Finding the funds for RI's human development

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%