND RESPONSIBILITIES LIES AT THE HEART OF THE PROBLEM OF EFFECTIVE AND COORDINATED SERVICE DELIVERY (WALLACE ET AL, 2006). IN ADDITION, HOWEVER, LOCAL GOVERNMENTS HAVE ONLY JUST STARTED TO CONSIDER THE BEST WAYS TO DELIVER THE SERVICES FOR WHICH THEY AREDELIVER THE SERVICES FOR WHICH THEY ARE RESPONSIBLE.


BLOCKAGES IN SERVICE DELIVERY OCCUR ON BOTH THEBLOCKAGES IN SERVICE DELIVERY OCCUR ON BOTH THE DEMAND AND THE SUPPLY SIDES: THE GOVERNMENT AND DELEGATED PROVIDERS DO NOT ALWAYS PERFORM THEIR FUNCTIONS AND THE USERS OFTEN DO NOT DEMANDFUNCTIONS, AND THE USERS OFTEN DO NOT DEMAND ACCOUNTABILITY FROM THEM. THERE ARE A NUMBER OF FACTORS CHARACTERIZING SERVICE DELIVERY OVER A RANGE OF SECTORS INSERVICE DELIVERY OVER A RANGE OF SECTORS IN INDONESIA: 1) BASIC SERVICES (HEALTH, EDUCATION AND WATER, FOR ( , ,

INSTANCE) ARE PREDOMINATELY PUBLIC; 2) THEY ARE POORLY COORDINATED ACROSS A RANGE OF

AGENCIES AND TIERS OF GOVERNMENT; 3) AND, THESE PUBLIC AGENCIES ARE NEITHER ACCOUNTABLE FOR

THE QUALITY OF THE SERVICE THEY DELIVER, NOR FOR THE OUTCOMES OF THEIR INTERVENTIONS.


CIVIL SERVICE FUNCTIONS ANDCIVIL SERVICE FUNCTIONS AND CONSTRAINTS

THE STRENGTHS AND WEAKNESSES OF THE CIVIL SERVICE IN INDONESIA HAVE BEEN EXTENSIVELY ANALYZED, AND THERE IS BROAD AGREEMENT THAT SIGNIFICANT CHALLENGES EXIST IN REFORMING THE CIVIL SERVICE. THE MASSIVE GROWTH OF THE CIVIL SERVICE REFLECTED THE POLICY EMPHASIS ON SERVICE DELIVERY AND INFRASTRUCTURE DEVELOPMENT (ROHDEWOHLD, 1995), AND THE RECRUITMENT OF TEACHERS, DOCTORS AND ENGINEERS INCREASED THE OVERALL SIZE OF THE CIVIL SERVICE FROM 525,000 IN 1970 TO 2 MILLION IN 1990 AND OVER 4 MILLION IN 1993.


THIS REPRESENTED A FIVE-FOLD INCREASE FROM 4.1 TO 21.8 STAFF PER THOUSAND INHABITANTS BETWEEN 1960 AND 1993 (HOFMAN, 2004). THE PROBLEM WAS NOT SIZE BUT QUALITY SIZE BUT QUALITY. THREE PRIORITY AREAS THAT WILL DRIVE REFORMS: IMPROVING RULES AND RESTRAINTS, ,ENHANCING VOICE, AND STIMULATING COMPETITIVE PRESSURES.


