Addresing Poverty

7/29/2019 Addresing Poverty

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Addressing

How Indonesia can deal with the

challenges of a middle-income country

to accelerate poverty reduction

Poverty


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Things that you can do now


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1. Providing the right benefits at the right time

2. Reaching the right people

3. Delivered in the right way

Response 1: Reforming current programs


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Add programs to cover the remaining serious risks:

a. Standing shock response system

b. Unemployment and old-age benefits

Expand programs that have be shown to work and those thathave promise: PKH, BSM and Jamkesmas.

Extend Programs: to vulnerable households have the highest

risk of falling into poverty and need reliable coverage.

Response 2: Filling in the gaps


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2. Unified safeguard mechanisms

Socialization, complaints and grievances system

Monitoring & evaluation

1. National Targeting System

New registry (PPLS11) for extracting beneficiary lists

Update mechanisms to capture new poor

Response 3: Integration and consolidation

3. Common support platform

Use the national community-driven development platform to

improve supply and accountability


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Through better information

Seed: Providing access to high quality seeds.Process improvement and post harvestinfrastructure

Penyuluhan: Counseling needs to be redesignedto be more responsive to the needs of farmersand increase the production of "high-value"commodities

ICT: better information on market andtechnology can be well delivered by utilizinginnovative information technology andcommunication

... Through better infrastructure

Infrastructure for market-based instruments :

such as improving warehouse

receipts, developing weather insurance(weather insurance)

Irigasi: need bigger funds to maintain irrigation

systems

Water Resources Management : Utilizing the

successful model of Farmer Water User

Association.

Rural road: larger investment to improve accessand road quality from farm to market

Response 4: Expedite the Revitalization of

Agriculture


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Indonesia Infrastructure investments (4% of GDP) has

slightly increased but lower than the pre 1997 level

7

0%

1%

2%

3%

4%

5%

6%

7%

8%

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Total investment in infrastructure by source (% of GDP)

National Gov't Sub-national Private SOE

Sources: Indonesian Government for national and sub-national governments; Annual reports for state-owned enterprises; World Bank PPIdatabase for private investment. Note: 2009 Energy investment data (blue area in left chart) are estimated

Response 5: Strongly Increase investment on

infrastracture


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Things that you need to prepare forthe future


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Make thingscheaper

Make thingsbetter

Make newthings

Access

to inputs

Quality

upgrading

Innovation

Process

Response 1. Revitalize

manufacturing


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Comparison of cost and speed of logistics

Source: World Bank Logistics Performance Index

Difficulties in

accessingfinance, dealing

with

regulations, and

infrastructure are

found to reduce

productivity by 10%

By reducing congestion costs for

investment

1.4

2.6

1.7

5.4

2.8

5.0

2.6

2,225

397

500

701

341

1,238

302

0

500

1,000

1,500

2,000

2,500

0.0

1.0

2.0

3.0

4.0

5.0

6.0

Bangladesh China Vietnam Indonesia Malaysia Philippines Thailand

Leadtime import for port/airport, median case (days)

Avg charge (US$) for 40-foot container (import+export) (right axis)


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Starting up a Business

Uncertainty in investment procedures, lack of skilled labor , costly

tax administration, and constrains firms to expand.

0

10

20

30

40

50

Singapore Malaysia India Thailand Philippines China Vietnam Indonesia

Procedures Days

By improving ability to expand

Source: DoingBusiness, 2012


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Source: World Bank Enterprise Surveys,World Development Indicators

Measures of national innovation capacity

Low levels of firmsophistication, weak

innovation

environment

constrains firms to

improve quality and

invest for long-term

competitiveness

By investing on long term competitiveness

1.5

0.8

0.05

0.64

0.12 0.25

1,070

137

0

372

81

311

0

200

400

600

800

1000

1200

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

Bangladesh China India Indonesia Malaysia Philippines Thailand

Research and development expenditures (% GDP)

Researchers in R&D (per million people) (right axis)


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Why are workers in Indonesia facing difficulties

in finding good jobs? Possible explanations:

Job creation is not keeping pace with

new entrants to the workforce.

Rigid labor regulations stunt job

creation andentrepreneurship, especially for

young workers.

Barriers to self-employment: micro-

finance, entrepreneurial skills, etc.

Youth prefer to wait for a better job

(unemployment as a luxury good).

Youth lacking work-relevant

skills, and not finding jobs in theirfield of study (mismatch).

Youth do not have access to

information about the jobs market.

Response #2:

Creating more jobs and better jobs


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Response #2:

How to tackle unemployment?

Improving employability of youth

Targeted scholarships

Links between training schools and industry

Reform training programs

Supporting entrepreneurs

Explore expansion of micro-credit targeting youth Improve quality and coordination entrepreneurial training

Connect workers and employers

Integration and coordination of national certification program

Pilot job placement services programs

Wage subsidies targeting youth


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Constraints Suggestion

1. capacity constraintsNeed understanding of the major

constraints facing by the area

Cooperation with local universities / think tank in preparing evidence-based planning

Need accurate data and appropriate evaluation

2. Incentive constraintsGood performance does not get

reward bad performance does not

received punishment

Use of performance-based transfers, so the focus shifted from input to output based transfers (for

example in Cambodia, Peru and Argentina)

3. Fund constraintsSome areas have fund constraints

for public services, while some

other areas excess funds

Increase weight of multi-dimensional poverty in DAUFormula

4. System/Law constraintUnclear job and responsibilities

Improve regulatory framework by reviewing the possibility of uniting framework revision of Law

32 and Law 33 to the Act to enhance coordination and coherence.

Response #3:

Making Decentralization works for the

Poor


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16

Micro

finance

Financial

Infra-

structure

Ag

Finance

SME

Finance

PREVIOUSLY:

Limited Financial Inclusion, focus on specificthemes rather than an integrated and strategicframework, microfinance vulnerable to crises

INTEGRATED FINANCIAL

INCLUSION:-Govt to Person Payments, CCTs

-Use of existing institutions e.g.Post Offices, Savings Banks

-Use of technology

-Banks, NBFIs, Investors, Supply

Chain

all play role-CPFL Responsible Finance

-Based on sound Financial Market

Infrastructure

-meets client needsMobile

payments

NOW:

Comprehensive approach, Universal Financial Inclusionas a goal, sustainable and responsible growth, focus on

Impact and Policy Frameworks

Response #4:

Comprehensive approach to financial

inclusion


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1. Simplify regulations, and adjust severance rates downward

1. Introduce expanded pension program

1. Require funding of promised severance benefits

Response #5:

Negotiate a Grand Bargain for Labor

Reform


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Response #5:

How to Negotiate a Grand Bargain?

Option 1: Pooled Fund

Modify/create a severance fund

But low coverage

Option 2: Unemployment Assistance

Fund that eligible workers can draw from when unemployed

But high institutional demands, risk of low compliance, underfunding

Option 3: Individual Accounts

Regularly deposit contributions into accounts managed by central agency But high administrative costs, financing and institutional challenges

Option 4: Unemployment Insurance

Support payments for those who want to work but cannot secure a job

But institutionally complex, resource intensive

Addresing Poverty

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