Empowering Rural Economy

The government has allocated social protection funds of about Rp 381 trillion (US$25.66 billion) in the 2019 draft state budget, while the Villages, Disadvantaged Regions and Transmigration Ministry is promoting productive rural businesses.

KOMPAS/ANGGER PUTRANTO

Villages, Disadvantaged Regions and Transmigration Minister Eko Putro Sandjojo (left) holds a dialogue with residents of Ramban Kulon Village, Cerme District, Bondowoso Regency, East Java, Monday (16/7/2018). Villagers were encouraged to form village-owned enterprises (BUMDes) and utilize village funds to improve the social economy.

JAKARTA, KOMPAS – Poor people in rural areas are still dependent on social safety nets to ease their cost of living. These social protection programs help reduce poverty, but extra efforts are needed to overcome inequality and empower village economies.

Statistics Indonesia’s (BPS) data for March 2018 shows that the rural poor population was 15.81 million people (13.2 percent of the total population), down from 17.1 million (13.39 percent) in March 2017. The BPS cites several factors that caused the decline in the poverty rate, such as government social assistance and the Beras Sejahtera (prosperous rice) rice assistance program.

Some villagers living in food production centers and on smallholder plantations in West and Central Java, North Sumatera, Jambi and Central Kalimantan that Kompas interviewed over the last two weeks said the government social safety net programs were a great help. The villagers said they faced difficulties increasing their incomes for various reasons, such as land tenure inequality and an imbalance in businesses, capital and market structure.

National Development Planning Agency head Bambang PS Brodjonegoro said the government planned to reduce the rural poverty rate to 11 percent in 2019 through means such as increasing the social protection budget and expenditure.

In the 2019 draft state budget, about Rp 381 trillion has been earmarked for social protection programs, a 31.9 percent increase from that in the 2018 state budget. The social protection funds are allocated for recipients of the Indonesia Smart Program (PIP), Family Hope Program (PKH) and Insurance Premium Assistance Program (PBI), which account for about 40 percent of the poorest people in the country. The social protection programs are expected to raise the poor above the poverty line and prevent the vulnerable population from falling below the poverty line.

However, efforts to overcome rural poverty face a number of challenges. Bambang said these challenges concerned infrastructure management, land tenure inequality and natural disasters.

In the last three years, the number of villages with damaged infrastructure had increased fivefold because of poor infrastructure quality, while the majority of the land was controlled by 20 percent of the richest rural population.

Productive businesses

In relation to the use of village funds, Villages, Disadvantaged Regions and Transmigration Minister Eko Putro Sandjojo told Kompas on Tuesday that infrastructure development had to come first, because rural residents will not be able to increase productivity if their villages did not have adequate infrastructure. These include facilities for improving the quality of life, such as bathing, washing and sanitary facilities (MCK facilities), village maternity clinics (Polindes), integrated health service posts (Posyandu) and clean water facilities, as well as infrastructure for empowering local economies, such as rural roads, dams and reservoirs, irrigation and public markets.

"In almost four years, more than 150,000 kilometers of rural roads and more than 1,000 kilometers of bridges have been built, as well as tens of thousands of PAUD (early childhood centers), Polindes and Posyandu," he said.

According to Eko, villages with well-developed infrastructure had begun to allocate more village funds toward economic development, such as establishing village-owned enterprises (BUMDes). "BUMDes can develop waste banks, tourist facilities, post-harvest processing factories, and others," he said.

Several BUMDes had paid taxes in excess of Rp 1 billion. Two years ago, only about Rp 800 million in village funds were provided per village. Eko said one BUMDes in Klaten, Central Java, had booked Rp 13.5 billion in profit.

A village sometimes falls within the poor village category from lacking focus in farm production and a production facility that meets the needs of the local economy. This also impedes the village from constructing post-harvest processing facilities.

KOMPAS/VIDELIS JEMALI

The Villages, Disadvantaged Regions and Transmigration Ministry’s rural area development director general, Ahmad Erani Yustika (wearing batik), checks out the products of a joint business group sold at Pajang House in Sigi, Central Sulawesi, Wednesday (10/1/2018). Since the disbursement of village funds in 2015, residents have been facilitated to develop businesses by utilizing local products.

Eko called on regents to determine a production focus through the superior rural product program (Prukades). "After that, we will give them access to other ministry programs, businesses and banks," he said.

Eko said that 154 out of 326 villages in Pandeglang regency, Banten were categorized as underdeveloped in 2014, whereas Pandeglang had fertile lands and a long coastline. In opening 30,000 hectares of farms last year, the region was able to produce 90,000 tons of corn and reduce the number of underdeveloped villages from 154 to 76.

Sustainability

Senior researcher Carunia Mulya Hamid Firdausy at the Economic Research Center of the Indonesian Institute of Sciences (LIPI), said that labor-intensive programs, village funds and social assistance were not enough to reduce rural inequality, and that such assistance programs were temporary.

Rather, rural communities needed to increase their incomes in a sustainable manner, such as through empowering businesses utilizing local resources. Carunia said that after improving the rural infrastructure, the government should turn its focus toward rural economic empowerment.

"Only traders, collectors and farm owners benefit from the high price of rice. Small farmers and farm laborers don\'t get enough attention,” he said. Amid the issues concerning farmer regeneration and the conversion of productive land, food consumption was increasing in the country. This was an opportunity for villages to develop their potential to meet national food needs.

Chairman Bayu Krisnamurthi of the Indonesian Agricultural Economic Association Advisory Board (Perhepi) believed that concrete efforts were necessary to overcome the risk of food security: first, by intervening in community consumption patterns such as through educating people to consume local foods, and second, by intervening in the supply of local foods.

"One of these is by diversifying local foods in the regions. We must be able to maximize the use of increasingly limited natural resources from the supply side," he said.

Agricultural economist Bustanul Arifin of Lampung University (Unila) said that, by 2025 and 2045, national consumption would be determined by food supplies, income, prices and urbanization. There was an increasing consumption trend toward foods such as rice, poultry and cattle, as well as fruits and vegetables.

(HEN/CAS/JUD/NAD/KRN)