After the fall: social safety net programmes in Indonesia

In early 1998, the government of Indonesia established several programmes to provide social welfare to those most affected by the economic crisis. Both chronically and newly poor people had to be provided for, and social welfare was a new intiative for the Indonesian Government. The results have been mixed.

Before the economic crisisof 1997, Indonesia was one of thefastest growing economies in the world. The crisis had major social impacts,with the national poverty rate increasing from 15.7 percent in 1996 to 27.1percent in 1999. In response, the Indonesian Government initiated several programmes to help both chronically and newly poor people.

These social safetynet programmes had several aims, including: foodavailability at affordable prices, creating employment for poor people toimprove their purchasing power, preserving access of poor people to servicessuch as health and education, and boosting community empowerment throughregional and local credit programmes. An article fromthe SMERU Research Institute in Indonesia looks at the impactof these programmes on household welfare and poverty.

Traditionally theIndonesian people had never relied heavily on government social welfare programmes. Therefore the government had to come up with anew system. The programmes also had to meet the needsof those living in chronic poverty, and others who had been pushed in povertyby the economic crisis.

Through a panel survey of 10,000 households, the authors findthat:

• Along with macroeconomic stabilisation,the economic situation of households improved, but there were fluctuationsduring the period studied.
• Consumption levels of households that participated in the programmes increased in general, except for those in thenutrition and credit programmes.
• Participation in the programmes alsotended to reduce the probability of a household being poor. This was onlystatistically significant for the subsidised rice programme, which the authors found effective in crisissituations, though under normal conditions only chronically poor people wouldbenefit.
• The subsidised rice programme had the highest participation rate (56 percent by1999), compared to much lower rates for other programmes(a maximum of 17 percent).
• Subsidised credit programmes, since they do not address the immediate needsof the poorest people, are not effective in a crisis.
• Numerous practical problems limited programmeeffectiveness, such as non-poor groups benefiting and irregularities in theimplementation of employment programmes.

On the basis ofthese findings, the authors suggest that future programmesconsider two basic principles:

• For chronically poor people, meeting immediate consumption needs(for example through the subsidised rice programme) is more urgent than generating income in themedium term.
• For poor people with greater earning possibilities, credit programmes will be more effective.