SSRN Id3585614

INTERNATIONAL CONFERENCE ON PUBLIC ORGANIZATION
ASIA PACIFIC SOCIETY FOR PUBLIC AFFAIRS (APSPA)

KHON KAEN PROVINCE, THAILAND, 28-30 AUGUST 2019
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Policy Economic Analysis of HIV/AIDS Intervention in Indonesian Local
Government
Rijal Ramdani & Eko Priyo Purnomo
iew
rijalramdani@umy.ac.id & eko@umy.ac.id
Department of Government Affairs and Administration, Jusuf Kalla School of Government
Universitas Muhammadiyah Yogyakarta
Abstract
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Global governance concerns the issue of HIV/AIDS through Millennium Development Goals
(MDGs) and followed by Sustainable Development Goals (SDGs). In the Indonesian context,
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the number of people living with HIV/AIDS has been increasing in the last ten years. This
paper studies the HIV/AIDS policy intervention in an Indonesian local government context by
using policy economic analysis. The finding demonstrates that the policy intervention has
been applied through a supply approach such as in welfare states in which the local
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government provides free access to health facilities for HIV/AIDS-positive persons. This
approach differs from the macro policy level of the Indonesian central government who
adopts free-market orientation and demand intervention of health economics. The research
focuses on a Yogyakarta Special Province case study while the data depend on analysing
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and interpreting regional and national regulation of HIV/AIDS and policy recommendations of
the regional public health department. We argue that the improvement of local intervention
emerges as the supply is just for the HIV/AIDS diagnosis test and it does not cover the
continued HIV/AIDS health treatments and nursing.
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Keyword: Policy Economic Analysis, HIV/AIDS, Local Government, and Indonesia

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1. Introduction
HIV/AIDS is one of the deadly diseases in which global governance has paid attention
through Millenium Development Goals (MDGs) and Sustainable Development Goals (SDGs)
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intervention. Six goals of SD are related to this issue including; (1) End poverty in all forms
everywhere; (2) End hunger, achieve food security and improved nutrition; (3) Ensure
healthy lives and promote well-being for all at all ages; (5) Achieve gender equality and
empower all women and girls; (9) Build resilient infrastructure, and (17) Strengthen the
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means of implementation (Unaids, 2015). According to the World Health Organization

(WHO), HIV is a virus “infecting cells of the immune system, destroying or impairing their
function. Infection with the virus results in progressive deterioration of the immune system,
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leading to immune deficiency” while AIDS is “a term which applies to the most advanced
stages of HIV infection” (WHO, 2017). Currently, the virus has infected 36.7 million people
This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=3585614
on this planet and passes newly infection to nearly 1.8 million humankind every year (WHO,
2017).
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Figure 1. The trend of people living with HIV and AIDS in Indonesia between 2007 and 2017
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Source: the Indonesian ministry of health 2018
In the Indonesian context, the number of HIV/AIDS-positive persons has been impressively
increasing in the last ten years. For example, in 2007 between 4,000 and 6,000 people lived
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with HIV, yet in 2017 the number was more than 48,000 inhabitants and almost 10,000
infected-AIDS people were identified. In Yogyakarta special province alone, where the
research focuses on, the trend has a similar figure. In 2015, for instance, more than 900
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HIV-positive persons existed, and 952 others had lived with AIDS. The highest rate of them
came for the Yogyakarta municipality followed by the regency of Sleman, Bantul,
Gunungkidul, and Kulonprogo, respectively. This figure is in a high-risk condition on how the
Yogyakarta special province to deal with delivering health facilities to the infected-HIV/AIDS
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people not only to answer the demand of global development trend but also to response the
need of citizens.
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Figure 2. The number of HIV/AIDS-positive persons in Yogyakarta special province between

1993 and 2015
3000
2500 1529
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2000
1500
1000 952
580 417
500 377
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251 240 65 300

