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M.

 Chatib Basri
LPEM University of Indonesia

Gustav Papanek
BIDE

Disclaimer: The views expressed in this paper/presentation are the views of the author and do not
necessarily reflect the views or policies of the Asian Development Bank (ADB), or its Board of Governors, or
the governments they represent. ADB does not guarantee the accuracy of the data included in this paper and
accepts no responsibility for any consequence of their use. Terminology used may not necessarily be
consistent with ADB official terms.
Outline
y Economic crisis in Indonesia
y Why we need social protection?
y Social protection policy in Indonesia
y Social Protection policy in the future
y What needs to be done
y What ADB can help
Why we survived the global crisis? Good luck 
and good policy
All were Screaming the same Mayday Exports Volume of Commodities remain Strong
20% 350.0
Quarterly Growth of Export Values (SA) Monthly export volumes (2006=100) 
15% 300.0 Seasonally adjusted
10%
250.0
5%
200.0
0%
‐5% Q1 Q2 Q3 Q4 Q1 Q2 150.0

‐10% 100.0
2008 2 009
‐15% 50.0
‐20%
0.0
‐25% 6 6 6 7 7 7 8 8 8 9 9
0
‐ 0
‐y 0
‐ 0
‐ 0
‐y 0
‐ 0
‐ 0
‐y 0
‐ 0
‐ 0
‐y
‐30% n
aJ a p
eS n
aJ a p
eS n
aJ a p
eS n
aJ a
M M M M
Singapore China
Indonesia Malaysia
Thailand Philippines
CPO Copper Coal

 
What made 2008 crisis different with 1998: good 
policy response
1998 2008
y Monetary policy: tight,  y Monetary policy: ease, 
very high interest rate flushed liquidity, lowered 
y Fiscal Policy: Initially  interest rate
tight, the expansionary y Fiscal policy: expansionary
y Banking system: weak,  y Banking system: relatively 
unprudent healthy
y Policy responses towards 
y Policy response towards  banking problem: bail‐out, 
banking sector: closed 16  deposit insurance
banks y Trade regime: relative open
y Focus on strutural reform y Exchange rate regime: flexible
y Exchange rate regime:  y Social protection policy to 
fixed protect the poor 
y Social safety net
…but, poverty and unemployment 
remains a problem
The poor remains vulnerable to 
economic shock

World Bank, 2006


Social Protection system in 
Indonesia
y To deal with structural poverty : PNPM Generasi, 
PNPM Mandiri, Raskin (rice for the poor),
y Breaking the intergenerational poverty chain: School 
Operational Assistance, Community health, 
Conditional cash transfers (PKH), credit guarantee 
program
y Dealing with shocks: cash transfers 
Direct cash transfers: pro poor and the largest cash 
transfers program in developing countries

Source: World Bank (2008)
Cash transfers is better than other programs
Table 1 BLT targeting is better than other poverty alleviation programs
%Poor %Near Poor %Non Poor
Households Households Households Total
BLT 26.02 24.07 49.91 100
Raskin 21.02 22.28 56.7 100
Askeskin 24.41 24.03 51.56 100
Kartu Sehat 21.62 21.22 57.16 100
BOS* 16.65 20.81 62.54 100
PNPM
APPENDIX TABLE 1.
CALCULATIONS OF THE EMPLOYMENT IMPACT OF PNPM (Rp billion)
2007 2008 2009 2010 2011
A. Number of Kecamatan 5,400 6,400
B, Grant in Rp. billion needed per kecamatan to 3
employ 24 million for 60 days
16,20 16,20 16,20 16,20 16,20
C. Total grant needed: A*B: no inflation 0 0 0 0 0
16,20 17,49 19,44 20,25 21,06
D. Total grant needed after adjusting for inflation of 0 6 0 0 0
'07-08: 15%; '07-09: 20%; '07-10: 25%
E. Grant needed per kecamatan if 6,400 kecamatan 2.5 2.7 3.0 3.2 3.3
10,29 14,72 21,06
F. Actual budget for grants-total billion Rp* 1,735 6,974 0 9 0
G. Actual grant per kec if 5,400 kecamatan 0.3 1.3 1.9 2.7 3.9
H. Grant per kecamatan if divided over 6,400
kecamatan Actuals for 07-09, proposed for '10-11 0.3 1.1 1.6 2.3 3.3
I. Estimated millions employed 60 days 2 9 13 18 24
J. Millions employed for 60 days if add 20%
contribution by local government 3 10 15 22 29
Problem with current social 
protection system
y Fragmented
y Less coordinated
y Different set of data base
y Problem of targeting, incomplete information, supply 
side problems (availability of school, infrastructure 
etc)
Social Protection policy in the 
future
What needs to be done?
• The creation of an unified database system;
• Integrate the PNPM program into the Family Centred
Integrated Social Assistance
• The creation of a work‐intensive program in PNPM;
• The creation of a scholarship system which guarantees 
that poor students, who are poor, will be able to continue 
their education to a higher level;
• The improvement of shortages in the current PKH 
program and dealing with the problem of shortage in the 
supply side through PNPM Generasi;
• A full review of the Raskin system and improvements to 
the existing shortages;
• Widening and adding funds for the PNPM program, 
especially in regions where there are many poor 
residents;
• Implementing a one roof, fully coordinated social 
protection system;
• The creation of a more comprehensibe social 
protection system, in order to be able to replace 
fragmented and adhoc social programs;
• The creation of a continuous national social guarantee 
system;
y An initial program as the first stage of countinous
health insurance program;
y The government to cover all payments of a health 
system for poor families;
y To phase out Jamkesnas and replace it with the 
Health SJSN:
y Increase health insurance coverage in stages