Donor community contributes to poverty fund mis-targeting

Donor community contributes to poverty fund mis-targeting

More than 42 million Indonesians are extremely poor but
wholesale poverty alleviation programs only sustain the
predicament, says social welfare expert Bambang Shergi Laksmono
at the University of Indonesia's School of Social and Political
Sciences. A rethinking of poverty alleviation strategies is
needed, he said in a recent interview. Excerpts:

Question: The World Bank and the Japan Bank for International
Cooperation (JIBC) recently canceled their poverty alleviation
loans because of Indonesia's failure to implement key economic
programs. Your comments?

Answer: The poverty situation is indeed grave but I believe
there were grounds for these decisions. We lack the capacity to
carry out the programs and manage the funds. Besides, we are
facing other problems such as the lack of counterpart funding --
we cannot secure a loan unless we have of our own funds, say, 20
percent of the amount of the loan in question.

I believe the JIBC and World Bank's concerns were specifically
about (Indonesia's capabilities in respect of) project
administration. When there is no accountability, of course, they
would be taking great risks by continuing with the loans.
However, even if they gave us the money there would still be no
assurance that we would have effective poverty alleviation
programs.

But let's not turn the cancellation of loans into a political
issue -- this is not the time for us to speak about national
pride as one minister did recently. We need to continue treating
the issue as a technical problem that has to be handled properly.

An improvement, for instance, could be made by launching
programs that specifically target the Indonesian poor. We need to
rethink how to deal with the poverty problem through strategic
programs.

What do you mean by rethinking the programs?

We need to understand the nature of poverty in Indonesia.
There are myriad causes of poverty. There are people who become
poor after social unrest displaces them, or because development
programs marginalize them, or because of state violence.

Given the various types of poverty, it cannot be solved using
one blanket approach -- providing everyone with soft loans. The
international donor community, including the World Bank and Asian
Development Bank (continue) showering people with dollars or
rupiah and expecting them to recover (and show) an increased
consumption rate. They are not sensitive to the nature of
poverty.

The donor community's "textbook approach" toward Indonesia was
first applied in 1978 when the country was embarking on its third
Five-year Development Plan and the World Bank was headed by
Robert McNamara with his "banking on the poor" strategy.

Another factor that influenced the approach was mainstream
macroeconomic management that evaluates poverty by consumption
levels and the employment rate. These two are, of course,
important but Indonesia's sociopolitical situation is unique --
its development programs have always created victims.

It is not enough to draw up linear projections on growth and
employment opportunities, because there is also the problem of
impoverishment (by development programs). Take deforestation, for
example, in large parts of Indonesia -- the people living around
our forests are made poor by the denuding of the environment. For
them, the causes of poverty are different from those in urban
areas.

What about the Indonesian government's approach to poverty
alleviation programs?

The international donor community is generally insensitive to
the context of our poverty problems and continues to judge the
situation according to the macroeconomic management -- which
speaks only about fiscal and monetary policies whose instruments,
ultimately, are loans and interest. The Indonesian government is
following this approach, this agenda, to the letter because what
can we say? We are borrowers, so of course we must follow their
lead.

But this means that we need to rethink our strategy in poverty
alleviation, we need to study and develop the potential of our
community to overcome their problems.

There have been, of course, variations in the donor
community's approach. There has recently been an emphasis on
institution building, as compared to the previous emphasis on
intervention in social vectors such as health and education.

These programs are good though inseparable from the question
of macro economic management, because it determines growth and
employment opportunity. The cheap housing, education and health
programs are all essential but depend greatly on the performance
of our macro economics.

How effective have our poverty alleviation programs been so
far?

This is where we talk about corruption. Most of those
programs, including the OPK (Operasi Khusus Pasar, government
control of market prices through wide distribution of subsidized
rice) and scholarship programs (funding for crisis-hit families
with school-age children), are beneficial but do not always reach
the intended parties.

Some experts have mentioned how 30 percent of the various
program funds were lost due to irregularities. I would say 30
percent is a modest figure. So, design-wise, those programs are
wonderful but how they are implemented is another matter
altogether.

In some developed countries, social service funding comes from
taxpayers money so demands for control and accountability are
high. In Indonesia, the funding comes from loans so our
bureaucrats and members of the community do not care about how
the money is being managed. The community does not know, in fact,
if the money never reaches them.

There is also the matter of the mistargeting of the social
safety net program, which is designed to cushion the worst
impacts of the crisis. The revolving fund and scholarship
programs are considered to have been well-accounted for.

But other programs such as health services and OPK? They are
quite debatable because there have been reports that they have
not reached the intended recipients. The subsidized rice is
distributed well, but who is to say that it is not being consumed
by other-than-intended parties?

How about the regional autonomy policy? How effective will it
be in alleviating poverty?

I think there is a mismatch here as well. The regional
autonomy policy has as its unit of analysis the development of
kabupaten (regency) while the handling of poverty has as its unit
of analysis the family at a local level. So the autonomy policy
may not be "sharp" enough to deal with our poverty problem.

Take the mines owned by Freeport or Newmont, for instance.
There we are facing the question of revenue-sharing and how it
should be allotted proportionally among the local community and
communities at the provincial and national levels.

There are people living right around the mines that have been
neglected. The provincial and regency governments need to devise
specific policies that will suit these communities.

The government is currently focusing its decentralization
policy on the issue of reorganizing institutions. But some real
public issues such as human development campaigns, have yet to be
handled adequately.

This is where we need to talk about the local potential. The
social safety net program is a good government initiative, apart
from being too centralized. But when it was closed, there was no
local substitute program. So we need to build local governments'
capacities to develop their own social safety nets.

Regencies differ from one another. Following the autonomy
policy, for instance, Bengkalis regency in Dumai (in oil-rich
Riau province) now has a budget of Rp 1 trillion at its disposal.
Before the autonomy policy, its budget was only several billion
rupiah. They need specific programs.

The community has to be empowered. The question is: Would the
Asian Development Bank and World Bank, for instance, be willing
to devise programs that are suitable for each poor community?
Would they agree to introduce programs that are tailor-made,
which take more effort to design? (Santi W.E. Soekanto)