0 90
52 109
Yogyakarta Bantul Kulonprogo Gunungkidul Sleman N
AIDS HIV
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Source: department of health, Yogyakarta special province
Some scholarly works have been concerning the HIV/AIDS issue in Indonesia. Mesquita
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et.al (2007) found that Indonesian central government and civil society organizations have a
positive commitment to response the HIV/AIDS epidemic event local governments have less
concern on allocating the budget to follow up the national concern (Mesquita et al., 2007).
Ibahim et.al (2009) focused on the policy intervention on how the Indonesian government
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prevents the spread out of HIV/AIDS diseases. He emphasised that the decentralization of
healthcare policy and the development of health workers are such critical intervention on this
issue (Ibrahim et al., 2010). Other scholars concern on the negative stigmatization to the
people living with HIV/ADIS, which can obstruct the government` policies for HIV/AIDS
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diagnoses and health treatments (Waluyo et al., 2015). Trompt et.,al (2015) argued that the
engagement of people living with HIV/AIDS in local government programmes should be
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encouraged to meet with the transparency and accountability (Tromp et al., 2014).
It is apparent, however, on how to portray the policy economic analysis of HIV/AIDS in the
local context whether the local government follows market mechanism or supply
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intervention. This paper focuses on Yogyakarta special province as a case study. We use a
simple analytical method of demand, supply and inelasticity of health economics. Our finding
demonstrates that the local policy intervention has followed a supply approach in which the
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local government provides free access to health facilities for HIV/AIDS-positive persons. It
differs from the Indonesian central government who adopts free-market orientation based on
the demand of health economic inelasticity. Although both levels of government interventions
seem contradicted, in a neoliberal political decentralization system, a local autonomous
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government could stand independently to introduce a specific health intervention if they are
able to cover the economic cost. To follow the discussion, the paper is divided into several
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sections such as a conceptual framework of policy economic analysis, research method,

result and discussion, and conclusion.
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2. Analytical framework
2.1. Negative externalities of HIV/AIDS market failure
The HIV/AIDS infection is a form of negative externalities in a market mechanism. The

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negative externality occurs when society suffers from the failure of an economic transaction
(Economicsonline, 2019). In the market mechanism, the producer and consumer are
categorized as the first and second party while society whom could be direct and indirectly
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affected by the market failure is recognized as the third party (Economicsonline, 2019). From
policy economic perspective, costs of the transaction are classified into two categories
namely individual cost and social cost (Sukirno, 2005). Individual cost is a fee that should be
paid by the customer while the social cost is a fee that should be fulfilled by society as a
consequent of the individual transaction.
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According to Gaffeo (2003), the global transmission of the HIV/AIDS epidemic is varying
from one to other regions. For example, unsafe blood donations, needle sharing of injecting
drug users, and homosexual relationship are the primary medium of HIV/AIDS transmission
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in the global north while the heterosexual is the most frequent in the global south (Gaffeo,
2003). This illustrates that although the epidemic transmission of HIV/AIDS depends on the
first- and second-party economic activities, society could also be affected from this negative
externality on account of fact that the HIV/AIDS can infect any individual. It is a government
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responsible, therefore, to intervene this market failure.
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To deal with the negative externality of the market failure, the government could adopt some
approaches (Ramdani, 2013; Ramdani et al., 2018). The first is a universal model in which
the government will cover all health facilities for citizens to prevent the negative externality
(Suharto, 2006). The second is a liberal model occurring when government leave the
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negative externalities in the market mechanism (Suharto, 2006). It means that all citizens
need to take healthcare by his or her selves including people living with HIV/AIDS. The last
but not the least is a residual model when the authority provides HIV/AIDS health facilities
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only for the basic treatment (Suharto, 2006; Eikemo et al., 2008). Whether the Yogyakarta
special province adopts universal, liberal, or residual model we will analyse it through the
curve of demand, supply and inelasticity of the microeconomics.
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2.2. Demand, supply and inelasticity of health economics

