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Indonesia’s ExperienceEconomic Shocks
Harapak GaolDirector, Social Disaster Victims, Ministry of Social Affairs
Indonesia
Source: CBS, 2011-2017 was September data
Global fuel and food price increased and reduction of oil subsidy
24.2 23.43
19.14 18.41 18.20 17.42 16.66 15.9717.75
16.5815.42
14.1513.33
12.36 11.66 11.47 10.96 11.13 10.70 10.12
19981999200020012002200320042005200620072008200920102011201220132014201520162017
Poverty has continue to decrease, but the pace is
getting slower2010-2011 decreased 0.97%2016-2017 decreased 0.58%
0%
5%
10%
15%
20%
Jan
2005
May
200
5Se
p 20
05Ja
n 20
06M
ay 2
006
Sep
2006
Jan
2007
May
200
7Se
p 20
07Ja
n 20
08M
ay 2
008
Sep
2008
Jan
2009
May
200
9Se
p 20
09Ja
n 20
10M
ay 2
010
Sep
2010
Jan
2011
May
201
1Se
p 20
11Ja
n 20
12M
ay 2
012
Sep
2012
Jan
2013
May
201
3Se
p 20
13
CPI vs CPI Poverty Basket (% YoY)
CPI
The Progress of Poverty Reduction, 1998-2017
8 March 20182
Indonesia’s fuel price was the lowest in Asian countries
… with fuel subsidy enjoyed mostly by the richest
Fuel and Electricity Subsidies take funding away from pro-poor
development.
Some Analysis on Subsidy
8 March 20183
Some Milestones of Subsidy Reform2005 2008 2013 2015
• Gasoline and kerosene prices increased by 150-185%
• Central Bureau of Statistic did a census for the 40% lowest income group (using 14 criteria).
• UCT/BLT was distributed to 19 million HH, received Rp.1,2 million/year in 4 tranches.
• Price of gasoline increased by 33%, kerosene by 50%.
• The Government redeployed BLT, of Rp900K in 3 tranches.
• Price of subsidized fuel increased from IDR 4,500 to IDR 6,500
• 15.5 million HH (the bottom 25%) received a temporaryUCT/BLSM of Rp600K & extra Rice Subsidy.
• In addition, scholarship (BSM) and CCT (PKH) were expanded and benefit levels increased.
• Integrated Social Protection Card (KPS), was used to receive assistance.
• President Jokowi era: Significant cut of fuel subsidy in 2015 to meet market price
• The Reform has continued
Poverty would have increased by 2.5 percentage points
without BLSM, but the actual increase was only 0.1
percentage point.
BLT did not lead to laziness: beneficiary HH
found new jobs at higher rates than non-BLT HH.
8 March 2018 4
UNCONDITIONAL CASH TRANSFER
• UCT was initiated in 2005. It’s relaunched in mid 2013 following another fuel subsidy cut.
• Targeted to 15.5 million HHs ~ constitute bottom 25% lowest income group.
• Transfer through post office.
• In 2007, UCT was transformed to CCT as a regular anti poverty program.
• Started in 2002, target bottom 25% of the population.
• 15 kg/month/HH with purchased of Rp1600/kg.
• Add frequency of distri-bution during crisis
• Main issue: inefficient distribution and ‘missing rice’
• In 2017, it started to transform to electronic food voucher of rice and egg.
RICE SUBSIDY FOR POORCONDITIONAL CASH
TRANSFER
• Begin in 2007 as pilot program in 6 prov, cover 380K poor HHs.
• In 2018, it all regions, covers 10 mio HH with pregnant/lactating mother, <5 & school-age children, disable, and elderly.
• Currently use electronic payment system via bank.
• Expand target and/or benefit in crisis.
• First time implemented during 1997/98 crisis. Become National com-munity-based program in 2007.
• Covering 7K subditricts, with 8K< facilitators.
• Combined advantages: improved village infra-structures & temporary employment creation.
• In 2015 has transformed to Village Fund. In 2018, cash for work is strengthened
COMMUNITY-BASED CASH FOR WORK
Social Protection Programs to Response Economic Shock
8 March 2018 5
COMPENSATION OBJECTIVES: poverty? fiscal sustainability?
Designing Shock Response toward Subsidy Reform
REFORM DECISIONS: SCALE, TIMING, SAVINGS
WHO TO COMPENSATE?
Targeted vs Universal
HOW MUCH TO COMPENSATE?
Fix/variable benefit
HOW LONG TO COMPENSATE?
Frequency, reform buy in
COMPENSATION DELIVERY METHODProgram effectiveness, delivery factors, global experience
8 March 2018 6
INSTITUTIONAL SET-UP
BENEFICIARY OUTREACH ENROLMENT
MIS, MONITORING & EVALUATION, COMPLAINTS & GRIEVANCES
PAYMENTSBENEFICIARY
IDENTIFICATION & VERIFICATION
A Roadmap to Ensure Effective Implementation
8 March 2018 7
How is the crisis being transmitted? What is the impact on households?
How is employment demand being affected?
– In which sectors?– Urban or rural?– In which provinces and
districts?– Through which channels?
• Wages, hours or jobs?
How are prices being affected?– Key staple foods?– Other prices?
