Indonesia Final Report
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INDONESIA A STUDY ON SUPPORT TO SMALL AND MEDIUM ENTERPRISES AND SOCIAL SAFETY NET PROGRAMS TO COPE WITH ECONOMIC CRISIS FINAL REPORT January 2010 JAPAN INTERNATIONAL COOPERATION AGENCY WASEDA UNIVERSITY A1P JR 10-002 Table of Contents Chapter 1 Political, Economic, and Social Conditions of Indonesia ...................................................... 1 1-1 Post-Crisis Political and Economic Reforms ................................................................................. 1 1-1-1 Overview of Post-Suharto Political and Economic Reforms ..................................................... 1 1-1-2 Impacts of the Global Crisis 2008 and PRJMN 2010-2014 ....................................................... 6 1-1-3 Decentralization and Its Distributional Impacts....................................................................... 11 Case Study 1: Decentralization in Indonesia and Neighboring Countries ................................................. 16 1-2 The Nature of Indonesia’s Poverty and Policy Reactions ............................................................ 18 1-2-1 Poverty Profile ......................................................................................................................... 18 1-2-2 The Nature of Indonesian Poverty ........................................................................................... 28 Case Study 2: Social Safety Net in Korea before and after the 1997 Financial Crisis .............................. 43 Chapter 2 Poverty Reduction, Social Protection, and Safety Net Programs in Indonesia .................... 46 2-1 Overview of Poverty Reduction Policies ..................................................................................... 46 2-1-1 Framework of Poverty Programs ............................................................................................. 46 2-2 Review of On-Going Projects ...................................................................................................... 49 2-2-1 Conceptual Framework: Strategic Policy Combatting Poverty in Indonesia ........................... 49 2-2-2 Cluster 1: Household Based Programs .................................................................................... 54 2-2-3 Cluster 2: Community Based Programs ................................................................................... 58 2-2-4 Cluster 3: Market Based Programs .......................................................................................... 59 2-3 Conclusions ................................................................................................................................. 61 Chapter 3 Program Evaluation .............................................................................................................. 62 3-1 Literature Review ........................................................................................................................ 62 3-1-1 Impact of Social Safety Net Program ...................................................................................... 62 3-1-2 Targeting .................................................................................................................................. 63 3-1-3 Evaluation of Government Programs ....................................................................................... 65 3-2 Evaluation by JICA Team ............................................................................................................ 71 3-2-1 Quantitative Evaluation (Econometric Study) ......................................................................... 71 3-2-2 Qualitative Evaluation (Participatory Poverty Assessment) .................................................... 84 Case Study 3: From the Lessons of Social Protection in Cambodia .......................................................... 95 Chapter 4 Donors’ Relations ............................................................................................................... 101 4-1 Donors’ Assistance in Poverty Alleviation and Social Safety Net Programs ............................ 101 4-1-1 Sectoral Distribution of Official Development Assistance .................................................... 101 4-1-2 Donor Coordination Mechanism ............................................................................................ 103 4-1-3 Multilateral Organizations ..................................................................................................... 105 4-1-4 Bilateral Donor Agencies ....................................................................................................... 106 4-2 Priority Areas of Japanese Assistance and Modalities ............................................................... 109 4-2-1 Comparative Advantages for Japanese Cooperation .............................................................. 109 4-2-2 History of the Social Security System ................................................................................... 109 Case Study 4: History of Social Security System in Japan ...................................................................... 111 Chapter 5 Recommendations .............................................................................................................. 115 5-1 Recommendations for Social Protection and Safety Net Policies in Indonesia ......................... 115 5-2 Possible Areas for JICA’ s Assistance for Indonesia .................................................................. 116 5-2-1 JICA’s Comparative Advantage and Issues for Assistance .................................................... 116 5-2-2 Rural Development ................................................................................................................ 118 5-2-3 Institutional Capacity Building in Social Protection .............................................................. 118 5-2-4 Micro, Small and Medium Enterprises .................................................................................. 118 5-2-5 New Trends in Aid Harmonization ........................................................................................ 118 References ................................................................................................................................................. 120 APPENDICES Participatory Poverty Assessment in West Java and South Sulawesi i Minutes of Meetings Statistical Appendix ii Figures and Tables Figure 1-1 Indonesia Stock Index 2-Year Fluctuations ................................................................................ 6 Figure 1-2 IDR / USD Exchange Rates 2003 - 2009 ................................................................................... 6 Figure 1-3 Distribution of Per-capita Household Consumption (log) before and after the 2008 Crisis (aggregate) .................................................................................................................................................... 7 Figure 1-4 Distribution of Per-capita Household Consumption (log) before and after the 2008 Crisis (urban) ........................................................................................................................................................... 8 Figure 1-5 Distribution of Per-capita Household Consumption (log) before and after the 2008 Crisis (rural) ............................................................................................................................................................ 8 Figure 1-6 Share of Local Expenditure over National Expenditure .......................................................... 16 Figure 1-7 The Number of Poor and Headcount Ratio Indonesia, 1996-2009 .......................................... 23 Figure 1-8 Rural and Urban Poverty Rate, 1996-2009 .............................................................................. 24 Figure 1-9 The Provincial Distribution of Headcount Ratio in Indonesia, 2002, 2005 and 2009 ............. 25 Figure 1-10 Poverty Rate and Economic Growth ...................................................................................... 29 Figure 1-11 Classifications of Poverty ....................................................................................................... 32 Figure 1-12 Poverty and Unemployment Rate, 1996-2009 ....................................................................... 35 Figure 1-13 Proportions of Formal and Informal Sector Employment in Indonesia, 1990-2009 .............. 35 Figure 1-14 Number of Workers by Employment Status ........................................................................... 38 Figure 1-15 Number of Informal Workers by Industry .............................................................................. 39 Figure 1-16 Number of Informal Workers by Educational Background.................................................... 40 Figure 1-17 HT Model of Migration .......................................................................................................... 40 Figure 2-1 Strategic Areas of Poverty Alleviation Program ...................................................................... 49 Figure 2-2 Prices of Premium Petrol (in Euro/10 liters) ............................................................................ 51 Figure 2-3 The Role of RASKIN for Poverty Reduction .......................................................................... 55 Figure 2-4 The Goal of Health Service Provision .....................................................................................