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The demand theory focuses on the characteristics of customer demands for goods or a
product and focuses on a relation between the demand and the price. According to the
demand verdict, the lower the price of a product, the higher the demand for a product will be
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(Sukirno, 2005). In contrast, the higher the price of stuff, the lower the demand for the stuff
will be. The demand of customers to a product has related with some factors such as the
quality of the stuff, a trend of other goods, family income and income per capita, the number
of population, and the economic forecast (Sukirno, 2005).
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On the other hand, supply theory examines the characteristic of producers once they are
selling their goods in a market and it exercises the relation between supply and the price of
stuff. The supply verdict illustrates that the higher the price of a product, the more the
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product offered in a market would be (Sukirno, 2005). However, the lower a price of stuff, the
more limited the product offered would be (Sukirno, 2005). Some factors have a strong
relationship with the supply mechanism, which is the price of the stuff, another product price,
the cost of production, and the level of technology used in the production.
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Figure 3. The inelasticity curve in the microeconomics
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P = Product (P1 & P2), Q = Quantity (Q1 & Q2), D = Demand
In the case of HIV/AIDS economics, however, due to the market failure, the market will come
into an inelasticity of the demand. According to Sadono (2005), inelasticity occurs when the
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price of a product has not related to the number of demands. The changing of the quantity
does not equally follow the price of the product. The inelasticity differs from market elasticity
in which the number of products will follow the number of demands. In another word,
HIV/AIDS is an example of market inelasticity in which the verdict of supply and demand is
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failed on account of fact that the price of HIV/AIDS health treatment will not follow the
demand and the supply of the product. In this situation, governments could intervene
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whether through supply or demand approaches.
3. Research method
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We utilized content analysis, which is a part of qualitative inquiry. Nowadays, this research
method is used in many fields of study such as health, education, nursing and including
public policy studies (Elo and Kyngäs, 2008). The content analysis aims to interoperate a
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meaning from the content of text data (Hsieh and Shannon, 2005). In this case, however, we
follow the conventional approach rather than the traditional one, which bases on coding
schemes, origins of codes, threats to trustworthiness, and context interoperation
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(Krippendorff, 2018). In the conventional approach, the analysis is derived directly from the
text data (Hsieh and Shannon, 2005) and we started our study by developing a conceptual
framework of demand, supply, and inelasticity as a lens of the data analysis. This approach
can also be categorized as a deductive method, which is started from general to a specific
case (Elo and Kyngäs, 2008).
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In this research, the text data refers to two regulations namely the regional regulation of
Yogyakarta Special province No.12 / 2010 and the decree of the Indonesian Ministry of
Health No.21/ 2013. Although in regard to national hierarchal regulation, the lower regulation
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should follow the higher one, in this case, the ministerial decree came later on. Both
regulations regulate the policy intervention of local and national government on treating
people living with HIV/AIDS. Besides, we will also refer to a presidential decree No. 75/ 2006
institutionalizing the national commission of HIV/AIDS. The commission is responsible for
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developing strategic planning to prevent, to control, and to deal with HIV/AIDS.
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To analyse whether the local government utilizes supply or demand approaches to
intervening the HIV AIDS issue, we will classify the data text based on both categorisations.
For example, the words “delivering health treatment” and “taking care of HIV/AIDS
diagnosis” can be classified as supply approach while the words “people living with
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HIV/AIDS needs are responsible for their medical treatments based on the health
information provided by local government” can be recognized as supply intervention. We
compared these supply and demand words from regional and national regulation texts.
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Finally, we focus on the Yogyakarta special province case because of several reasons. First,
the province is the most progressive region in responding to the issue of HIV/AIDS. Second,
the number of people living with HIV AIDS is relatively high, compared to other provinces on
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Java islands such as West, Central, and East Java event the population of those provinces
is much higher than that in Yogyakarta. Third, Yogyakarta is a special province based on
national autonomy regulation. This province is led by a Sultan and has more power on
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managing their local budget.
4. Result and Discussion