How are households responding?– Move into agriculture and
informality– Reduced quantity and quality
of food consumption– Reduced health and
education expenditures– Women and children
entering the work force– Risk-pooling
What are the outcomes?– School drop-out and
absenteeism– Malnutrition– Infant and child mortality– Maternal mortality– Disease and illness
Education11.8%
Spending reduction
15.4%
Difficulties to fulfill
basic needs14.7%
Declining working
condition15.4%
Declining Income16.2%
Seeking other jobs
2.2%
Social Aspects
5.1%
Psychologic19.1%
Source: SMERU, 2009
Crisis Response at Household Level
Some Key Questions for a Crisis Response
8 March 2018 8
UNIFIED DATABASE IMPROVEMENT
10,12%
38%
40%
Poor
25%
Alm
ost P
oor /
Vul
nera
ble
15%
Exclusion Error
PREMIUM FOR NATIONAL HEALTH INSURANCE (KIS)94.2 million people
FOOD ASSISTANCE/VOUCHER (KKS)15.6 million families
CONDITIONAL CASH TRANSFER (PKH)10 million families
NATIONAL POVERTY LINE (SEPT 2017)26.6 million people
Inclusion Error
UNIFIED DATABASE *)
*Notes: 1. UDB consists of the 40% poorest population. It is updated every May and Nov through MoSA Decree2. The current update is more regular and participatory. Using community-based meetings to update targeting lists to address exclusion
errors; verified by local government through verification and validation application3. New and improved proxy-means testing identified the poor more accurately4. Available for use by different anti-poverty programs to identify target groups eligible to receive benefits 9
9
Number of People427.222
Number of Households26.742055
Number of Families28.780.456
Number of People96.829.022
SCHOLARSHIP FOR THE POOR (KIP)19.7 million students
Social assistance programs (PKH and PIP) are mostly enjoyed by the poor. Rastra subsidy, 3kg of LPG and electricity are enjoyed by all expenditure deciles, even the middle group enjoys more electricity and LPG subsidies. Solar subsidies are mostly enjoyed by rich people who use open distribution (non-targetted)
Accuracy Of Implementation Target Of Subsidy And Social Assistance Program
8 March 2018 10
Subsidy Budget Reform
11
733,773
573,703
-
1,770,562
286,385
643,835
20,766
1,984,150
174,227
663,578
46,679
1,864,275
168,877
697,667
58,200
2,111,364
156,228
706,163
60,000
2,220,657
- 1,000,000 2,000,000
Subsidy
Transfer to Region
Village Fund
Total State Expenditures
2018 2017 2016 2015 2014
Distribution of State Expenditures (Billion Rupiah)
Fuel subsidy allocation decreased significantly in 2015.
The subsidy allocation was transferred for the village fund and regional transfers to reduce inequality.
Subsidy Reform has continued to ensure:• Right targeting• Fiscal sustainability• Energy diversification
Source: Financial Note, various years
Significant subsidy reduction (from 3.4% to 0,8% PDB) between 2015 and 2018 has been allocated for SP: • Premium of National
Health Insurance for the poor.
• Social Assistance Programs has been scaled up.
In 2018, significant budget goes to infrastructure and economic investment.
52.7 61.9 69.282 90.1 98.4 99.6 99.6 99.6
26.130.6
38.7
60.957.8
76.7 78.3 81.49 85.9911.3%
10.5% 10.1%
12.6% 12.4%13.3% 13.6% 13.5%
12.8%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
0
20
40
60
80
100
120
140
160
180
200
2010 2011 2012 2013 2014 2015 2016 2017 2018
Jaminan Sosial
Bantuan Sosial Berbasis Keluarga
Sumber: Bappenas diolah dari berbagai sumber
Budget Allocation Based on Intervention and Share from Central Government Spending (in Rp Trilion)
12
Social Protection Budget, 2010-2018
Integration of bank channel distribution by using one card (with e-wallet) to be more targeted, efficient and effective. A publication of Presidential Regulation 63/2017 on the Non-Cash in Social Assistance. Necessary expansion of telecommunication and signal networks, local bank agencies and local government support (a.l.
socialization, availability and smooth food logistics, complaint handling, etc.)
Provide the option for Beneficiary Family (KPM) in terms of:• Type, quantity,
and quality as needed (eg food with balanced nutrition)
• Flexibility of time and location of withdrawal
Increase the effectiveness of subsidy / aid distribution:• Targeting • Transparent and
accountable• Encourage better
customer management
• Increased access to financial service
Improving regional economic growth through empowering the people's economy:• Utilization of stalls /
kiosks / retail traders as agents of the Bank.
• Utilization of Bank agents as a place to purchase food, gas, and electricity payment
a process of bridging beneficiaries in:
• Accumulated assets and financial management capacity (reducing direct use of cash for consumption, savings culture)
• Entrance to various other financial services (transactions, transfers, credits, microinsurance, remittances)
• Safety and comfort
• Minimize illegal levies
Encourage financial inclusion
Continuous Reform Of Targeted Assistance / Subsidies - Food And Energy
8 March 201813
Food Energy
Bank Account
Beneficiaries
Non-cash Assistances
CashNon-Cash
Merchant Energy Saving ATM
e-voucher
Smart Indonesia
Card CCT/PKH
Cash Assistances
The objectives: asset accumulation, financial inclusion, minimize fraud and error.
Non-cash assistance can only be used to exchange for food assistance, electricity subsidy payments, and other non-cash assistances. The non-cash assistance cannot be withdrawn.
Combo Card
E-wallets
Integrated Non-cash Transfer Of Social Assistance
14
Conclusion• Crises are extraordinary events a broader focus – e.g. on vulnerability
and poverty – gives more purpose to the system.
• A need to develop information system that provide dynamic access to various types of socio-economic data and information for policy-making in response of crises.
• Coordination mechanism for adaptation & response (national, regional, local).
• Promote macro policies to strengthen resilience to shocks: increase tax collection, redirect spending from regressive subsidies to infrastructure and social spending.
• Comprehensive and inclusive SP as a strategy to address economic growth, longer term structural poverty, human capital development, and inequality.
15THANK YOU8 March 2018