RULES AND RESTRAINTS

WEAK INCENTIVES AND A RIGID PERSONNEL SYSTEM MAKE SUCCESSFUL PROGRAM IMPLEMENTATION DIFFICULT. MANAGERSSUCCESSFUL PROGRAM IMPLEMENTATION DIFFICULT. MANAGERS ARE IN MANY CASES NOT ACCOUNTABLE FOR THE OUTPUTS ASSOCIATED WITH SERVICE DELIVERY. THE LACK OF ACCOUNTABILITY IS EXACERBATED BY A CLOSED PROMOTION SYSTEM AND THE LACK OF A PERFORMANCE LINKED SALARYSYSTEM AND THE LACK OF A PERFORMANCE-LINKED SALARY STRUCTURE. PROMOTIONS ARE BASED ON SENIORITY, THERE IS NO LATERAL ENTRY (PROMOTING COMPETITION) AND AS A CONSEQUENCEENTRY (PROMOTING COMPETITION) AND, AS A CONSEQUENCE, THERE ARE FEW INCENTIVES TO FOCUS ON RESULTS. THIS LACK OF ACCOUNTABILITY CREATES FEW INCENTIVES TO, FOR EXAMPLE, IMPLEMENT A POVERTY REDUCTION MANDATE, OR TO MOBILIZE STAFF TO ENGAGE IN POVERTY REDUCTIONMOBILIZE STAFF TO ENGAGE IN POVERTY REDUCTION INITIATIVES.


FEW WITHIN THE CIVIL SERVICE SEE THE BENEFITS OF STRIVING FOR RESULTS IN TERMS OF POVERTY REDUCTION. INCENTIVES TO PERFORM DEPEND ON REWARDS (PAY AND ALLOWANCES), AS WELL AS INFORMAL INCENTIVES THAT COME WITH AINFORMAL INCENTIVES THAT COME WITH A MERITOCRACY (SUCH AS RECOGNITION FROM SUPERVISORS AND PEERS) AND PUNISHMENT FOR )POOR PERFORMANCE OR FOR BREAKING THE RULES.


THE RIGIDITY OF THE STAFFING SYSTEM HINDERS THE FLEXIBLE HIRING, TRANSFER AND PROMOTION OF GOOD PEOPLE FOLLOWING DECENTRALIZATIONPEOPLE. FOLLOWING DECENTRALIZATION, OVERSTAFFING HAS BECOME MOST COMMON AT THE LOCAL LEVEL WITH AN IMBALANCE FAVORINGLOCAL LEVEL, WITH AN IMBALANCE FAVORING GENERALISTS OVER MORE NEEDED TECHNICAL STAFF.TRANSFERS ARE THE EXCEPTION RATHER THAN THE RULE AND CIVIL SERVANTS WITH ILL-ADAPTED SKILLS FOR THEIR POSITIONS CAN STAY PUT FOR YEARS.


THE INTERGOVERNMENTAL TRANSFER SYSTEM NOW ENCOURAGES LOCAL GOVERNMENTS NOT TO REDUCE THEENCOURAGES LOCAL GOVERNMENTS NOT TO REDUCE THE NUMBER OF CIVIL SERVANTS. THE GENERAL ALLOCATION FUNDS (DAU) ARE ALLOCATED TO PAY FOR STAFF AND THE CURRENT FORMULA MEANS THAT IF REGIONALCURRENT FORMULA MEANS THAT IF REGIONAL GOVERNMENTS REDUCE THEIR STAFF NUMBERS, THEIR GRANTS WILL ALSO BE REDUCED, RESULTING IN A STRONG DISINCENTIVE FOR THESE GOVERNMENTS TO CUT THEIRDISINCENTIVE FOR THESE GOVERNMENTS TO CUT THEIR STAFF.


