Trends in Poverty and Inequality in Decentralising Indonesia Riyana Miranti, Yogi Vidyattama, Erick Hansnata, Rebecca Cassells and Alan Duncan NATSEM, University of Canberra Presentation to the Working Party on Social Policy Meeting, OECD, Paris 29-30 November 2012
Acknowledgement Dr Michael Forster, Dr Ana Llena-Nozal and Laura Quintin of the OECD who has invited me and arranged my visit here and also Michael and Ana and other OECD staff for their useful and extensive feedback on this report. Research Reference Group s useful feedback and comments, Dr Sonny Harmadi from the Demographic Institute, University of Indonesia, Dr Evi Arifin from ISEAS, Singapore and Dr Asep Suryahadi from SMERU Research Institute, Indonesia. My acknowledgement also goes to my co-authors who are not here today.
Framework of the Presentation Today Map of Indonesia Decentralisation in Indonesia Economic and Employment Indicators Indonesia vs other Countries Trends in Poverty and Inequality Regional Disparity Characteristics of People Vulnerable to Poverty New Estimates of GEP and IEP Conclusion and Summary
Map of Indonesia Kalimantan Papua and Maluku Sumatra Sulawesi Java Australia Source: ArcGIS Map Service, World_Topo_Map, http://services.arcgisonline.com/arcgis/services and CV. SPATIAL DIGITAL MAPPING, Peta Dasar Indonesia, http://spatial-mapping.blogspot.com.au/2011/12/download-peta-dasar-indonesia.html
Decentralisation in Indonesia Big bang decentralisation Substantial delegation of authority from the central to local/regional government Decentralisation Laws No 22/1999 and 25/1999 Crucial context in terms of poverty and inequality discussion Some consequences: inspiration to form their own regional area and therefore create several new Provinces and Districts. In 2010 there were 33 provinces in Indonesia from a previous 26 and 491 Districts from a previous 293.
Macro Indicators Decentralisation (1) growth in sectoral GDP Prior to the crisis (1990-1996) Crisis Period (1997-1998) Recovery Period (1999-2002) Early Stage Decentralisation (2001-2004) Full Implementation (2005-2010) Entire Decentralisation period (2001-2010) GDP GDP per capita Manufacturing GDP Agriculture GDP Mining GDP Service GDP 7.2-13.1 4.0 4.8 5.7 5.4 5.3-14.3 2.5 3.0 4.1 3.7 9.9-11.4 4.2 5.7 3.9 4.6 3.9-1.3 1.9 3.4 3.7 3.5 5.2-2.8 3.1-1.6 2.4 1.1 8.8-3.8 2.5 4.5 6.3 5.6 Economic growth lower during the decentralisation period Agricultural growth relatively stable, prior and after the crisis while service sector grew the strongest compared to the other sectors after the crisis.
Employment Indicators Decentralisation (2) growth and shares in employment by sector Growth episodes Agriculture, Forestry & Fisheries Employment Growth (per cent p.a.) Average Share of Total Employment (per cent p.a.) Employment Growth (per cent p.a.) Manufacturing Average Share of Total Employment (per cent p.a.) Employment Growth (%p.a.) Services Average Share of Total Employment (per cent p.a.) Prior to the crisis (1990-1996) Crisis Period (1997-1998) Recovery Period (1999-2002) -1.9 49.6 5.8 11.6 5.9 34.1 6.4 41.9-12.9 11.9-0.4 39.8 1.9 44.1 1.7 13.1-1.2 37.6 Early Stage Decentralisation (2001-2004) 0.7 44.4-2.9 12.6 2.3 Full Implementation (2005-2010) -0.2 40.9 3.5 12.4 4.8 40.2 37.2 Entire Decentralisation period (2001-2010) 0.5 42.3 1.5 12.5 3.3 39.0
Poverty rate (%) Gini Inequality Index Indonesia vs EEs and ASEAN countries 80 70 Poverty rate at $1.25 a day (PPP) (% of population) Poverty rate at $2 a day (PPP) (% of population) Gini index 68.7 70 60 60 53.3 50 50 40 30 29.8 32.7 46.1 31.3 43.4 40 30 20 10 0 0.9 1.9 Argentina 6.1 10.8 Brazil* 22.8 Cambodia** 13.1 China** India 18.1 Indonesia 0.0 Russian Federation * 0.1 13.8 South Africa * 0.4 Thailand* 4.6 16.9 Vietnam** 20 10 0
Per cent Trends in poverty official BPS data 45 40 35 30 25 20 15 10 5 0 Total Rural Urban Revised Total Revised Rural Revised Urban 25.7 24.2 21.9 Early stage Full implementation 16.6 13.3 9.9 1976 1978 1980 1981 1984 1987 1990 1993 1996 1998 Year 1999 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Overall poverty rate have been decreasing More gradual decline in terms of poverty rate during the decentralisation period than prior to the crisis There is gap between rural and urban over time.
