Stopping the poverty cycle

I am writing in response to an op-ed by Dr. Anis Chowdury, a consultant with the United Nations Support Facility for Indonesian Recovery (UNSFIR), that appeared in The Jakarta Post on June 10.

Of course, everyone wants to help the unemployed and underemployed in Indonesia. As Dr. Chowdury stated, the idea is a populist one.

However, we must take into account the costs of any job creation programs that are created to achieve this objective, whether the government has the necessary resources to fund such programs and whether it has the capacity to implement them successfully.

Unfortunately, the government's past record in this matter is not something to be proud of.

First of all, it simply has no additional resources to fund any job creation programs: It no longer has windfall revenues (e.g., from oil sales) at its disposal to spend readily, and if it tries to fund such programs through deficit spending, it would only hurt Indonesia's macroeconomic stability and significantly raise our public debt, which is already at an all-time high.

Furthermore, various studies have shown that past government intervention to create short-term jobs through infrastructure projects were ineffective, given that they did not have a focused target and were vulnerable to significant financial leakage, and were thus less successful in creating jobs and reducing poverty.

In addition, most job losses in Indonesia are caused by excessive and burdensome labor regulations and high taxes and levies imposed by central and local governments on businesses, which have prompted many employers to relocate overseas, thus leading to great job loss and increased poverty among low-income workers.

Instead of pursuing the course of action recommended by Dr. Chowdury, the next president would be better off pursuing policies that would reduce or eliminate these regulations and taxes and implement good governance practices. Investors would consequently be more inclined to put their money in Indonesia and thus create good and stable jobs for Indonesians who want them, thereby lift them up from the vicious cycle of poverty.

ALEX ARIFIANTO The SMERU Research Institute Jakarta