THE BASICS OF BETTER STAFFING

OVERSTAFFING IN FRONTLINE INSTITUTIONS CAN PARTIALLY BE DEALT WITH BY MOVING EXCESS PERSONNEL TEMPORARILY TO A ‘POOL OF STAFF IN WAITING’. ‘POOL’ STAFF CAN RE-APPLY FOR POSITIONS ONCE A RE-ORGANIZATION HAS BEEN COMPLETED ANDPOSITIONS ONCE A RE ORGANIZATION HAS BEEN COMPLETED AND CLEAR JOB DESCRIPTIONS ARE IN PLACE. IF SKILL-SETS MATCH AND STAFF ARE TRAINABLE, EMPLOYEES CAN RETURN TO THE MAINSTREAM OF THE ORGANIZATION. THOSE WITHOUT POTENTIAL FOR RE-DEPLOYMENT CAN BE LEFT IN THE ‘POOL’ OR ENCOURAGED TO SEEK OPPORTUNITIES OUTSIDE GOVERNMENT. IF VOLUNTARY DEPARTURES DO NOT OCCUR, IT IS STILL BETTER TO KEEP SUCH STAFF IN A ‘POOL’. ENSURE THAT RECRUITMENT AND PROMOTION ARE OPEN AND TRANSPARENT, AND BASED ON CLEAR JOB DESCRIPTIONS. ALTHOUGH CANDIDATES PUT FORWARD FOR PROMOTION STILL HAVE TOALTHOUGH CANDIDATES PUT FORWARD FOR PROMOTION STILL HAVE TO FULFILL CERTAIN RANK CRITERIA, THE GOVERNMENT CAN USE SPECIALIZED COMPANIES TO CARRY OUT TESTS AND ASSESSMENTS OF CANDIDATES FOR RECRUITMENT AND PROMOTION TO RAISE PROFESSIONALISM THE DRAFTING OF CLEAR JOB DESCRIPTIONS FORPROFESSIONALISM. THE DRAFTING OF CLEAR JOB DESCRIPTIONS FOR THOSE RECRUITED OR PROMOTED IS ALSO IMPORTANT BECAUSE IT CLARIFIES AND SPECIFIES THEIR TASKS, ENABLES PERFORMANCE EVALUATION AND INTRODUCES PERFORMANCE-BASED INCENTIVE SCHEMES.


SET PROPER TERMS AND CONDITIONS FOR CONTRACT STAFF. CONTRACTING S O S CO O S O CO C S CO C GIS AT PRESENT USED TO HIRE A LARGE NUMBER OF LOW-SKILLED STAFF IN SUPPORT FUNCTIONS, BUT IF USED WISELY IT CAN ALSO BE USED TO IMPROVE THE SKILLS OF THE CIVIL SERVICE. THIS WILL EASE THE CONSTRAINTS POSED BY THE RIGID CIVIL-SERVICE RULES. CONTRACT EMPLOYMENT CAN ALSO INTRODUCE AN ELEMENT OF FLEXIBILITY WITHIN THE LOCAL HUMAN-RESOURCES PLANNINGAN ELEMENT OF FLEXIBILITY WITHIN THE LOCAL HUMAN-RESOURCES PLANNING SYSTEM. PLAN THE USE OF HUMAN RESOURCES WISELY. BUILDING A DATABASE FOR HUMAN-RESOURCE PLANNING AND MANAGEMENT IS THE BASIS FOR PLANNING OF ORGANIZATIONAL AND PERSONNEL REFORMS. A MODERN DATABASE IS A TRANSPARENT AND ALTERNATIVE HUMAN-RESOURCE PLANNING AND MANAGEMENT TOOL AND IT WILL ENABLE REGIONS TO DO MORE INDEPENDENT AND TAILORED PLANNING OF PERSONNEL ACTIONS. DEVELOP PREDICTABLE INCENTIVES FOR GOOD PERFORMANCE AND SANCTIONS FOR BAD PERFORMANCE WHILE SCHEMES TO ENFORCESANCTIONS FOR BAD PERFORMANCE. WHILE SCHEMES TO ENFORCE ATTENDANCE AND DISCIPLINE ABOUND IN FRONTLINE INSTITUTIONS, GOVERNMENT SHOULD ADD PERFORMANCE-BASED INCENTIVES EITHER ON A GROUP OR INDIVIDUAL BASIS. REVAMPING POLICIES SO THAT THE PROVISION OF TRAINING OPPORTUNITIES AND MONETARY REWARDS PROMOTE GOOD PERFORMANCE AND A REGIME OF SANCTIONS DETER BAD PERFORMANCE WOULDPERFORMANCE AND A REGIME OF SANCTIONS DETER BAD PERFORMANCE WOULD GO A LONG WAY TOWARDS PROVIDING BETTER SERVICES. SUCH A SYSTEM SHOULD BE TRANSPARENT AND MONITORED CLOSELY.