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4.1. HIV/AIDS Policy Intervention in Yogyakarta Special Province
The local policy intervention of HIV/AIDS in Yogyakarta special province refers to the
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regional regulation No.12 / 2010. This regulation had been regulated by 2 years earlier than
the Indonesian ministerial decree of HIV/AIDS intervention No.21/ 2013. According to the
regional regulation, the local government is in charge of delivering a sustainable medical
treatment to prevent, to nurse, to medicate, and to rehabilitate people living with HIV/AIDS.
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They are also on duty to maintain a healthy quality of HIV/AIDS-positive persons. Moreover,
the governor has an authority to make a regional policy on referral system of HIV/AIDS.
In regard to HIV/AIDS health management, the Yogyakarta special province has three
stages of the intervention namely promotion, HIV/AIDS diagnosis test and counselling, and
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treatment, nursing, and supporting. In this research, we will more be focusing on diagnosis
test, treatment, and nursing. Every citizen of Yogyakarta special province has a right to take
a medical test of HIV/AIDS in public health facilities such as local hospitals. This test is free
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in charge of all citizens. Both public and private hospitals with HIV/AIDS medical facilities in
Yogyakarta special province are responsible to facilitate HIV/AIDS test, health medication,
and nursing. However, the medical cost of health medication and nursing of HIV/AIDS
following the national health system, and in more details, it will be regulated in a governor
decree.
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Table 1. A Comparative Analysis of HIV/AIDS Intervention between Regional and
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National Regulation
Regional regulation of the decree of Indonesian ministry
Yogyakarta Special province of health
Year of the 2010 2013
Establishment
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HIV/AIDS Focus of 1. Providing an access 1. Developing a partnership
Intervention of HIV/AIDS with local governments on
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intervention HIV/AIDS policy
2. Providing HIV/AIDS implementation and
health facilities monitoring
3. Developing skilful 2. Developing international
medical staffs collaboration, and
3. Granting the availability of
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HIV/AIDS medicines and

medical instrumentations
Authority 1. To monitor the 1. Formulating a national
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implementation of policy of HIV/AIDS

HIV/AIDS prevention and
programmes management
2. To declare an 2. Decentralizing HIV/AIDS
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emergency status of powers to regional and

HIV/AIDS case local governments
Policy Intervention of 1. HIV/AIDS diagnosis 1. Health campaign and
HIV/AIDS treatment test promotion
2. HIV/AIDS medication, 2. Developing strategic
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3. HIV/AIDS nursing, planning on preventing

and the HIV/AIDS
4. Psychological transmission
consultation and 3. Regulating the Diagnosis
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support for people test, medication, nursing,

living with HIV/AIDS and rehabilitation of
HIV/AIDS
HIV/AIDS Cost 1. Free for HIV/AIDS - Market mechanism and

Facility diagnosis test national health system
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2. HIV/AIDS medication
and nursing is
following the national
heath system
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Source: Regional regulation No.12 / 2010 and Ministry of Health Decree No. No.21/ 2013
To support the HIV/AIDS service deliveries, the Yogyakarta special province also commits
on providing access of communication, information, and communication to society, on
providing health facilities for HIV/AIDS diagnosis test, medical treatment, and nursing, and
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on developing the number of skilful medical staffs of HIV/AIDS. In comparison with the
ministerial decree No.21/ 2013, it more focuses on macro policy on how the central
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government regulates the right of people living with HIV/AIDS, the transmission of HIV/AIDS,
and the relation between the national and regional government. There is no clear information
whether the cost of HIV/AIDS diagnosis test, medical treatment, and nursing is covered by
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government budget or by patients. For example, in the chapter No. 4, the decree regulates
only on how health public facilities such public and private hospitals facilitate HIV/AIDS
diagnosis test, the medical treatment and the nursing for people living with HIV/AIDS.
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4.2. Inelasticity, Supply, Demand: between Welfare and Liberal System
Both the Yogyakarta province and national government realize that HIV/AIDS as an
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inelasticity of a market failure in which HIV/AIDS health price treatment will not follow the
demand and the supply. At the same time, society suffers from this failure of an economic
transaction as the producers and consumers could not be responsible and are not the only
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parties whom will be affected by the disease. The Yogyakarta special province stands on
supply intervention by introducing several programmes on their HIV/AIDS strategic planning
namely providing an access of communication, information, and communication to society,
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on providing health facilities for HIV/AIDS diagnosis test, medical treatment, and nursing,
and on developing the number of skilful medical staffs of HIV/AIDS. Moreover, the province
provides free facilities for citizens to take a medical test of HIV/AIDS in public health facilities
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such as local hospitals.
Those policy interventions reflect that the Yogyakarta special province has a high
commitment to providing basic HIV/AIDS health facilities and treatment. The province
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allocates the cost from their regional annual budget. However, for the next stage of the
health treatments such as medication and nursing, the cost is following the national
regulation of health care in which it can become to the health market mechanism or national
health insurance. Both oppositional interventions demonstrate that the province adopts the
residual model of the welfare system since the authority provides HIV/AIDS health facilities
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only for the basic treatment. This scheme can also reflect the ability of the province financial
allocation on threatening HIV/AIDS positive persons. We argue that the Yogyakarta province
is one stage more progressive than that national government on HIV/AIDS response, even
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though they just focus on basic health treatment and the availability of HIV/AIDS facilities.
On the other hand, the national government stands on supply approach by regulating
HIV/AIDS health mechanism. For example, the government regulates on how health facilities
such public and private hospitals facilitate HIV/AIDS diagnosis test, the medical treatment
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and the nursing for people living with HIV/AIDS. The government holds the authority on their
hand, but at the same time, they publicly put the HIV/ADIS health treatment on the market
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mechanism. This position reflects that although HIV/AIDS is a critical inelasticity of market
failure, the national government does not intervene in the problem with an extraordinary
supply intervention. We argue that the national HIV/AIDS system, in general, more likely
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follows the liberal model in which people living with HIV/AIDS in Indonesia have to take care
their selves for their health treatment. The only commitment the national government has is
on the availability of medicines and medical instrumentations. Nevertheless, they also put
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the cost of both medicines and medical instrumentations in the health market mechanism.
5. Conclusion
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The HIV/AIDS is a form of an inelasticity in the market mechanism in which society can be
suffered from this failure. The Yogyakarta special province is one stage more progressive on
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intervening this negative externality by providing an access of information and

