Preparatory studies on national security system in Indonesia

The Government of Indonesia faces a challenging period in reforming its national social security system. In response to the Asian financial crisis in 1997, legislative reforms have been introduced to be better prepared in the future. This paper outlines how the challenge for Indonesia is to transform this aspiration into a framework that judiciously and fairly embodies the principles of assistance for the needy and insurance for those who are able to pay. The report seeks to illuminate the nature of the challenges in terms of the expected fiscal costs of alternative  arrangements assuming a variety of macroeconomic, indexing, and demographic scenarios. It also suggests how existing schemes could be integrated under the National Social Security System Law.

As the author notes, the existing social security- related programs are costly and provide only limited protection to those covered. There are also issues related to their governance and management. The document highlights how the Sistem Jaminan Sosial Nasional (SJSN) law is a framework law. It outlines the basic structure of the reformed social security system, but does not specify details. Major strategic policy options, amounts of benefits, and contribution rates still need to be determined by regulations. Experience from other countries shows that one of the keys to successful social security reform is political support from the highest levels and the presence of a reform champion to lead and sustain the effort on a daily basis. In Indonesia, the key first steps for successful SJSN design and implementation include:

• creation of the SJSN Council
• appointment of a coordinator in the Ministry of Finance and other key ministries
• identification of a champion to lead reform on a daily basis.