Chatib Basri LPEM University of Indonesia Gustav Papanek BIDE
Disclaimer: The views expressed in this paper/presentation are the views of the author and do not necessarily reflect the views or policies of the Asian Development Bank (ADB), or its Board of Governors, or the governments they represent. ADB does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequence of their use. Terminology used may not necessarily be consistent with ADB official terms.

Economic crisis in Indonesia Why we need social protection? Social protection policy in Indonesia Social Protection policy in the future What needs to be done What ADB can help

Why we survived the global crisis? Good luck  and good policy
All were Screaming the same Mayday
20% 15% 10% 5% 0% ‐5% ‐10% ‐15% ‐20% ‐25% ‐30% Singapore Indonesia Thailand China Malaysia Philippines
Q1 Q2 2008 Q3 Q4 Q1 2 009 Q2

Exports Volume of Commodities remain Strong
350.0 300.0 250.0 200.0 150.0 100.0 50.0 0.0

Quarterly Growth of Export Values (SA)

Monthly export volumes (2006=100)  Seasonally adjusted

6 0 ‐ n a J

6 0 ‐ y a M CPO

6 0 ‐ p e S

7 0 ‐ n a J

7 0 ‐ y a M

7 0 ‐ p e S

8 0 ‐ n a J

8 0 ‐ y a M

8 0 ‐ p e S

9 0 ‐ n a J

9 0 ‐ y a M




What made 2008 crisis different with 1998: good  policy response 1998 2008
Monetary policy: tight,  very high interest rate Fiscal Policy: Initially  tight, the expansionary Banking system: weak,  unprudent Policy response towards  banking sector: closed 16  banks Focus on strutural reform Exchange rate regime:  fixed Social safety net
Monetary policy: ease,  flushed liquidity, lowered  interest rate Fiscal policy: expansionary Banking system: relatively  healthy Policy responses towards  banking problem: bail‐out,  deposit insurance Trade regime: relative open Exchange rate regime: flexible Social protection policy to  protect the poor 

…but, poverty and unemployment  remains a problem

The poor remains vulnerable to  economic shock

World Bank, 2006

Social Protection system in  Indonesia
To deal with structural poverty : PNPM Generasi,  PNPM Mandiri, Raskin (rice for the poor), Breaking the intergenerational poverty chain: School  Operational Assistance, Community health,  Conditional cash transfers (PKH), credit guarantee  program Dealing with shocks: cash transfers 

Direct cash transfers: pro poor and the largest cash  transfers program in developing countries

Source: World Bank (2008)

Cash transfers is better than other programs
Table 1 B targeting is better than other poverty alleviation program LT s
%Poor %N Poor ear Households Households %N Poor on Households

BLT Raskin Askeskin Kartu Sehat BOS*

26.02 21.02 24.41 21.62 16.65

24.07 22.28 24.03 21.22 20.81

49.91 56.7 51.56 57.16 62.54

Total 100 100 100 100 100



CALCULATIONS OF THE EMPLOYMENT IMPACT OF PNPM (Rp billion) 2007 A. Number of Kecamatan B, Grant in Rp. billion needed per kecamatan to employ 24 million for 60 days 16,20 C. Total grant needed: A*B: no inflation 0 16,20 D. Total grant needed after adjusting for inflation of '07-08: 15%; '07-09: 20%; '07-10: 25% E. Grant needed per kecamatan if 6,400 kecamatan 2.5 2.7 3.0 10,29 F. Actual budget for grants-total billion Rp* G. Actual grant per kec if 5,400 kecamatan H. Grant per kecamatan if divided over 6,400 kecamatan Actuals for 07-09, proposed for '10-11 I. Estimated millions employed 60 days J. Millions employed for 60 days if add 20% contribution by local government 3 10 15 22 29 0.3 2 1.1 9 1.6 13 2.3 18 3.3 24 1,735 0.3 6,974 1.3 0 1.9 3.2 14,72 9 2.7 3.3 21,06 0 3.9 0 16,20 0 17,49 6 16,20 0 19,44 0 16,20 0 20,25 0 16,20 0 21,06 0 5,400 3 2008 2009 6,400 2010 2011

Problem with current social  protection system
Fragmented Less coordinated Different set of data base Problem of targeting, incomplete information, supply  side problems (availability of school, infrastructure  etc)

Social Protection policy in the  future

What needs to be done?
• The creation of an unified database system; • Integrate the PNPM program into the Family Centred Integrated Social Assistance • The creation of a work‐intensive program in PNPM; • The creation of a scholarship system which guarantees  that poor students, who are poor, will be able to continue  their education to a higher level; • The improvement of shortages in the current PKH  program and dealing with the problem of shortage in the  supply side through PNPM Generasi; • A full review of the Raskin system and improvements to  the existing shortages;

• Widening and adding funds for the PNPM program,  especially in regions where there are many poor  residents; • Implementing a one roof, fully coordinated social  protection system; • The creation of a more comprehensibe social  protection system, in order to be able to replace  fragmented and adhoc social programs; • The creation of a continuous national social guarantee  system;

An initial program as the first stage of countinous health insurance program; The government to cover all payments of a health  system for poor families; To phase out Jamkesnas and replace it with the  Health SJSN: Increase health insurance coverage in stages

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