Viviyulaswati@bappenas.go.id Christof.kersting@giz.de November 2, 2016 Disclaimer: The views expressed in this document are those of the author, and do not necessarily reflect the views and policies of the Asian Development Bank (ADB), its Board of Directors, or the governments they represent. ADB does not guarantee the accuracy of the data included in this document, and accept no responsibility for any consequence of their use. By making any designation or reference to a particular territory or geographical area, or by using the term “country” in this document, ADB does not intend to make any judgments as to the legal or other status of any territory or area. CHALLENGES OF DEVELOPING COMPREHENSIVE SOCIAL PROTECTION IN INDONESIA Viviyulaswati@bappenas.go.id Christof.kersting@giz.de November 2, 2016

THE SLOW DOWN DECREASED OF POVERTY Poverty has been decreased, yet the rate is getting slower. The reduction in rural areas between 2010-2014 was faster than the one in urban areas. However, in period of 2014--2016, poverty reduction in urban area was much faster than in rural area.

Expenditure Rate Per Capita, 2008-2014 47.3 Million Vulnerable Workers INCOME GROWTH OF THE POOR IS LOWER THAN THE MIDDLE TO THE TOP  INCOME INEQUALITY Expenditure rate per capita of the poorest in 2008-2014 of grew slightly above 2% While around the poor and vulnerable to the 40th percentile slightly below 2%, the national average grew about 3,41% Expenditure Rate Per Capita, 2008-2014 47.3 Million Vulnerable Workers Source: processed based on BPS data, Agriculture and Economic Census

CHALLENGE OF THE “MISSING MIDDLE” Government of Indonesia offers: Social insurance: Health Insurance and Labor Insurance (pension, old age insurance, accident & death benefit). Social assistance for the poor Middle class Social insurance However: Those in the middle are excluded from social protection 25,8% (42 million) members of National Health Insurance don’t have single identity number. Lack of formal sector participation. Lacking vertical and horizontal coordination Lack of understanding and synchronization among sectors and Local Governments on the participation of poor population in national programs. Unclear verification/validation data of poor and near poor. Missing middle Insecurity Poverty Social assistance Extreme poverty 4

POVERTY REDUCTION STRATEGIES IN NATIONAL MEDIUM-TERM DEVELOPMENT PLAN 2015-2019 Comprehensive Social Protection Social Security Natural Resources Assets Social Assistance Voluntary Insurance Physical Assets Improving the Access and Quality of Basic Services Basic Infrastructure & Public Service Facilities Human Assets Welfare Improvement Expansion of Public Services Gini ratio was 0,397, slightly reduced after increasing for the last 5 years. Only 20% richest people have spending growth above the national average 40% lowest income people have spending growth less than 2% per year. Inequality is increase due to unequal opportunities for people to contribute and be benefitted from development. Social Assets Reducing Poverty and Inequality Sustainable Livelihoods Development Sustainable Livelihoods Financial Assets Poverty Rate Existing (2016) 2016 RPJMN 2019 Existing (2016) 2016 RPJMN 2019 Gini Ratio 0,39 0,36 10,86% 9-10 % 7-8 % 0,397 3

UNIFIED DATABASE FOR TARGETING OF POVERTY AND SOCIAL PROTECTION PROGRAMS 10,86% 40% 60% 25% POOR 38% NEAR POOR/VULNERABLE 13% Need to build ownership from sectors and local governments Need to build capacity on merging and managing Need to update to capture the dynamic of poverty Exclusion Error UNIFIED DATA BASE Covers 25,7 71million households/27,046 million families or around 92,994 million people PEOPLE WHO GETS GOV’T CONTRIBUTION FOR HEALTH INSURANCE PREMIUM Covers 22,05 million households or 92.4 million people Inclusion Error RICE SUBSIDY, SCHOLARSHIP FOR THE POOR Covers 15,5 million households, including 19.7 million children CONDITIONAL CASH TRANSFER Covers 6 million families (with children 0-18 years old, disable and elderly) NATIONAL POVERTY LINE (Mar 2016) Covers 5 million households or around 28,01 million people

CHALLENGE IN TARGETING Poverty based (eg, “poorest 10%): Administratively difficult Least transparent – open to abuse Difficult to justify where poverty is pervasive – “leapfrogging” Suitability – where poverty is not pervasive / data rich environments Categorical (eg, Old Age Pension): Popular - widely understood and accepted Administratively simple Flexible, But, who to prioritise? Suitability – Social Welfare Grants Universal: Politically appealing Expensive Elements of self-targeting & cost recovery Suitability - support vulnerability and economic growth Self targeting (eg Public Works): Addresses concerns about dependency & perverse incentives Wage rate issues Conditionality concerns Suitability – support to the able- bodied poor

TRANSITION TOWARD INTEGRATED SOCIAL ASSISTANCE 2014 - 2019 2017 - 2022 Poorest Poor Vulnerable PREPARATION TOWARD: DIGITAL PAYMENT SINGLE/COMBO CARD/E-WALET PART OF FINANCIAL INCLUSION NAT’ L STRATEGY Health Risk 1 CCT Basic Health Subsidy of Health Insurance Premium Catastrophic 2 Continuation Of Education Basic Education Education Assistance CCT Higher Education Economy 3 Incapable Rice Subsidy Energy subsidy Seed & fertilizer Policy Impact Cash for work More complicated coordination & enggagement set up Needs to set up/revise regulatory, institutional & funding framework. Interconnection and interoperability of banks. Support & facilitation of local governments.

INTEGRATED REFERAL AND SERVICES SYSTEM AT DISTRICT LEVEL To compile and inform all national and local programs To verify/validate and revise information about poor and vulnerable families/HH. To refer and register the poor and vulnerable who are excluded from programs to related offices. To develop all needed guidelines by local governments & programs To disseminate all information about national and province programs to local governments and villages. To identify local stakeholders and develop network to local governments To facilitate innovations that involve local stakeholders (youth association, faith-based organization, NGOs, CSRs, etc) for poverty reduction FUNCTIONS ENABLING FACTORS 1. Governance & Readiness of LGs 2. Funding (CSR, State & local budget) 3. Human Resource Capacity 4. Local Political Situation 5. Stakeholders Relation

Thank You NEXT STEPS TO CONSIDER..... A prolonged and ongoing debate: search for perfection? High vulnerability (incl. hidden population, remote places that data is empty and needs specific intervention) Households’ growing understanding of how to play the system (moral hazard) High administrative cost Social tension/equity Social inclusion policies Reducing Exclusion  Equality of opportunity Promoting Inclusion  expand access, realize formal rights, equality of result “Targeting within universalism” – find ways to treat everyone the same although some are more in need and will benefit more than others 3. Political will and commitment are pre-requisite for comprehensive & sustainable social protection. Thank You