The government plans to increase subsidies for the poor by distributing non-cash direct assistance for electricity and liquefied petroleum gas (LPG).
Direct subsidies to poor households will be distributed beginning in 2018 (Kompas, 9/3). Non-cash direct energy subsidies complement the existing four assistance programs for the poor, namely rice for the poor (Raskin), the National Health Insurance program, educational assistance through Indonesia Smart Cards, and the PKH conditional cash transfer program.
Although the poverty rate has dropped in recent years we are facing a major problem, namely the slowdown of poverty reduction and widening inequality. To overcome this, in addition to efforts to improve public spending allocation and increase budget allocations for poverty reduction, a variety of affirmative steps directly targeting the poorest people must also be taken.
Such initiatives should improve the design and delivery mechanism and integrate subsidies and social assistance with poverty reduction programs. In addition, indirect assistance should become direct assistance, goods subsidies should be direct subsidies and cash subsidies should be non-cash subsidies. The goal is to reduce the amount of misdirected subsidies and to more effectively reduce the number of poor people.
Indirect assistance and subsidies in the form of goods have many weaknesses because they often do not reach the actual target while, at the same time, those really in need do not receive them. Indirect subsidies can also widen disparities between communities.
Fuel subsidies, for example, are enjoyed by the wealthy. Findings in 2005 also showed that only 68 percent of the poor received the two main social assistance programs, namely Raskin and medical treatment.
This indicates the importance of an accurate database to ensure the poor are the real recipients of social assistance and subsidies. Data held by agencies and ministries, and the central and regional governments, needs to be updated and synchronized. A centralized single database would prevent overlapping and misdistribution of subsidies. Integrating the subsidies into a single electronic card would also reduce the possibility of aid falling into the hands of unauthorized recipients.
With the six assistance programs, subsidies for the poor, centralization and the use of a single database, 40 percent of the poor population, the main target of the subsidy programs, would be covered. However, in addition to further improving data, special efforts must also be taken by the government to reach out to the poor people who deserve to receive the subsidies but are not included on the list of recipients.
