TARGETED POVERTY PROGRAMS

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As far as actual poverty alleviation programs are concerned, it has not

been possible to include in this chapter all those programs that have been

implemented in Indonesia at various times – before, during and after the

Crisis – especially since some of these programs have not been independently

and rigorously evaluated. A complete list of such programs would also

include some of the major donor-funded initiatives, in particular several

infrastructure and community development loan projects such as the World

Bank’s Village Infrastructure Project (VIP/P3DT), Kecamatan Development

Program (KDP/PPK), and Urban Poverty Project (P2KP).15 Some of these

programs had broader community development aims and were not intended

simply as poverty alleviation measures, although this was still an important

consideration. There were also several 1998 donor-funded drought relief

programs that directed special assistance to poor rural villages. We

concentrate, however, here on those key programs that have already been

subjected to some serious analysis, and in particular where there have been

published studies of the effectiveness of program targeting.

Although the combination of the Crisis, and the accompanying political

and social turmoil of the early months of 1998 contributed to a delay

of nearly a year before any signifi cant action was taken, in mid-1998 the

government announced a package of social safety net measures designed

to cover the following areas of need:

• Employment – emergency job creation schemes to provide work

opportunities for the poor

• Food security – a program to provide certainty over both the availability

and affordability of the rice staple throughout the entire country

• Education – special assistance both to poor families and poor

schools

• Health – a package of measures designed to ensure that public health

care services were accessible and affordable for the poor.

While the initial plans were announced in June and given further substance

with the announcement of the details of the IMF reform package in July,

various authors have pointed out that neither the Indonesian government

nor its senior offi cials within the responsible ministries were well prepared

for the implementation of this social rescue package. In fact, the bureaucracy

itself lacked the necessary experience in such matters, and regrettably, it was

inevitably caught up in the political turmoil of mid-1998 to the point where

demoralization frequently contributed to inaction (Feridhanusetyawan,

2000: 155–8).

Further announcements from the National Planning Board (Badan

Perencana Pembangunan Nasional or BAPPENAS) about the social safety

net, outlining a planned expenditure of Rp 17 trillion in September 1998

created the impression that this body was closely coordinating the entire

program. Although BAPPENAS spokespersons continued to give the

impression in public pronouncements that this was the case, in reality

the safety nets announced were little more than a collection of disparate

programs that were planned and implemented by separate government

agencies with little or no effective coordination between them. The entire

package of measures was supported both as a whole and in its component

parts by donor assistance, including a controversial World Bank loan known

as the Social Safety Net Adjustment Loan. During late 1998 and throughout

1999 there were frequent allegations in the press and protest demonstrations

from civil society groups claiming that the Social Safety Net program was

being poorly implemented and the funds misdirected. The reputation of the

entire Social Safety Net program was adversely affected by these campaigns,

even though the protests were usually directed at one or two particular

programs that had gained particular notoriety in the press and were the

subject of allegations of corruption on the part of local offi cials.16 We

will consider the targeting of the most important of these programs in the

following section. A summary of the programs is presented in Table 3.5.

Village Programs

The Inpres Desa Tertinggal (IDT), literally translated as the Neglected

Villages Program, was an attempt by the New Order government to reach

out to those parts of the country that had not yet shared in the benefi ts of

its development policies and the steady economic growth of the previous

two decades. By targeting direct assistance to the poorest sections of society

in these locations, the government aimed to speed up the reduction of

Indonesia’s already declining poverty rate. The program formally began in

1994 with the strong backing of President Suharto through the announcement

of a Presidential Decree (Instruksi Presiden or INPRES).17

Table 3.5 Summary of the main poverty-targeting programs

Area Program description Targeting Database Period Costs

(& budget

share) 1998/99a

Village Inpres Desa Tertinggal Geographic Village Potential 1994–96

Improvement (IDT): provision of small- Survey (Podes)

scale credit to poor households

living in the poorest

or most neglected villages

Food Security OPK/Raskin Program: Geographic BKKBN list, 1998–2003 Rp 5 450 000

sale of subsidized rice to Household with fl exibility (3.7% of total

targeted households. government

Eligible households are expenditure)

able to purchase 10–20kg

of rice at lower than

market price

Community PDM-DKE: a Geographic Pre-Crisis data 1998–2000 Rp 1 701 470

Empowerment a ‘community fund’ Household (then updated) (1.16%)

program providing block combined with

grants for either public works local decision

or revolving credit funds making

Employment ‘Padat karya’: a loose, Household Various 1998–2000 Rp 2 066 000

Creation uncoordinated collection Self-selections ministries, based (1.62%)

of several labor-intensive on urban

programs under various unemployment

government agencies

Education • Scholarships for Geographic SUSENAS data 1998/99– Rp 1 138 000

elementary, lower and Household on enrollment, 2002/03 (1.06%)

upper secondary level poverty data academic

students worth updated to 1998, year

Rp 10 000, Rp 20 000 and combined with

Rp 30 000/month local criteria

• Block grants to

selected schools

Health JPS-BK, a program Geographic BKKBN list with 1998–2002/03 Rp 1 043 000

providing subsidies for: Household fl exibility (0.97%)

• Medical and family

planning services

• Nutrition

(supplementary food)

• Operational support

for health centers and

midwives

Note: a The budget data for 1998/99 have been compiled from various sources; for further details, see Daley and Fane (2002: 311).

