Helping the poor

Helping the poor

Apart from the qualified support of its implementation,
Presidential Decree No. 90/1995, which calls on the rich to
donate up to two percent of their income to poverty alleviation,
offered observers no great surprise. It only represents another
manifestation of Soeharto's great concern for the less fortunate
among us. That executive order, we think, restates the
President's determination to completely abolish absolute poverty
in the country of 195 million people before the end of his sixth
term in March, 1998.

Since the mid-1960s, when he took over the reins of power in
the world's fourth most-populous country, President Soeharto has
always been greatly concerned -- sometimes to the point of
obsession -- with the lot of the poorest segment of the people
and equity promotion.

This is reflected in his preoccupation with developing the
agricultural sector, in which the majority of the people work,
and in his perseverance in promoting primary village cooperatives
as grassroots economic units. The results have indeed been quite
impressive. The number of the people living below the poverty
line fell sharply from 63 percent of the total population in
1970, to only 13.7 percent, around 25 million, in 1993.

Then, noting that the steadily high economic growth has caused
a negative side-effect -- the widening polarization of ownership
of economic assets -- he summoned the largest business groups in
early March, 1990 and asked them to sell, at par value, a portion
of their shares to primary cooperatives. He also ordered state
companies to set aside up to five percent of their net earnings
for developing small enterprises and cooperatives. He launched a
more ferocious, frontal attack on poverty in April 1994 through
aid programs specially designed for persistent pockets of
poverty.

Set against these developments, we would therefore tend to see
the latest Presidential decree as another move to accelerate the
poverty alleviation. Indeed, since the decree is meant only for
individuals and companies with an annual after-tax income or
profit of Rp 100 million (US$43,4700) or more, the directive, is
not economically burdensome. After all, the minimum income level
set in the decree is already higher than the per capita income
even in the world's richest countries such as Luxembourg and
Switzerland.

However, the reservations which qualify the support of the
objective by businessmen should be addressed properly, otherwise
the goodwill message of the order could cause confusion and even
suspicions.

The strongest point of reservation is related to how the
donations will be collected, who will use the funds, how they
will be used, and what accountability there is to be. Another
question is whether the decree is legally binding for the
individuals and entities with annual after-tax incomes or profits
meeting the range of amount stipulated in the decree.

These questions are quite legitimate. While the government has
improved the management and accountability of revenues, including
those from service fees and other forms of charges or levies, by
accounting for them in the state budget, the mechanism for the
use and accountability of the funds to be collected under the
decree is not clear yet. That is worrisome indeed.

Even the state budget which has to be approved by the House of
Representatives and is managed under tight procedures remains
vulnerable to embezzlement, abuse and other forms of malfeasance,
as shown by the findings of the Government Audit Agency and the
Supreme Audit Agency, not the least public funds administered
outside the state budget.

It is therefore imperative that the rulings which will be
issued by the finance minister to implement the Presidential
decree should address the public's concern over accountability.