Poverty Reduction in Indonesia: A Brief Institutional History

Field: Social Sciences (Social Sciences)

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. II. The Political Economy Background and the Origins of TNP2KAs stated above, the National Team for the Acceleration of Poverty Reduction (TNP2K) was a GoI institutional innovation intended to analyse and set out policy options to improve the coherence and coverage of poverty reduction and social protection programs.This section presents an overview of the history of TNP2K.It discusses some of the political economy background, the actors and origins of TNP2K, and also explains some of the reasoning behind the initial design of the institution. The Political Economy BackgroundDespite Indonesia having a relatively high number of poor households, the technocratic discourse around poverty issues and "poverty reduction" was not common in the public media prior to the general election in 2009.Poverty alleviation discussion was largely the domain of technocrats and planners at the Ministry of National Development Planning (Badan Perencanaan Pembangunan Nasional -Bappenas).These were the officials responsible for designing policies and coordinating the implementation of poverty reduction programs.Inputs and discussions were provided by limited numbers of research institutes, universities and donors that were helping Bappenas in developing an anti-poverty strategy.The discourse on poverty issues began to get more public attention when the GoI took steps to raise subsidised fuel prices by an average of 125% in 2005.As a net importer of oil since 2004, the GoI needed to increase domestic fuel prices in order to prevent budget deficit explosion caused by a large step change in the prices of crude oil.For the same reason, the subsidised fuel prices were raised again in early 2008, although later downgraded several times before the 2009 general election.In order to offset the adverse impact of fuel price increases on the poor and near poor households, the GoI prepared a variety of social compensation programs funded from budgetary saving arising from the reduction of fuel subsidies.These programs included an unconditional cash transfer (Bantuan Langsung Tunai-BLT), a rural infrastructure program and a set of social programs in education and health.In the education sector, the GoI issued School Operational Assistance (Bantuan Operasional Sekolah -BOS) which provided block grants for schools.Correspondingly, in the health sector, the GoI introduced Health Insurance for the Poor (Asuransi Kesehatan untuk Masyarakat Miskin -Askeskin) 2 .However, the rise in subsidised fuel price happened simultaneously with significant increases in prices of some staple food, most notably rice, driven to some degree by the energy-related rise in production costs.The combined price increases of fuel and basic foodstuff caused a double-digit inflation of 17.11% in 2005.At the same time, the compensation programs were only partially effective in protecting the poor and preventing the vulnerable from falling to poverty.This was partly due to problems of coordination in policy implementation by multiple actors, along with problems of targeting the poor.Despite the interventions, the official poverty 2