Vice President Jusuf Kalla (second left) speaks with Coordinating Economic Minister Darmin Nasution (second right), National Development Planning Minister/National Development Planning Board (Bappenas) head Bambang Brodjonegoro (left) and Minister Counsellor for the Australian Embassy in Jakarta Bradley Armstrong during the opening of the Indonesia Development Forum (IDF) in Jakarta, Wednesday (9/8). The IDF, themed “Fighting Inequality for Better Growth” and held by the National Development Planning Ministry/Bappenas and the Australian Department of Foreign Affairs and Trade, gathered domestic and foreign stakeholders to find solutions to the problems in Indonesia’s development.
JAKARTA, KOMPAS – The government needs to be more aggressive in its efforts to reduce the number of poor citizens and inequality. For more effective implementation of the poverty alleviation program, bureaucratic capacity and political will must be heightened.
This was one of the issues raised during the Indonesia Development Forum (IDF) in Jakarta, Wednesday (9/8), held by the National Development Planning Ministry and the AustralianDepartment of Foreign Affairs and Trade (DFAT).
Themed "Fighting Inequality for Better Growth", the international forum discussed and sought solutions to the development problems in Indonesia. Relevant stakeholders from Indonesia and overseas were invited as speakers, including Vice President Jusuf Kalla, Bradley Armstrong of the Australian Embassy, Coordinating Economy Minister Darmin Nasution, Tonga’s Finance Minister Tevita Lavemaau, National Development Planning Minister Bambang PS Brodjonegoro, and Georgetown University Professor Martin Ravallion.
In his speech, Kalla said the government hoped that equal distribution of income could be achieved as soon as possible. Toward this end, the basic income of the low-income community should be increased. However, the effort should go hand in hand with increased productivity.
Kalla cited as an example that the income of a company executive in Jakarta can be hundreds of times the earnings of minimum wage workers. The same thing could be said for the incomes of farmers or fishermen, which were vastly different from that of laborers, teachers and doctors.
Efforts to overcome these disparities, according to Kalla, should be carried out by raising the people’s income and productivity. The government could reduce the expenditures of poor citizens by providing subsidies such as for electricity, fuel and fertilizers. The government also provides social welfare to meet basic needs through the Family Hope and Smart Card Programs. "However, this is not enough, because the most important issue is how to increase the income of the people as a whole. Therefore, the government provides KUR (microcredit) programs, village funds, and others,"he said.
Meanwhile, Darmin spoke about the government’s concepts for poverty reduction and inequality management. The concept was once explained to Kompas in a special interview in March.
The poverty reduction program consists of the three pillars of land, opportunity, and human resources. For land, the program covers agrarian reform, agriculture, plantations, urban poor and affordable housing, as well as fishermen and seaweed farmers.
For opportunities, the program covers a fair taxation system, manufacturing and information technology, retail and markets, as well as government financing and budgeting. For human resources capacity, the program focuses on vocational education, entrepreneurship, and labor market.
Economic equity
Darmin acknowledged that the decline in poverty rates and the Gini ratio had slowed. As of March 2017, the poor population totaled 27.77 million people or 10.64 percent of the national population, with a Gini ratio of 0.393.
In order to significantly reduce the number of poor, the concept of economic equality must be accelerated. The convergence of social assistance programs is also important, through refining goals and transforming social aid to non-cash direct assistance.
"We must make all social assistance more convergent for the rightful people. If we do not succeed in doing so, reducing poverty and inequality amid economic growth will become more and more difficult," said Darmin.
In another session, Georgetown’s Ravallion said that most developing countries, including Indonesia, had recorded positive progress in reducing poverty. However, a number of challenges still remained. One of these is that the poorest people are often left behind, despite the government’s various poverty eradication programs.
Increased consumption as an indicator of household economic capacity shows improvement for the upper-middle class. However, for the poorest of the population, the increase is minimal. "The policy already exists and a number of experiences can be used as reference. However, due to the absence of political will and administrative capacity, it cannot be implemented effectively," Ravallion said.
During the dialogue session, Corruption Eradication Commission (KPK) head Agus Rahardjo said that corruption was one of the causes of poverty and inequality. Corruption could take root due in part to overlapping authority among government agencies.
To that end, he proposed bureaucratic overhaul as a basic solution. Parallel to this, the government should implement a single identification number as soon as possible.
Bambang said the government would focus on improving the lives of 40 percent of the population in the lowest economic bracket. This means that government intervention will be focused on these communities.
"Indonesia has a good pattern of reducing poverty, but is not yet aggressive enough. Of course, there are many areas to be fixed," he said.
Bambang also expressed the need for the private sector in accelerating poverty reduction and overcoming inequality, as the central government alone was not enough. Similarly, the role of local governments should be expanded because the program was implemented in regional areas.
Meanwhile, Armstrong explained the use of taxes as a tool for reducing inequality in Australia. The Australian government had been working hard to overcome income inequality through efforts that could drive the economy and raise state revenues. The proceeds of state revenues were then channeled to finance health, education and social programs.
"We have implemented a progressive tax system. The tax burden is higher in line with the level of income,"Armstrong said. About 20 percent of the highest income population in Australia accounted for 70 percent of total tax revenues. In contrast, 40 percent of the lowest income population contributed only 3 percent. Australia\'s tax revenues accounted for about 24 percent of the GDP.
"Social transfers are the largest allocation in the Australian budget, which amounts to US$140 billion, or about Rp 1,600 trillion. Without the taxation system and social transfer, the estimated Gini ratio could have reached 0.52. The actual Gini ratio now is 0.33," he said.