Gini Coefficient Trends in Inequality 0.40 0.35 0.30 0.25 0.20 0.15 0.10 0.05 0.00 Gini Coefficient Urban Rural Total 0.33 0.34 0.35 0.33 0.32 0.31 0.26 0.28 0.29 0.25 0.24 0.24 0.37 0.37 0.30 0.30 0.29 0.37 0.38 1999 2002 2003 2004 2005 2006 2007 2008 2009 2010 Year 0.32 A general pattern of rising inequality over the last decade Rural inequality lower than urban inequality reflecting large increases in urban populations in recent years
Regional Disparity Poverty Rates (%)
Regional Poverty Number of Poor ( 000s)
Characteristics of People Vulnerable to Poverty selected indicators Labour force participation rates for persons aged 15-64 years are very similar across the distribution. Almost 60 per cent in the bottom quintile work in the primary sector of agriculture and related industries. This contrasts to only 12 per cent in the top quintile. Only 18 per cent in bottom quintile work as formal employment compared with almost 56 per cent in the top quintile. This suggest that poverty risks depend less on whether an individual work or not but rather in what industry and whether the person work in formal employment Educational attainment still varies with many adults in the bottom and second quintiles not having any education.
Estimating the Impact of Consumption Growth and Inequality on Poverty during Decentralisation Period To explore the direction and strength of associations between poverty, inequality and growth over the main development periods in Indonesia. Extending previous work (Miranti 2007; 2010) now 2002-2010 Examines the consumption growth elasticity of poverty during the fourth major decentralisation period, again taking into account changes in inequality. Has the decentralisation period been pro-poor? To what degree has the change in the degree of inequality offset the alleviating impact of growth in consumption on poverty?
Estimation Results: Consumption Growth and Inequality Elasticity of Poverty in Indonesia Period GEP IEP First liberalisation period (1984-1990) -2.00 0.50 Second liberalisation period (1993-1996) -2.33 0.93 Recovery period (1999-2002) -2.29 0.92 Decentralisation period (2002-2010) -2.46 1.13 All periods (average) -2.28 0.86
Quantifying the Contribution to Poverty Change Period First liberalisation period (1984-1990) Second liberalisation period (1993-1996) Contribution to poverty change (percentage points ) Inequality Growth Change Total poverty change (percentage points) -3.54-0.61-4.15 0.54 0.79 1.33 Recovery period (1999-2002) -4.84 0.99-3.85 Decentralisation period (2002-2010) -5.71 1.88-3.83 All periods (average) -13.55 3.05-10.50
Conclusion and Summary Decentralisation brought significant change in the Indonesian political structure and consequently economic and social development of the nation. Continued improved performance in terms of poverty rate however inequality increases Poverty risks depend on what industry a person works and whether the person work in formal employment Regional disparities are still a major issue New estimates of GEP and IEP in this report suggest that rising inequality has been strengthening the offsetting positive benefit of consumption growth on poverty.
Terimakasih (Merci) riyana.miranti@natsem.canberra.edu.au
Global HDI Alternative Wellbeing Indicators Human Development Index (HDI) 0.8 0.7 0.6 0.527 0.543 0.572 0.579 0.591 0.598 0.607 0.613 0.5 0.4 0.3 0.2 0.1 0 1995 2000 2005 2006 2007 2008 2009 2010 Year Indonesia Medium human development East Asia and the Pacific World
Alternative Wellbeing Indicators Selected MDGs, Areas of Concern Population proportion consuming below 1400 kcal/capita/day Population proportion consuming below 2000 kcal/capita/day Maternal Mortality Ratio (per 10,000 live births) Contraceptive use: married women aged 15-49 (per cent) Household access to improved water sources (per cent) Improved water access - urban Improved water access - rural Households access to basic sanitation: total (per cent) Improved sanitation: urban Improved sanitation: rural Proportion of urban population living in slums 17 14 9 39 23 10 0 38 32 25 11 34 21 12 6 64 62 35 47 57 48 51 50 46 51 54 56 69 75 66 62 70 77 0 20 40 60 80 100 Baseline Latest data MDGs Target 2015
Clusters of Poverty Reduction Strategy Government Strategy in Poverty Alleviation (Central Social Assistance (SA) Expenditures) Cluster II : Community Empowerment Cluster I : Basic Needs and Social Protection Cluster III : Microfinance National Program for Community Development (PNPM Mandiri) Rice to the Poor (Raskin) Microcredit / Kredit Usaha Kecil (KUR) Health Service and Insurance (Jamkesmas) Education and School Assitance (BOS & BSM) Family Hope Program (PKH)
Issues and Challenges Mistargeting issue remain as a major challenge for government authorities to make the programs more effective and thus accelerate poverty reduction. For example, RASKIN Targeting Proportion of household recipient by quintile (per cent) Distribution across quintiles (per cent) Quintile 1 (most disadvantage) 80.6 30.4 Quintile 2 72.4 27.3 Quintile 3 58.8 22.2 Quintile 4 38.8 14.6 Quintile 5 (least disadvantage) 14.7 5.5 Total 53.1 100 Access to the program sometimes too limited - costs to access the services are too high for people in rural areas Supply side constraints such as inadequate service provision and perceived low service quality.