Sustainable Development Goals (SDG) in Indonesia: Review of Poverty and Inequality Goals Asep Suryahadi The SMERU Research Institute
Outline Poverty and Inequality in SDG Trends in Poverty and Inequality The Causes of High and Increasing Inequality The Impact of Increasing Inequality Policy to Reduce Poverty and Inequality 2
Poverty and Inequality in SDG
Sustainable Development Definition Development that meets the needs of the present without compromising the ability of future generations to meet their own needs (Brundtland Commission, Our common future, 1987) Dimensions Economic dimension: An economically sustainable system must be able to produce goods and services on a continuing basis, to maintain manageable size of government and external debt and to avoid sectoral imbalances (maintain diversity) Environmental dimension: A stable resource base, do not overwhelm the waste assimilative ability of the environment nor the regenerative services of the environment, deplete nonrenewables only to the extent we invest in renewable substitutes Social dimension: Achieve distributional equity, adequate provision of social services including health and education, gender equity and political accountability and participation 4
Social Dimension of SDG 1. End poverty in all its forms everywhere 2. End hunger, achieve food security and improved nutrition and promote sustainable agriculture 3. Ensure healthy lives and promote well-being for all at all ages 4. Ensure inclusive and quality education for all and promote lifelong learning 5. Achieve gender equality and empower all women and girls 6. Ensure access to water and sanitation for all 7. Ensure access to affordable, reliable, sustainable and modern energy for all 8. Promote inclusive and sustainable economic growth, employment and decent work for all 9. Build resilient infrastructure, promote sustainable industrialization and foster innovation 10. Reduce inequality within and among countries 11. Make cities inclusive, safe, resilient and sustainable 12. Ensure sustainable consumption and production patterns 13. Take urgent action to combat climate change and its impacts 14. Conserve and sustainably use the oceans, seas and marine resources 15. Sustainably manage forests, combat desertification, halt and reverse land degradation, halt biodiversity loss 16. Promote just, peaceful and inclusive societies 17. Strengthen the mean of implementation and revitalize the global partnership for sustainable development 5
Targets of Goal #1: No Poverty By 2030, reduce at least by half the proportion of men, women and children of all ages living in poverty in all its dimensions according to national definitions Implement nationally appropriate social protection systems and measures for all, including floors, and by 2030 achieve substantial coverage of the poor and the vulnerable By 2030, ensure that all men and women, in particular the poor and the vulnerable, have equal rights to economic resources, as well as access to basic services, ownership and control over land and other forms of property, inheritance, natural resources, appropriate new technology and financial services, including microfinance By 2030, build the resilience of the poor and those in vulnerable situations and reduce their exposure and vulnerability to climate-related extreme events and other economic, social and environmental shocks and disasters Ensure significant mobilization of resources from a variety of sources, including through enhanced development cooperation, in order to provide adequate and predictable means for developing countries, in particular least developed countries, to implement programmes and policies to end poverty in all its dimensions Create sound policy frameworks at the national, regional and international levels, based on pro-poor and gender-sensitive development strategies, to support accelerated investment in poverty eradication actions 6
Targets of Goal #10: Reduced Inequalities By 2030, progressively achieve and sustain income growth of the bottom 40 per cent of the population at a rate higher than the national average By 2030, empower and promote the social, economic and political inclusion of all, irrespective of age, sex, disability, race, ethnicity, origin, religion or economic or other status Ensure equal opportunity and reduce inequalities of outcome, including by eliminating discriminatory laws, policies and practices and promoting appropriate legislation, policies and action in this regard Adopt policies, especially fiscal, wage and social protection policies, and progressively achieve greater equality Improve the