[Poverty in Indonesia]


Historical Profile of
Poverty Alleviation in Indonesia

The Government of Indonesia (GOI) has launched several
programmes to alleviate poverty. Among others are: (i) the
income improvement project for small farmers and fishermen
(called P4K) in 1980; (ii) the household income improvement
programme (called UPPKS) in 1991/1992; (iii) the development
programme for undeveloped rural areas (called IDT) in 1993-
1996; (iv) the household welfare development programme
(called PKS) in 1997/1998; (v) the food security programme
(program ketahanan pangan) in 1997-1999; (vi) the social safety
network (called JPS) in 1998, and some other similar
Almost all programmes were implemented by providing poor
societies, including rural societies (mostly farmers) with soft
credit or revolving funds to enable them to run their individual
or group businesses. Unfortunately, none of these efforts have
been sustainable. The small-scale businesses were not well
developed and consequently there was no capital
accumulation for them to expand. Even the seed money (the
start-up capital) was used for daily family consumption leaving
the borrowers unable to repay their soft loans. Another
supporting system that GOI should develop is a rural soft credit
system incorporating a simple procedure. This facility is much
better than a revolving fund or other programme which tend to
create a moral hazard among rural societies and executing
However, supported by long-lasting high economic growth, the
long history of government effort to alleviate poverty
significantly reduced the poverty figure from 54.2 million
people or 40.1 per cent in 1976 to only 22.5 million or 11.3 per
cent in 1996 (BPS 2004). However, a massive economic crisis
in Indonesia in 1997-1999, simultaneously with a long drought
(El Nino) pushed the number of poor Indonesians to 48 million
or 23.4 per cent of the Indonesian population in 1999. The
gradual recovery of the economy reduced the incidence of
poverty to 37.3 million people in 2003 (BPS, 2003).
There were two good examples of projects that did not provide
farmers with soft loans or revolving funds for economic
business, but provided them with the construction of
infrastructure facilities, such as village roads, farm roads,
bridges, and irrigation facilities. The IDT project in 1993-1996
was designed to provide farmers with village roads, bridges,
drinking water, and sanitary facilities (bathroom with toilet).
However, the coverage areawas relatively small.
Currently, there is an ongoing poor farmers project (called
Poor Farmers Income Improvement through Innovation
Project = PFI3P), funded by soft loans from the Asian
Development Bank (ADB). The objective of PFI3P is to
increase farmers' innovation in solving their own problems.
PFI3P is aiming at empowering farming communities in rural
areas, especially those on marginal lands.
Through PFI3P, some innovations related to and supporting
agricultural development have been introduced to farmers at
the project sites. These innovations are based on identified
problems at the specific locations. The project hands
responsibility to rural societies to manage their budget for the
development of infrastructure and agricultural innovations
under the supervision of district administrators and local
NGOs. It is expected that eventually rural communities will be
capable of implementing development in accordance with
their needs, limiting the government's function to facilitator.
The project started in 2003 and will continue until 2008. The
project was implemented in five districts, namely, Blora and
Temanggung in Central Java, East Lombok in West Nusa
Tenggara, Ende in East Nusa Tenggara and Donggala in
Central Sulawesi. In each district there will be about 200
villages included in the project to develop infrastructure. The
main examples of infrastructure that influence
farming systems are, among others: village roads, farm roads, irrigation
channels, markets, credit schemes, and information systems.
Due to budget limitations, the infrastructure being developed
by rural societies is in the form of farm roads, check-dams,
irrigation channels, wells, drying floors and information
systems. These facilities are aimed at overcoming the
problems associated with the transportation of agricultural
products, water shortages during the dry season, and flooding
during the wet season.
These two projects are thought to be more appropriate to help
farmers improve their agribusinesses. Integrated poor farmer
empowerment such as PFI3P can be considered as a model of
the future of rural development. Improvement in agricultural
technology to increase production is meaningless without the
development of supporting infrastructure. Nevertheless, its
implementation requires adequate control in order to achieve
effectively and efficiently the goal of farmer empowerment ¡
Written by Dewa K.S. Swastika, Senior Researcher, ICASERD,
Bogor, Indonesia.
Historical Profile of Poverty Alleviation in Indonesia

[UN Millenium Project]

