Vivi Alatas and Matthew Wai-Poi
The first Millennium Development Goal (MDG) is to eradicate extreme poverty and hunger. Under this MDG, countries committed to halving poverty between 1990 and 2015. By various measures of poverty, Indonesia has already successfully achieved this goal. Nonetheless, significant challenges remain, including high vulnerability, regional disparities, non-monetary poverty and rapidly rising inequality.
The first MDG has three targets: (a) between 1990 and 2015, halve the proportion of people whose income is less than one dollar a day; (b) achieve full and productive employment and decent work for all, including women and young people; and (c) between 1990 and 2015, halve the proportion of people who suffer from hunger. In this article we focus on the first of these. This target also partly addresses the second two. Escaping income poverty depends on decent employment, while having a sufficient income to buy food is vital for avoiding hunger.
There are different ways of measuring poverty in Indonesia. The government works out the cost of buying enough food in urban and rural areas in each province for all family members, as well as a small amount for essential goods and services, such as housing and transport. In 2014, this was around Rp300, 000 per person per month. By this measure, poverty fell by half between 1990 and 2014, and currently stands at 11 per cent. If we use the World Bank’s extreme poverty line of $1.25 per day, poverty had fallen to 16 percent by 2011, a decline of 70 percent from 1990. These measures serve different purposes: the national poverty rate is best used to understand poverty trends over time in Indonesia, while the $1.25 rate allows international comparisons. However, both show that Indonesia has already successfully achieved the goal of halving poverty before the 2015 deadline.
Nonetheless, many challenges remain. Differences in poverty across regions, a large number of Indonesians living just out of poverty and at risk of falling back in, high poverty in other important areas such as health and living conditions, and rising inequality, all mean tackling poverty in a post-MDG world will be as hard as ever. Looking ahead, what do these challenges mean for Indonesia’s development framework? The policies and strategies which were successful in the past will not necessarily remain so. The world that we live in is changing quickly and is increasingly complex, so we face new challenges that will need new solutions. It is clear that a one-size-fits-all approach will not work. What has effectively reduced poverty rates in much of Indonesia may not work in other parts, such as remote Papua.
Moreover, these days poor places and poor people are not the same thing. When the MDGs were agreed upon, poverty was high in most of Indonesia. Now, most of the poor live in non-poor places, while the poorest places account for relatively few of the total poor in Indonesia. For example, eastern Indonesia is one of the poorest parts of the country, with poverty around 20 per cent in Maluku, East and West Nusa Tenggara, and around 30 percent in Papua. However, only 11 percent of Indonesia’s poor live in these provinces. At the same time, over half (55 percent) live on the island of Java, where poverty is just over 10 percent on average.
We also need to accept that poverty will increasingly have an urban face. While we have learned much about what works in rural areas, there is still much to learn about what drives poverty in cities and towns. We must learn how to reach both the urban poor and the poor in non-poor areas, while continuing to respond to the remaining rural poor and those in poor areas.
The chances of falling back into poverty are high in Indonesia. In addition to the 28 million Indonesians living below the national poverty line, there are another 68 million living just above the line and vulnerable to falling into poverty if they experience a shock such as illness, job loss or a bad harvest. In fact, half of the poor each year were not poor the year before. Furthermore, despite significant reductions in economic poverty, poverty remains high in a number of other dimensions. For example, 72 percent of Indonesians live in housing which is overcrowded, badly made, or lacks clean water, proper sanitation and electricity. Thirty-seven per cent of Indonesian children under five years old are malnourished and much shorter than they should be. Being malnourished will affect their educational achievement, as well as their adult health and income.
Finally, inequality is rising rapidly. In 2002, the richest 10 percent of Indonesians already lived on as much as the poorest 40 percent combined. Now, that 10 percent are consuming as much the poorest 52 percent combined. When Indonesia’s impressive economic growth is not being shared by all, reducing poverty and vulnerability is that much harder.
Tackling poverty in Indonesia in the post-MDGs world
What will it take to address these challenges in the post-MDG world? First, more jobs and better jobs. Young Indonesians need to have good work with good pay available to them when they begin working. This means the economy has to continue to grow strongly. It also means more roads, ports and bridges to make the economy more efficient. It means laws and regulations which encourage businesses to invest, grow and create jobs. And it means that young people will need the education and skills that employers are looking for. Second, it means stronger social protection for all Indonesians, so that the poor can help themselves out of poverty, the vulnerable are protected from shocks which would make them poor, and everyone has the chance to climb up into the middle class. It will also mean working out how to support the growing number of the elderly.
Responding to these challenges demands the participation of many. It means involving the poor, who need to be empowered to help themselves. But it also means involving all society: central and local governments, civil society, international development partners and the private sector.
Vivi Alatas (email@example.com) is a Lead Economist with the World Bank’s Poverty Global Practice. She leads the Indonesia team, whose main focus is supporting the Government of Indonesia in strengthening evidence-based policy making for poverty reduction.
Matthew Wai-Poi (firstname.lastname@example.org) is a Senior Economist with the World Bank’s Poverty Global Practice. He leads the Indonesia team’s analytic program on poverty and inequality, as well as its technical assistance to the government on targeting social assistance to the poor and vulnerable.