CITIZEN AND CIVIL SOCIETY VOICE

INVOLVING END-USERS AND POOR CITIZENS IN DEVELOPMENT EFFORTS IS CRITICAL, AS IT IMPROVES ACCOUNTABILITY AND THEEFFORTS IS CRITICAL, AS IT IMPROVES ACCOUNTABILITY AND THE LIKELIHOOD THAT INTERVENTIONS WILL BE DESIGNED TO MEET DEMAND. THE ROLE OF COMMUNITIES IN POVERTY REDUCTION PROGRAMS CAN VARY BOTH IN TERMS OF THE DEGREE OF THEIR INVOLVEMENT AND THE STAGE AT WHICH THEY BECOME INVOLVEDINVOLVEMENT AND THE STAGE AT WHICH THEY BECOME INVOLVED IN THE PROCESS (PROJECT IDENTIFICATION, PLANNING, BUDGETING AND PROGRAMMING, MONITORING, DELIVERY AND IMPLEMENTATION).IMPLEMENTATION). LOCAL GOVERNMENTS CAN SUPPORT USERS TO BECOME INVOLVED IN SERVICE DELIVERY BY PROMOTING THEIR PARTICIPATION IN THE ACTUAL DECISION-MAKING OVER THEIR PARTICIPATION,AND BY APPROPRIATELY ASSIGNING RESOURCES TO COMMUNITIES OR TO PARTNERSHIPS BETWEEN PROVIDERS AND COMMUNITIES.


CURRENTLY, THE PARADIGM OF AN AUTHORITARIAN STATE WITH UPWARD ACCOUNTABILITY STILL REMAINSSTATE WITH UPWARD ACCOUNTABILITY STILL REMAINS STRONG: CITIZENS HAVE A VOICE, BUT LACK THE POWER TO ENFORCE THE ACCOUNTABILITY OF LAW-MAKERS OR TACKLE THE BUREAUCRACY OVERSIGHT BYMAKERS, OR TACKLE THE BUREAUCRACY. OVERSIGHT BY AN ACTIVE CIVIL SOCIETY AND POLITICAL REPRESENTATIVES IS ESSENTIAL, BUT IS CURRENTLY MISSING IN THE TRIANGLE OF POLICY MAKERMISSING IN THE TRIANGLE OF POLICY-MAKER–PROVIDER–CITIZEN ACCOUNTABILITY.


CIVIL-SOCIETY ORGANIZATIONS HAVE DEVELOPED CONSIDERABLY SINCE DECENTRALIZATION, AND CORRUPTION WATCHDOGS AND CONSUMER ASSOCIATIONS ARE EMERGINGWATCHDOGS AND CONSUMER ASSOCIATIONS ARE EMERGING THAT WILL INCREASINGLY ACT AS A CHECK ON GOVERNMENT BEHAVIOR. HOWEVER, A GREAT DEAL OF SCOPE EXISTS FOR FURTHER EMPOWERING CIVIL SOCIETY AND THE PUBLICFURTHER EMPOWERING CIVIL SOCIETY AND THE PUBLIC. THE EXPERIENCE WITH THE SUB-DISTRICT (KECAMATAN) DEVELOPMENT PROGRAM (KDP) SUGGESTS THAT EMPOWERING COMMUNITIES TO MONITOR DEVELOPMENTEMPOWERING COMMUNITIES TO MONITOR DEVELOPMENT PERFORMANCE AND FACILITATING THIS PROCESS THROUGH CIVIL SOCIETY AND MEDIA COVERAGE HAVE HELPED MODERATE CORRUPTIONMODERATE CORRUPTION.