Following over two years of work, the United Nations
Millennium Project published its final report “Investing in
Development” on 17 January 2005. The report is a practical
plan to achieve the Millennium Development Goals. Professor
Jeffrey Sachs, special advisor to the United Nations Secretary
General and head of the Earth Institute at New York's
Columbia University, was the lead author. A considerable part
of the Sachs Report addresses the costs of achieving the MDGs.
These are based on calculations of capital requirements at a
country level. The Millennium Project team developed an
extensive methodology for needs assessment. As a first step
they ascertained the total investment capital needed to attain
the MDGs in each country. Following on from this was
estimated how much could be raised in the country itself and
how much external support in the form of ODA is required.
On the basis of these figures the Sachs team then projected
how much official development assistance would be needed
to finance MDGs on a global level. The conclusion reached
was that ODA must increase to $ 135 billion in 2006, implying
doubling previous ODA amounts. By 2015 the volume of
ODA would have to be trebled to $ 195 billion. This means
that ODA must increase from the current 0.25 per cent of
Gross National Income (GNI) of donor countries to 0.44 per
cent in 2006 and 0.54 per cent in 2015. In light of publicly
announced (but so far unrealized) governmental pledges, the
Sachs Report calculated a shortfall of $ 48 billion for 2006.
Given the present fiscal constraints of donor countries the
Sachs Report obviously regards it unrealistic that the required
increase of ODA can be financed solely from national budgets.
It is for this reason that the report calls on all donor countries to
support the British proposal for an International Finance
Facility (IFF). Such a fund, financed by the issue of bonds,
could be established by 2006 ¡
Based on United Nations, 2005. Report of the UN Millennium Project,
Investing in Development, http://www.globalpolicy.org.

Healthy Drink: Soy-Based Drinks

The managing director of ACNielsen for Southeast Asia said that
as consumers were becoming more concerned about their diets
and health, and food and beverage products that support healthy
diets, weight loss and on-the-go lifestyles are among the world's
fastest growing. Soy-based drinks are just one example of such
products. According to ACNielsen's news report, revenue from
the sale of soy-based drinks in 19 out of the 20 markets surveyed
increased by 31 per cent to $ 317.2 million in 2004. In the Asia-
Pacific region, revenue from sales of soy-based drinks grew by 44
per cent. Health and convenience continue to be the key themes
for consumers the world over.
The Jakarta Post, 2005. Healthy Foods a Fast Growing Market Segment:
Study, (31 March 2005).

About Protein-Energy Malnutrition
First recognized in the 20th century, protein-energy malnutrition
(PEM) is by far the most lethal form of malnutrition/hunger and
the one referred to as far as world hunger is concerned. PEM is a
lack of protein and food that provides energy. Approximately
850 million people worldwide are malnourished. Children are
the most visible victims of malnutrition. Malnutrition plays a role
in at least half of the 10.9 million child deaths each year.
Geographically, more than 70 per cent of PEM children live in
Asia, 26 per cent in Africa and 4 per cent in Latin America and the
World Hunger Education Service, 2005. World Hunger Facts 2005,

Increased Aid, But ODA Target Not Met

Official Development Assistance (ODA) to developing countries
increased to $ 78.6 billion in 2004, its highest level ever, the
Organization for Economic Cooperation and Development
(OECD) reported. This represents a 4.6 per cent rise in
real terms from 2003 to 2004. However, most of the
participating countries do not meet the United Nations
target for ODA of 0.7 per cent of Gross National Income
Global Policy Forum, 2005. More Aid Still Short of Goal,
http://globalpolicy.igc.org/, (11 April 2005).
Source: http://www.uncapsa.org/Flash/flash0605.pdf.

[Poverty Reduction]

Recent findings in policy research have shown that the pace of
poverty reduction depends both on the rate of average income
growth, the initial level of inequality, and changes in the level
of inequality (World Bank, 2000; Bourguignon, 2003). In
particular, poverty reduction will be fastest in countries where
average income growth is highest (Dollar and Kraay, 2002), in
countries where initial inequality is lowest and in situations
where income growth is combined with falling inequality.
Thus there is a pay-off in terms of poverty reduction of growth,
but also of lower initial inequality and reductions in inequality
during the growth process. In addition, there appear to be
linkages between initial (income or asset) inequality and
growth where the balance of evidence seems to suggest that
high initial inequality is harmful for overall economic growth,
and thus for poverty reduction, at least in environments of very
high (income or asset) inequality. Similar results also appear to
hold true for gender inequality, particularly gender inequality
in education ¡
Based on Klasen, Stephan, 2005. Economic Growth and Poverty
Reduction: Measurement and Policy Issues. Paper prepared for POVNET
for the work programme on Pro Poor Growth, University of Göttingen,
(5 February 2005).
Source: http://www.uncapsa.org/Flash/flash0605.pdf.

China's Gains from Market Liberalization Must Be
Better Distributed

Market liberalization and other reforms associated with China's
accession to the World Trade Organization (WTO) are delivering
gains worth more than $ 40 billion a year to China's economy,
and adding about $ 75 billion a year to real incomes worldwide,
says a World Bank study. However, the same report recommends
that China makes policy adjustments to balance the uneven
distribution of benefits between the country's rural and urban
World Bank, 2005. Accession to WTO Delivers $40 Billion a Year to
China's Economy but Gains Unevenly Shared: World Bank Study, Press
Release No:2005/337/EAP, http://web.worldbank.org/, (21 February

Source: http://www.uncapsa.org/Flash/flash0605.pdf.