regulation and monitoring of global financial markets and institutions and strengthen the implementation of such regulations Ensure enhanced representation and voice for developing countries in decision-making in global international economic and financial institutions in order to deliver more effective, credible, accountable and legitimate institutions Facilitate orderly, safe, regular and responsible migration and mobility of people, including through the implementation of planned and well-managed migration policies Implement the principle of special and differential treatment for developing countries, in particular least developed countries, in accordance with World Trade Organization agreements Encourage official development assistance and financial flows, including foreign direct investment, to States where the need is greatest, in particular least developed countries, African countries, small island developing States and landlocked developing countries, in accordance with their national plans and programmes By 2030, reduce to less than 3 per cent the transaction costs of migrant remittances and eliminate remittance corridors with costs higher than 5 per cent 7
Trends in Poverty and Inequality
Trends in Poverty and Inequality 20 18 16 14 12 10 8 6 4 2 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Economic Growth (%) Poverty Rate (%) Gini Ratio 0,45 0,4 0,35 0,3 0,25 0,2 0,15 0,1 0,05 0 9
Consumption Share of the Poorest 40% and Richest 20% 10
The Underlying Cause: Growth has not been pro-poor 10.0 Annual growth rate % 8.0 6.0 4.0 2.0 4.87 0.0 1 15 29 43 57 71 85 99 Percentiles Source: Susenas, 2008-2012 11
The Causes of High and Increasing Inequality
One Third of Inequality is Due to Endowment Factors Source: World Bank, 2015 13
Technological Change has Increased Demand for Skilled Workers and Led to Increasing Wage Inequality Source: World Bank, 2015 14
Indonesia is One of Countries with the Highest Wealth Concentration 15
Ineffective Social Protection has Left the Poor Vulnerable to Shocks Source: World Bank, 2015 16
Commodity boom benefited only the elite groups 120 100 80 60 Monthly Commodity Price Index (2011M1=100) 14 12 10 8 Change in expenditure per person by percentile (%) 2009-2011 (Commodity boom) 40 6 20 0 Jan-09 Mei-09 Sep-09 Jan-10 Mei-10 Sep-10 Jan-11 Mei-11 Sep-11 Jan-12 Mei-12 Sep-12 Jan-13 Mei-13 Sep-13 Jan-14 Mei-14 Sep-14 Jan-15 Mei-15 4 2 2011-2014 (Falling commodity prices) Coal Copper Palm Oil Rubber 0 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 Percentile of expenditure per capita (poorest to richest) Source: Yusuf (2016) 17
The Impact of Increasing Inequality
PENINGKATAN KETIMPANGAN AKAN MENGURANGI KEMAMPUAN PERTUMBUHAN The Direct EKONOMI Effect DALAM of Inequality MENGURANGI on KEMISKINAN Poverty Reduction r = -3.699 (1 - i) g + error r = change in poverty rate i = inequality (Gini ratio) at initial period g = economic growth Economic Growth Gini Ratio Reduction in Poverty Rate 1% 0 3.7% 1% 0.5 1.85% 1% 1 0 Source: Suryahadi, Suryadarma, dan Sumarto (2009) : Economic growth significantly reduces poverty High inequality reduces growth elasticity of poverty 19
When inequality increases, poverty reduction becomes slower 1,4 0,42 1,2 0,41 0,4 1 0,39 0,38 0,8 0,37 0,6 0,36 0,35 0,4 0,34 0,2 0,33 0,32 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 0,31 Series1 Series2 20
The Impact of Increasing Inequality on Economic Growth Peak: 0.3 Mean: 0.29 Fitted values.02.04.06.08.1.2.25.3.35.4 average 2000-2005 gini Fitted values Fitted values Sumber: Yumna et al., 2014 21
The Impact of Increasing Inequality on Unemployment Fitted values 0.05.1.15 Peak: 0.167 Mean: 0.173.12.14.16.18.2 average 2000-2005 edugini Fitted values Fitted values Sumber: Yumna et al., 2014 22
The Impact of Increasing Inequality on the Probability of Social Conflict Source: Pierskalla & Sacks, 2014 23
Policy Reduce Poverty and Inequality
Government Policy on People s Welfare 25
Government s Policy to Reduce Poverty and Inequality Source: Nazara, 2015 26
Non-contributory Welfare Programs Source: Nazara, 2015 27
Reallocations Towards More Productive Government Spending Source: Parjiono, 2015 28
But Its Impact on Inequality Depends on Who Benefits Most from the Government Spending Source: Dartanto, 2015 29
Productivity must be increased in addition to delivering social assistance 10 Total Factor Productivity Growth 14.000 Value Added per Worker (2005 PPP$) 8 12.000 Percent 6 4 2 0 10.000 8.000 6.000 4.000 2.000-2 - 2011 Percentage point change since 2007 1995 2005 2010 30
Access to Financial Services is Important to Reduce Poverty and Inequality 31