THREE FACTORS IMPACT UPON THE ABILITY OF CITIZENS TO EFFECTIVELY EXERCISE THEIR VOICE. FIRST, THE DEGREE TO WHICH CITIZENS ARE INVOLVED IN AND INFLUENCEWHICH CITIZENS ARE INVOLVED IN AND INFLUENCE PLANNING AND BUDGETING BY THEIR LOCAL GOVERNMENTS; SECOND, GIVING COMMUNITIES THE POWER TO DELIVER SOME SERVICES THEMSELVES (FOR EXAMPLE SMALL SCALESOME SERVICES THEMSELVES (FOR EXAMPLE, SMALL-SCALE INFRASTRUCTURE); AND THIRD, THE PROVISION OF VOUCHERS TO THE POOR SO THAT THEY ARE FINANCIALLY EMPOWERED TO MAKE CHOICES.


COMPETITIVE PRESSURES

THE PRIVATE SECTOR CAN BOTH PROVIDE COMPETITION TO THE PUBLIC SECTOR AND ALSO DELIVER SOME SERVICES MORE EFFICIENTLY ANDSECTOR, AND ALSO DELIVER SOME SERVICES MORE EFFICIENTLY AND EFFECTIVELY THAN PUBLIC SERVICE PROVIDERS. MUCH OF THE DIALOGUE REGARDING GOVERNMENT SERVICES AND ADMINISTRATION FOCUSES UPON HOW TO IMPROVE EFFICIENCY AND EFFECTIVENESS THROUGH INTERNAL REFORMS. HOWEVER, EQUAL ATTENTION SHOULD BE PAID TO USE OF THE PRIVATE SECTOR. THE PRIVATE SECTOR IS NOT ONLY MORE COST EFFECTIVE IN DELIVERING SERVICES IN SOME CASES BUT THE MERE EXISTENCE OFDELIVERING SERVICES IN SOME CASES, BUT THE MERE EXISTENCE OF PRIVATE SECTOR COMPETITION CAN, UNDER THE RIGHT CONDITIONS, STIMULATE THE PUBLIC SECTOR TO DELIVER HIGHER QUALITY SERVICES TO CITIZENS. IN ADDITION, THERE ARE SOME TASKS THAT THE PUBLICTO CITIZENS. IN ADDITION, THERE ARE SOME TASKS THAT THE PUBLIC SECTOR CAN SUBCONTRACT TO THE PRIVATE SECTOR, AS THESE TASKS DO NOT FALL WITHIN THE CORE RESPONSIBILITIES AND/OR COMPETENCIES OF THE PUBLIC SECTOR.


MONITORING AND ASSESSMENT

TO REDUCE POVERTY MORE EFFECTIVELY IT IS NECESSARY TO

MONITORING AND ASSESSMENT

TO REDUCE POVERTY MORE EFFECTIVELY, IT IS NECESSARY TO BUILD MORE KNOWLEDGE AND INFORMATION ON THE NATURE AND DETERMINANTS OF POVERTY AND THEN DEVELOP POLICIES AND PROGRAMS THAT RESPOND TO EMPIRICAL EVIDENCEEVIDENCE. TO DATE, THE GOVERNMENT HAS ASSESSED POVERTY THROUGH ANNUAL HOUSEHOLD SURVEYS THAT HAVE PROVIDED VERY SOUND QUANTITATIVE DATA AT THEPROVIDED VERY SOUND QUANTITATIVE DATA AT THE NATIONAL LEVEL. INDONESIA HAS BEEN SUCCESSFUL IN COLLECTING GOOD QUALITY MONETARY INDICATORS, AND HAS ALSO DEVELOPED SOME USEFUL NON-MONETARY INDICATORS OF POVERTY ACROSS THE REGIONS THROUGH THE SUSENAS HOUSEHOLD SURVEY. THE NATIONAL SOCIO-ECONOMIC SURVEY (SURVEI SOSIAL EKONOMI NASIONAL, OR SUSENAS) INITIATED IN 1963 64SUSENAS), INITIATED IN 1963-64. BUT THEY NEED TO BE IMPROVED.


THE CHALLENGES

• For some important non-monetary indicators, such as infant mortality, maternal mortality and nutritional status, data compiled by the Indonesian Demographic and Health Survey (DHS) are not collected on an annual basis and in most cases are only aggregated at the national levelaggregated at the national level.

