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)