1. The Real Costs of Indonesia’s Economic Crisis: Short-Run Impacts
February 2008

2. Indonesia Was a Development Success Story From 1967 to 1997
Gross domestic product grew at an average annual rate of 4.5%
Poverty rate declined from 40% to 11%
High school enrollment increased from less than 10% to nearly 50%
Life expectancy increased from 45 to 61 years

3. Indonesia 1998: A Year of Living Differently
Rupiah/US$
Thai currency
collapses July 1997
The inflation rate grew to 80%
The gross domestic product contracted 12% to 15%
Suharto, president of Indonesia for 32 years, was forced to resign
Violent riots and demonstrations occurred throughout the country

4. Empirical Evidence on Impacts: IFLS2+
The Indonesia Family Life Survey collected longitudinal data on individuals, households, and communities in 1993 and 1997
The Philippines
Pacific Ocean
Thailand
Brunei
IFLS1 and IFLS2 Provinces
IFLS2+ Provinces
M a l a y s i a
Singapore
Papua New Guinea
Jakarta N
Indian Ocean
East Timor
I n d o n e s i a
600 km

5. The Indonesian Economic Crisis Presented an Opportunity and a Challenge for the IFLS
Rupiah/US$
IFLS2

6. To Measure the Effects of the Crisis, RAND Responded Quickly to Field IFLS2+
Design
and
pretests
Fieldwork
Preliminary
results
IFLS2+
Design and pretests
Fieldwork
January 1996
January
1997
January
1998
January 1999

7. The IFLS Found the Increase of Poverty, While Large, Was Not As Bad As Feared
% of persons in poverty
50%
40%
30%
20%
10% 0%
1997 estimate
1998
1998 ILO
1998 IFLS2+
government
estimate
estimate
estimate
In February 1999, President Habibie said poverty had risen to 19%

8. Households Shifted Spending to Staples and Away From Education and Health
% of household expenditures
35%
1997
30%
1998
25%
20%
15%
10% 5% 0%
Rice and
Vegetables
Meats
Household
Education
Health
other
goods
staples

9. What Were Expectations About Education?
There were early fears that enrollment rates would fall, but the Central Bureau of Statistics reported enrollment growth
Enrollment “growth,” however, was from flawed methodology comparing different points of school year

10. IFLS Found Dropout Rates Increased, Particularly for Poor and Rural Students
% of students 7 to 12 years of age dropping out 8 7
1997 6
1998 5 4 3 2 1
Urban
Rural
Bottom
Middle
Top 25%
25%
half
Per capita household
expenditures

11. Before IFLS2+, Only Limited Evidence Was Available on Health Care Effects
Anecdotal reports suggested big increases in use of subsidized public care, particularly by middle class
Little attention was given to effects on vulnerable populations (e.g., children)

12. Crisis Saw Fewer, Not More, Indonesians Use Public Health Care Facilities
% using public health clinic 8%
1997 7%
1998 6% 5% 4% 3% 2% 1% 0%
Adult 15+
Child 0-14

13. Prices of Public Health Services Increased Greatly
Cost in rupiah for service
8,000
1997
7,000
1998
6,000
5,000
4,000
3,000
2,000
1,000
Child immunizations
Contraceptive injection

14. Quality of Public Health Services Declined
% of public health facilities
1997
40%
1998
30%
20%
10% 0%
Stock outage of antibiotics in past six months
Inadequate bandage stock at time of survey

15. Use of Preventive Health Care by Young Children Dropped Sharply
% of children 0-4
60%
1997
50%
1998
40%
30%
20%
10% 0%
Use health post
Receive Vitamin A

16. Incorporating Results into Policy
Initial government lump-sum transfer programs were scaled back after IFLS results became available
IFLS helped refocus attention away from urban businesses and toward poorest households slipping through safety net
IFLS results helped spur efforts to revitalize the health post program, which had been allowed to atrophy

17. Monitoring the Crisis: Beyond 1998
Studies of specific programs, including the set of programs introduced in mid-1998 to address crisis (JPS -Jaringan Pengaman Social – programs)
Scholarships (Sparrow, 2004)
Health Cards (Pradhan et al 2004)
Studies of overall performance/poverty, general trends in SES outcomes
Strauss et al. (2004)
Ravallion and Lokshin (2005)