Thursday, November 30, 2023

No one left behind in Indonesia?

Paul Burke & Martin Siyaranamual

President Jokowi has used the phrase ‘No one left behind’ in prioritising inclusivity in the development process in line with the United Nations’ Sustainable Development Goals (SDGs). The SDGs include ending poverty (SDG 1), achieving universal access to affordable and clean energy (SDG 7) and sustaining decent work and economic growth (SDG 8). While the phrase should not be taken too literally—some people are always left behind, at least in relative terms—it does encapsulate a desire to make progress towards meeting the SDGs and enhancing the inclusivity of development, not only for the poor but also for other often-marginalised groups.

Steps are being taken to establish and broaden access to modern energy and targeted assistance for members of marginalised groups, namely persons with disabilities (PWD), older persons, and unemployed. Nevertheless, there is a long way to go in reducing the extent to which marginalised members of society are left behind.

At the October 2018 ASEAN Leaders’ Gathering in Bali, the president used the phrase ‘No one left behind’ in referring to the need to ensure that economic development is inclusive of all. The phrase is drawn from the United Nations’ 2030 Agenda for Sustainable Development, under which 17 Sustainable Development Goals (SDGs) were agreed by the international community. The SDGs include ending poverty (SDG 1), achieving universal access to affordable and clean energy (SDG 7) and sustaining decent work and economic growth (SDG 8). While the phrase should not be taken too literally—some people are always left behind, at least in relative terms—it does encapsulate a desire to make progress towards meeting the SDGs and enhancing the inclusivity of development, not only for the poor but also for other often-marginalised groups.

One of the requisites for success in a ‘no one left behind’ agenda is achieving broad access to modern energy sources. Indonesia has made impressive progress in broadening residential electricity access. Only about half the population had residential access to electricity—well below the rate for the rest of the world (IEA 2018). Data from the Ministry of Energy and Mineral Resources (2019) indicating that Indonesia had reached a household electrification rate of 98.8% by June 2019.

The headline numbers hide much of the story, however. Households with broken connections or systems are included in the electricity-access count. Furthermore, many households consume only a small quantity of electricity; among customers of PLN, the average residence in East Nusa Tenggara consumed less than half the national average in 2018. Electricity outages also remain a serious issue, especially outside Java. With household electrification near universal, Indonesia next challenge is to move ‘beyond electrification’, prioritising improvements in the quantity and quality of available electricity.

Indonesia’s progress on expanding access to clean cooking also has been impressive, although there is a long way to go. In 2000, about 88% of Indonesians relied primarily on dirty cooking fuels. By 2017, this had been reduced to about 30% (IEA 2018), with traditional biomass remaining the most-used dirty cooking fuel. A major contributor to the expanded access to clean cooking was the national kerosene-to-LPG conversion program launched in 2007.

The LPG subsidies do not flow only to those in need. Only about 12% of the benefits of the subsidy flow to the bottom income quintile, for reasons including that LPG canisters are not easily accessible in eastern Indonesia (Kusumawardhani et al. 2017). The National Team for the Acceleration of Poverty Reduction found that about 72% of non-poor households accessed subsidised LPG cylinders in 2018, while slightly more than half of poor households accessed them (TNP2K 2018). There are thus opportunities to improve the targeting of the LPG subsidy.

Renewed emphasis on clean cooking will be required if Indonesia is to have a chance of achieving SDG 7 on universal access to affordable and clean energy by 2030.

Taking a broad approach to the definition of ‘marginalisation’—one that involves exclusion from various aspects of society, including education and employment, the ‘no one left behind’ agenda clarifies the importance of homing in on disadvantages faced by individuals. Indonesia’s poverty rate fell to 9.4% in March 2019, however, about one-fifth of Indonesians have expenditure levels that are less than 50% above the poverty line (World Bank 2019a). There are also many marginalised people who lack opportunities to participate fully in society.

Focusing on the status of and recent initiatives for three groups who have members among the more marginalised individuals in society: people with disabilities, the elderly and the unemployed.

According to the 2015 intercensal population survey (SUPAS; BPS 2016) there are about 9% of Indonesians aged two or older have a moderate or severe disability. Unfortunately, most of the severely disabled in Indonesia do not benefit from disability-focused social assistance schemes, with Indonesia lagging behind countries such as Vietnam and Nepal (Larasati et al. 2019). The 2019 expansion of the Indonesia conditional cash transfer program, known as PKH, is an important step towards broader coverage.

