Poverty Reduction in Indonesia: A Brief Institutional History

Abstract

This report tries to capture in a limited space the important information about a unique institutional experiment in improved policy making, to address the challenge of poverty in Indonesia. The initiative has been underway for a few years only, and while those involved are clear in their own minds about what they did and what happened, that knowledge needs to be solidified and kept because it can provide a number of guide posts to future reforms of the policy making machinery in Indonesia. If the information is not written down now it could be lost, and with that an opportunity for significant institutional learning would also be lost. The challenge of reducing poverty remains one of Indonesia’s most pressing issues. Although poverty rates have declined from 23.4% in 1999 to 11.25% in 2014, the number of the population living in extremely poor condition remains high at around 28 million people. That is a relatively large fraction of the population in severe poverty when compared with neighbouring countries. In addition, a further 30% of Indonesians are considered vulnerable to poverty, which means not only that living standards are very low for a large group of people above the poverty line, of Indonesia, but their vulnerability also implies that a relatively small shock to income and consumption can send those in this group back below the poverty line. Various measures indicate a high degree of “churn” in the numbers of families moving into and out of poverty. The high incidence of chronic poor and the number people vulnerable to poverty shocks underlines the important of both good poverty reduction programs as well as the need for systems of social protection. The Government of Indonesia (GoI) at national and local levels has developed various anti poverty and social protection programs. However, the increasing numbers of programs have not always corresponded to better welfare and protection for the poor. Many policies were not coherently designed, resulting in gaps of coverage, and also in redundancies where one policy may have crowded out another. Furthermore, implementation of poverty programs has become more difficult to coordinate. As the numbers of those in poverty have fallen, the efforts needed to address the remaining poor have become more difficult, requiring more complex planning and solutions. The National Team for the Acceleration of Poverty Reduction (TNP2K) was formed in 2010 as a temporary institutional innovation, to address these problems. TNP2K aimed to develop policy options to improve the coherence of poverty alleviation and social protection policies. It was also mandated to coordinate and oversee the implementation of various poverty reduction and social protection programs as well as apply more advanced techniques for improving their targeting. The idea was to enhance or “supercharge” the whole apparatus of policy making and policy management in an area of high political importance. By implication, key features of the design of TNP2K can be related to the shared understanding of senior officials as to what inhibited and undermined policy management within the traditional bureaucracy. TNP2K was therefore itself the result of earlier “institutional lessons”, as well as being itself a likely source of such lessons, for the future. This report traces the history of the TNP2K, beginning in 2009 when a small group of scholars in Indonesia proposed a special coordinating body to accelerate poverty reduction. It examines the political economy background and context as well as the rational of this specific form of intervention. It then identifies challenges it has faced and the steps taken to respond them. By analysing the nature and the evolution of TNP2K this report will try to contribute to a deeper understanding of how to formulate more effective poverty reduction strategies in Indonesia.