Bali bombings slow down pace of poverty reduction
Dadan Wijaksana, The Jakarta Post, Jakarta
After increasing slightly last year, poverty in the country is expected to decrease again this year although the impact of the Bali bombings will likely limit its pace, according to a report issued by the World Bank.
The bank said that the number of poor Indonesians would have decreased to 15 percent of the population this year from 16 percent last year if the Bali tragedy had not occurred. But because of the bombings, the decline will only be 15.5 percent, it said.
"Assuming the attack only affects (economic) growth, not the (rupiah) exchange rate and prices, about 1 million more people will be in poverty than without the attack," said the World Bank report, which was released last week prior to the annual meeting of the country's major donors under the Consultative Group on Indonesia (CGI).
CGI is slated to gather at a two-day meeting starting Tuesday.
Such a projection, the bank added, was based on the assumption that there would be a slowdown in the country's gross domestic product (GDP) growth from the initial projection of 4 percent to 3.3 percent.
The figure could have been much worse had the government not moved quickly to address the anticipated 3 percent depreciation in the exchange rate of the rupiah against the U.S. dollar as a result of the bombings, otherwise it would have further raised the poverty rate to 16.7 percent in 2003, the report said.
The rupiah's depreciation has been the main driver for the increase in basic food prices, including rice. The poor spend a relatively large portion of their income on food, making them vulnerable to changes in food prices.
Nevertheless, the slowing pace of poverty reduction will leave a black spot on the country's previously exceptional efforts in reducing the number of poor people.
Although the progress was stalled in 2002, poverty reduction previously run at a fast pace. The number of poor people has fallen substantially from 26.9 percent of the population in 1999 to 16 percent in 2002.
The reports attributed the rapid decline of poverty mostly to increased real wages and growth in economic sectors that provide jobs for the poor, combined with change in relative prices in favor of the poor. Food prices have decreased since 1999. Even though the price of rice increased in late 2001, it remained below the level recorded in January 1999.
The poverty gap, a measure that defines the average shortfall below the poverty line relative to the poverty line, also fell from 5.27 percent to 2.75 percent during the same period.
The report added that the 2002 poverty gap implies that it would only cost around Rp 7 trillion to bring all the poor up to the poverty line on a yearly basis.
While poverty has declined since 1999, it rose slightly by 1.3 percent between 2001 and 2002. The increase was primarily caused by price rises in various basic foods, especially rice as a result of the floods that hit the country in early 2002.
Under domestic measures, the Central Bureau of Statistics (BPS) says that an Indonesian is regarded poor when he or she only earns some Rp 90,000 per month.