• Regional coverage of data is lacking. Unfortunately, most household surveys are only reliable at the regional/provincial level, but program design and budget allocations (including the DAK) require a more precise definition (below the kabupaten level) of where the poor reside.

• Quantitative data are not supported by systematic qualitative assessment.Indonesia has some experience in participatory poverty assessment. However, this is far from widespread and is not mainstreamed at the local levels of government or in national approaches to poverty assessment. Routine and administrative data at the district/municipal level are lacking The• Routine and administrative data at the district/municipal level are lacking. The regional branches (Kanwil/Kandep) of the central government that previously collected and reported these data no longer exist. While some districts now collect data, these are not necessarily fed into national-level information systems.

• Data collection efforts are not well coordinated across departments. There is noData collection efforts are not well coordinated across departments. There is no system to coordinate the collection of data by the BPS and line ministries. Incentives tend to foster independent data collection efforts (for example, data associated with individual programs or projects) and there are gaps in the development of the sorts of poverty diagnostics that are needed.


RECOMMENDATIONS

1. MAKE BETTER USE OF EXISTING AND EMERGING DATA SOURCES TO BOTH BETTER UNDERSTAND POVERTY AND PROGRAM IMPACT

2. LINK MONITORING FINDINGS MORE EFFECTIVELY WITH FEEDBACK TO, AND DESIGN OF, SECTORAL PROGRAMS AND FOR USE BY LOCAL GOVERNMENTSPROGRAMS AND FOR USE BY LOCAL GOVERNMENTS


CONCLUSIONCONCLUSION

FIRST, AS IT GROWS, INDONESIA’S ECONOMY IS BEING TRANSFORMED FROM ONE WITH IS BEING TRANSFORMED FROM ONE WITH AGRICULTURE AS ITS MAINSTAY TO ONE THAT WILL RELY MORE ON SERVICES AND INDUSTRY. THE PRIORITY FOR MAKING THIS GROWTH WORK FOR THE POOR IS A FRIENDLIER RURAL INVESTMENT CLIMATE FRIENDLIER RURAL INVESTMENT CLIMATE.


SECOND, AS DEMOCRACY TAKES HOLD, THE GOVERNMENT IS BEING TRANSFORMED FROM ONE GOVERNMENT IS BEING TRANSFORMED FROM ONE WHERE SOCIAL SERVICES WERE DELIVERED CENTRALLY TO ONE THAT WILL RELY MORE ON LOCAL GOVERNMENTS. THE PRIORITY FOR MAKING SERVICES WORK FOR THE POOR IS STRONGER CAPACITY OF LOCAL GOVERNMENTS AND BETTER CAPACITY OF LOCAL GOVERNMENTS AND BETTER INCENTIVES FOR SERVICE PROVIDERS.


THIRD AS INDONESIA INTEGRATES THIRD, AS INDONESIA INTEGRATES INTERNATIONALLY, ITS SYSTEM OF SOCIAL PROTECTION NEEDS TO BE MODERNIZED SO THAT INDONESIA IS BOTH SOCIALLY EQUITABLE AND INDONESIA IS BOTH SOCIALLY EQUITABLE AND ECONOMICALLY COMPETITIVE. FOURTH, THE PRIORITY FOR MAKING PUBLIC ,EXPENDITURE WORK FOR THE POOR IS TO SHIFT FROM INTERVENING IN MARKETS FOR COMMODITIES THAT THE POOR CONSUME (SUCH AS FUEL AND THAT THE POOR CONSUME (SUCH AS FUEL AND RICE) TO PROVIDING TARGETED INCOME SUPPORT TO POOR HOUSEHOLDS, AND USING THE FISCAL SPACE TO IMPROVE CRITICAL SERVICES SUCH AS SPACE TO IMPROVE CRITICAL SERVICES SUCH AS EDUCATION, HEALTH, SAFE WATER, AND SANITATION.


making government work for the poor -the case of indonesia

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