Although Indonesia already has a legal framework for the inclusion of PWD in all aspects of life, nevertheless, there is a large gap between what is required under the law and what has been achieved in reality. An example is the challenges that PWD face in the labour market. The law mandates that PWD have equal rights to obtain decent work, and that at least 2% of employees of each public sector entity and 1% of employees of each private sector entity should be PWD. There is, however, no formal procedure for implementing these requirements.

Currently, about 6% of the population is aged 65 or older, but only a small fraction of the elderly, mostly former government employees, have access to pension schemes. As a result, many older Indonesians—about 40% of people aged 65 or older (6 million people)— are still working. Many of these people—about 62%—work in the agricultural sector, with generally low and insecure earnings.

There is the potential for Indonesia to move towards a more comprehensive system of retirement pensions for the elderly. TNP2K (2018) explored a three-tiered approach: (1) providing non-contributory grants to elderly people who are without access to old-age insurance or pensions; (2) enhancing publicly managed pension schemes; (3) developing contributory private pension schemes for people who can afford to make direct contributions.

Providing non-contributory grants to the elderly (the first tier) would come at a fiscal cost, although this could be manageable. TNP2K (2018) calculated that a grant of Rp 300,000 per month to every Indonesian aged 70 or older without a pension would involve a fiscal cost equal to only 0.2% of GDP. The report also concluded that this type of approach would be able to help reduce the overall rate of poverty.

In February 2019, Indonesia’s unemployment rate among those aged 15 or over was down to 5.0%, equal to 6.8 million people. Those with either a general or vocational high school education have an unemployment rate of 7.5%, whereas those with no or little education have a low unemployment rate (0.9%), as they typically cannot get by without some type of work. A sizeable proportion of the unemployed are thus individuals who are not members of the lowest-income families.

A major structural constraint to increase the formal employment rate is the complex system of rules under Law 13/2003 on Manpower concerning the hiring and firing of permanent employees. Jokowi has expressed a desire to ease over-restrictive labour regulations. The proposed reform is motivated in part by frustration that more manufacturing firms are not choosing to invest in Indonesia, even after the United States imposed tariffs on exports from China.

Another proposed initiative is the introduction of pre-employment cards (Program Kartu Pra-Kerja) to fund short-term vocational training for job seekers and perhaps also a short-term job-search allowance. The idea is still being developed and may take longer to implement than planned. Key issues include whether Indonesia’s institutional architecture is ready to administer the scheme, whether adequate-quality training will be provided and whether the vocational skills could be productively applied in the workforce.

No one left behind? Considerable progress has been made in moving to near-universal residential access to electricity in most of Indonesia, although sizeable energy access challenges remain, especially in remote regions. Indonesia has also begun to tackle some of the more challenging issues facing disadvantaged groups hitherto largely neglected by public policy. Most notably, the first steps have been taken to establish a broader social safety net—including for the disabled, the elderly and the unemployed. The government has given a degree of priority to the SDGs, including by linking SDG targets and indicators to the national mid-term development plan for 2015–19 and through the president’s ‘no one left behind’ focus. Unfortunately, Indonesia’s fiscal capacity remains small, and scarce resources are proposed to be diverted to an expensive plan, such as, to build a remote new national capital.

There is scope for research into what is and is not working in broadening the inclusiveness of Indonesia’s economic development. For example, future evaluations of the effectiveness and impacts of the 2019 reforms to the PKH may be useful for informing policy design in both Indonesia and other countries. An issue of particular interest is the effect of PKH disability-support payments on the labour force participation of both PWD and other members of their families. If the pre-employment card scheme goes ahead, future evaluations will also be important for identifying whether this type of approach can make a tangible contribution to improving productivity and reducing unemployment.

This article is a summary of more comprehensive paper titled “No one left behind in Indonesia”, published in Bulletin of Indonesian Economic Studies, Volume 55, 2019 – Issue 3.

Paul Burke is an Associate Professor at the Australian National University, Australia.

Martin Siyaranamual is a Senior Researcher at SDGs Center UNPAD

Photo credit Andreas Stephan