Finding the funds for RI's human development

UNSFIR, Jakarta

Indonesia's 2004 Human Development report has estimated what it would cost to provide good basic health and education services -- and also to offer both food security and better physical security for the whole population. Fulfilling these rights turns out to be much more affordable than might have been expected.

Most people assume that fulfilling rights to health, to education, to food and to physical security is impractical in Indonesia.

As a developing country, occupying 112th position in the global human development rankings, surely Indonesia does not have sufficient resources to fulfill the basic rights for all its people -- especially when it is still recovering from the effects of a severe economic crisis.

This may be the instinctive reaction, but is it correct?

Indonesia's 2004 Human Development Report, The economics of democracy, provides the first overall estimates -- and concludes that guaranteeing these rights should in fact be quite feasible.

The report looks first at health. It points out that good health is the outcome of many different factors, including poverty, environmental circumstances and matters of personal behavior. Nevertheless public health provision can make an important contribution.

Of total health expenditure in Indonesia around 80 percent is paid for by private individuals or institutions and the rest by the state -- a higher private share than in most other countries in the region.

What would it cost to guarantee effective services for all? The report cites a World Bank study which estimates that it would cost Rp 51,000 per person to deliver a basic package of health services -- including immunization, family planning, mother and child health care and curative care for diseases such as TB, malaria, and dengue fever. However this does not include hospital or in-patient care which represents a high proportion of current private health expenditure.

The Ministry of Health has therefore made a proposal for extra funds to cover this in the form of a "poverty health grant" which would be distributed to districts.

This indicates that the additional requirement per poor person -- around 20 percent of the population -- would be Rp 78,412. The total cost of this on an annual basis would be Rp 13.6 trillion -- compared with the existing expenditure on basic health of Rp8.4 trillion: An increase of Rp 5.2 trillion.

In the case of education the report estimates what it would cost to ensure that almost all children completed primary and junior secondary education in schools that were adequately funded and staffed.

The best estimates of what it would cost to fulfill the rights to basic education have been produced by the Ministry of National Education in its National Plan of Action: Indonesia's Education for All.

The result at the primary level is an annual "ideal" cost of Rp 1.17 million per pupil at primary level and Rp 2.28 million per pupil at junior secondary level.

The report then looks at food security. It says that the simplest approach is to consider that all those who fall below the poverty line -- 18 percent of the population -- are "food insecure".

In Indonesia in 2002 the basic minimum food requirement was estimated to cost Rp 82,328 per month while the non-food items were priced at Rp 28,957, so the total poverty line was fixed at Rp 111,285 per month.

If the approach were simply to hand over the funds to the poor to lift them all above the poverty line and thus able to buy the minimum food requirements the cost would be Rp. 8.4 trillion. However, many people are below the poverty line at least partly because of health and education expenditures.

The final issue the report looks at is physical security. In Indonesia, as elsewhere, violence takes many forms. In some cases it has been linked to ethnic and other struggles, claiming the lives of many people and displacing thousands of others.

One of the most important ways of providing physical security would be to have a well-trained and uncorrupted police force -- whose officers were seen as integral parts of the community and who worked in partnership with the local people.

Dealing with corruption and improving the quality of the police force will demand wide ranging reforms, including better training, along with effective systems of monitoring and appropriate disciplinary procedures.

But probably one of the most effective, and expensive elements of reform would be to improve the salaries of police such that they are less tempted by bribery and corruption.

At present police wages are only around 20 percent of those of bank employees while in other countries the wages for the two professions are more or less equivalent.

How much would it cost to offer more reasonable salaries to the police force?

Currently the annual budget for the police is Rp 6.74 trillion for routine expenditure and Rp 0.78 trillion for development expenditure.

Setting the wages according to the standard of Malaysia or Singapore would mean that current wages would have to be roughly quadrupled.

In addition it would also be necessary to increase the numbers of police. Taking this into account the report estimates that the total cost would Rp 28.4 trillion -- an increase of Rp 20.9 trillion.

The total cost for fulfilling rights to food security, to health, to education and physical security, are indicated in the table below.

Of course these are only broad estimates and they refer primarily to routine costs rather than development or capital costs.

But they do indicate a general order of magnitude, suggesting that government expenditure on these rights as a proportion of GDP would need to rise from 3 percent to 6 percent -- a relatively modest increase which would bring Indonesia roughly into line with neighboring countries.

The central message, however, is that rights that most Indonesians consider remote possibilities are actually well within the country's reach.

Annual costs for financing basic rights

Current annual cost Required increase Full annual cost

Food security Rp 4.8 trillion 0.27% Rp -1.1 trillion Rp 3.7 trillion 0.2%

Basic health Rp 8.4 trillion 0.47% Rp 5.2 trillion Rp 13.6 trillion 0.77%

Basic education Rp 33.0 trillion 1.84% Rp 25.0 trillion Rp 58.0 trillion 3.24%

Physical security Rp 7.5 trillion 0.42% Rp 20.9 trillion Rp 28.4 trillion 1.59%

Total 53.7 trillion 3.00% Rp 50.0 trillion Rp 103.7 trillion 5.80%