IDT applied geographic targeting to provide small-scale credit to poor

households living in the poorest or most neglected villages throughout the

entire country. The program channeled funds worth US $200 million per

year over a three-year period (1994, 1995 and 1996), which were targeted to

more than 20 000 poor villages across Indonesia (Pangestu and Azis, 1994;

World Bank, 1995). Each participating village received a block grant of Rp

20 million (US $8700)18 that was to be used as a base fund for small-scale

revolving credit (dana bergulir) to be made available to selected groups of

people within the village. The credit was to be directed at a range of selfemployment

activities (Alatas, 1999: 1).

The identifi cation of the poor who were the intended targets of the

program was carried out through a two-stage process. Firstly, the IDT

villages were selected, and then secondly, community organizations within

the villages decided which particular households should receive the funds.

The initial village selection process was carried out in June 1993, drawing

on data obtained from the 1990 Podes survey conducted by BPS.19 The

irregular Podes surveys (‘Village Potential’, Potensi Desa or Podes) are a

complete enumeration of every village in the country, and collect basic

information and data about village characteristics. This includes crude

population statistics, data about local economic characteristics, and the

presence or absence of basic infrastructure and government-provided

facilities such as health services, schools, marketplaces, potable water,

electricity and roads. For the IDT village selection process, BPS extracted

some 25 relevant variables for urban areas and 27 variables for rural areas

to make a classifi cation of neglected and non-neglected villages.20 For each

of these variables, villages were assigned scores from 0 to 5 to indicate

their status.

The determination of whether a particular village was classified

as ‘neglected’ was based upon two different types of assessments, an

examination of the range and standard deviation of village scores within

the provinces, as well as the results of fi eld-based qualitative assessments

by local offi cials. To be listed as an IDT recipient, a village had to satisfy

two of the following three conditions:

• a score less than or equal to the provincial average score minus one

standard deviation,

• a score less than or equal to the provincial maximum score minus 0.6

times the provincial range,

• an assessment by local offi cials that the village was poor, following a

fi eld inspection.21

Based on the June 1993 methods, 20 622 villages were classified as

‘neglected’ (31 per cent of all villages in Indonesia). Of these neglected

villages, 19 615 were in rural areas, and 1007 in urban areas (see Tables

3.6 and 3.7). It needs to be pointed out that the allocation of IDT funds

was not entirely free of political considerations, for in two of Indonesia’s

most troubled provinces, Irian Jaya (now Papua) and East Timor (now an

independent country), all villages were included as recipients of IDT funds

at the 1994 selection.

Table 3.6 Number of neglected villages in rural areas 1993–95

Rural

1993 1994 1995

Village % Village % Village %

Western Indonesia 12 087 61.6 12 709 60.7 11 355 54.8

Java 5 427 27.7 5 648 27.0 5 610 27.1

Bali 81 0.4 92 0.4 91 0.4

Sumatra 6 579 33.5 6 969 33.3 5 654 27.3

Eastern Indonesia 7 528 38.4 8 242 39.3 9 366 45.2

Total 19 615 100.0 20 951 100.0 20 721 100.0

Note: Data in 1993, 1994 and 1995 are not comparable because of a modifi cation in the

method of determining poor villages.

Source: Sumarto et al. (1997: Tables 2.6, 2.7, 2.8).

Table 3.7 Number of neglected villages in urban areas 1993–95

Urban

1993 1994 1995

Village % Village % Village %

Western Indonesia 853 84.7 928 81.2 905 68.6

Java 663 65.8 681 59.6 666 50.5

Bali 17 1.7 19 1.7 18 1.4

Sumatra 173 17.2 228 19.9 221 16.7

Eastern Indonesia 154 15.3 215 18.8 415 31.4

Total 1007 100.0 1143 100.0 1320 100.0

Note: Data in 1993, 1994 and 1995 are not comparable because of a modifi cation in the

method of determining poor villages.

Source: Sumarto et al. (1997: Tables 2.6, 2.7, 2.8).

The second stage in the process of delivering the IDT assistance to

the poor occurred at the village level. The program was designed to give

village communities a certain degree of freedom to set their own rules

and procedures concerning the allocation of the funds within the village,

although this meant that the process was not always accountable and that

credit could be misdirected, especially since supervision and monitoring

were notoriously lax and ineffective.

In the recipient villages, community groups (Kelompok Masyarakat or

Pokmas) of poor households were established. According to anecdotal

evidence, village leaders played a decisive role in the formation of these

Pokmas, which were usually based on the geographic distribution of

poor households within a village. Each Pokmas had to submit a proposal

explaining their plans for using the funds, and how the funds were to be

distributed among members. These plans were subjected to scrutiny by

the village council and its offi cials. According to IDT program guidelines,

the available funds were intended for small-scale investment activities

that were to be quick-yielding (so that credit could be rolled over to other

poor households), reliant on available local resources, easy to market and

contributed ‘value-added’ through generating additional household income.

However, in reality there was a considerable tolerance and a wide degree

of freedom for the Pokmas to include almost anything in the proposal. In

cases of immediate need, proposals could even be used to meet the basic

needs of poor households, and only physical village infrastructure projects

were explicitly excluded from the IDT program. We are unaware of any

comprehensive studies of the allocation of IDT funds at the household

level within villages. Hence, our analysis focuses on the effectiveness of the

targeting at the broader level.