communication, delivering free health facilities for HIV/AIDS diagnosis test, developing the
number of skilful medical staffs of HIV/AIDS, and facilitating free medical check-up of
HIV/AIDS test in public health facilities such as local hospitals. However, for further
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HIV/AIDS treatment such as medication and nursing, they follow the national health system.
We argue that the HIV/AIDS policy intervention of Yogyakarta special province stands on the
supply approach following the residual model of welfare economics. This differs from the
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national paradigm which is closed to the liberal model system in which the national
government just regulates the stage by stages HIV/AIDS health treatment and put all those
stages in the market mechanism.
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Since HIV/AIDS is a critical disease, the national government should have more commitment
to dealing with the issue. The role of provinces should not only be as the implementor of the
programmes but also, they can actively be encouraged to be more autonomous on
introducing local policy intervention of HIV/AIDS. The national government needs to transfer
powers to the regional level to be more innovative. For example, if the province has the
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power to develop a network with international donors and to establish regulation on
allocating corporate social responsibility for HIV/AIDS treatment and facilities, the source of
HIV/AIDS budget will not only come from the annual regional budget but also can come from
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other sources.
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INTERNATIONAL CONFERENCE ON PUBLIC ORGANIZATION

ASIA PACIFIC SOCIETY FOR PUBLIC AFFAIRS (APSPA)

Keyword: Policy Economic Analysis, HIV/AIDS, Local Government, and Indonesia

means of implementation (Unaids, 2015). According to the World Health Organization

Figure 2. The number of HIV/AIDS-positive persons in Yogyakarta special province between

251 240 65 300

Source: department of health, Yogyakarta special province

sections such as a conceptual framework of policy economic analysis, research method,

The HIV/AIDS infection is a form of negative externalities in a market mechanism. The

2.2. Demand, supply and inelasticity of health economics

whether through supply or demand approaches.

managing their local budget.

4. Result and Discussion

4.1. HIV/AIDS Policy Intervention in Yogyakarta Special Province

HIV/AIDS medicines and

implementation of policy of HIV/AIDS

emergency status of powers to regional and

3. HIV/AIDS nursing, planning on preventing

support for people test, medication, nursing,

HIV/AIDS Cost 1. Free for HIV/AIDS - Market mechanism and

4.2. Inelasticity, Supply, Demand: between Welfare and Liberal System

such as local hospitals.

intervening this negative externality by providing an access of information and

Developmentalisme. Jurnal Ilmu Pemerintahan Widya Praja 44: 21-36.

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