Poverty-reduction strategy

Poverty-reduction strategy

The Indonesian delegation to the World Bank-sponsored
international conference on poverty reduction in Shanghai last
week should be able to bring home a great deal of knowledge and
information to help improve the country's Poverty Reduction
Strategy Paper (PRSP), which is currently in the final stage of
preparation.

The two-day conference that ended last Thursday made the
standard appeal to rich and poor countries to redouble their
efforts to speed up poverty reduction and stimulate economic
growth, in light of bringing peace and stability to the world.
However, most important is the long list of recommendations the
conference made on the basis of the extensive research of 100
case studies and exchanges of knowledge and experiences in
poverty reduction programs in many countries.

Indonesia, which gained international acclaim for its success
in significantly ameliorating absolute poverty until the 1997
economic crisis that again increased the incidence of its
poverty, also shared its experiences with around 1,000 delegates
attending the conference.

Like most other development strategies and policies, there is
obviously no single model for scaling up poverty reduction that
is suitable for all countries. The meeting, nevertheless,
identified a number of key factors that are crucial for
sustainable and effective poverty-reduction programs.

Not all the recommendations are completely new. Most of them,
notably those vital to macroeconomic stability, have often been
propagated by such multilateral institutions as the World Bank
and International Monetary Fund (IMF). Such key factors as
macroeconomic and political stability are critical for job
creation and economic growth. This in turn requires strong
economic fundamentals, a sound investment climate and good
governance in the public and private sectors.

The Indonesian government has been pursuing these measures --
although progress in many areas is still deemed much slower than
required to meet the pressing needs of the people -- notably with
regard to the generation of jobs to absorb the huge pool of
unemployment.

Economic growth of almost 4 percent a year over the past four
years has certainly been the primary factor in reducing poverty
in Indonesia, from 23.4 percent in 1999 to 18.2 percent in 2002
and 17.4 percent in 2003, or about 37.50 million. The poverty
incidence had been cut down to 17.50 percent in 1996.

However, the experiences of many countries have shown that
economic growth, even though quite vital, is not sufficient for
improving the well-being of poor people. These people must share
in the benefits of growth.

The conference, therefore, cited additional key factors for
successful poverty-reduction efforts: the empowerment and
involvement of poor people, the participatory process in
conceiving programs, transparent rules in budget, processes and
procedures, adequate sequencing of reforms and attention to their
political economy, changing and adapting implementing
institutions and adequate and assured long-term financing.

While economic growth helps poor people through the creation
of jobs, additional efforts are still needed, specifically to
address the needs of poor people. Hence, the role of empowerment
through investments in the poor: in the adequate and effective
delivery of education, health and other public services as well
as social infrastructures.

The participatory process ensures that the programs selected
for poverty reduction address the most pressing needs of large
numbers of people, thereby making them quite effective and
efficient, as well as politically sustainable. The rationale is
that when people have more access to information about
governmental activities, they are empowered to play an informed
role in the development process.

Our poverty problem is still quite challenging because of the
large number of people on the verge of absolute poverty, defined
nationally as the daily spending of the equivalent of US$1.55.
The 2004 World Bank report put the number of Indonesians on the
brink of poverty, or people with daily expenditures of
approximately $2, at 53.40 percent of the total population of
around 215 million. This means that even the slightest
deterioration of the economic condition could plunge almost 115
million people into dire poverty.

The government White Paper of September, 2003, confirms its
commitment to the development of a comprehensive PRSP by this
month. The International Monetary Fund also reminded the
Indonesian government last month of the urgent need of early
completion of its interim PRSP, which was launched in March,
2003, for deliberations with local administrations and civil
society organizations throughout the country. Developing
countries are entitled to debt relief and concessional lending
only after their PRSPs are approved by the World Bank and the
IMF.

It is, therefore, most imperative for the government to speed
up the final preparation of the PRSP because it will require some
time to integrate this poverty-reduction strategy with existing
budgetary and planning procedures and sector development
strategies.