Asian Social Work and Policy Review 5 (2011) 92–106

ORIGINAL ARTICLE

The Poverty Situation in Indonesia: Challenges

and Progress of the Marginalized Group
Zulkarnain A. Hatta and Djuni Thamrin Sarkawi
School of Social Sciences, University Sains Malaysia, PPSK, USM, Penang, Malaysia

This paper focuses on Indonesian poverty alleviation programs. It examines the national poverty
reduction programs of cash-based support projects for the poorest of the poor and highly marginal-
ized groups. Indonesia was the country hardest hit by the East Asian financial crisis of the late
1990s. In 2005, Indonesia began unconditional cash transfers (UCT) for the first time – giving cash
money to the poorest, poor and near-poor targeted households. As a result, the income of the poor-
est households receiving UCT increased by 1.3 times compared to that of non-recipients. The UCT
can be seen as a new benchmark for Indonesia as a mechanism of a ‘‘shockbreaker’’ for the poor
affected by the crisis. In 2007, the government of Indonesia began a trial of the conditional cash
transfer (CCT) program known as the Hopeful Family Program (Program Keluarga Harapan or
PKH). The CCT program was provided to poor families with an allowance conditional on their
attention to their children’s education and health. With this program, women in the community
gained access to new resources, in the form of the additional cash. CCT is planned to be the basis
of the development of a future social security system.
Keywords CCT; empowerment; financial crisis; Indonesia; poverty; UCT
doi:10.1111/j.1753-1411.2011.00051.x

Introduction
For the last 20 years, one of the major problems faced by many nations is poverty.
Almost 30% of the world’s population is still trapped in the hardships of extreme pov-
erty. Broad interventions are needed to end poverty and its damaging consequences. In
2000, the Millenium Development Goals (MDGs) adopted a benchmark of halving pov-
erty levels throughout the world with obvious plans and programs, and encouraged glo-
bal cooperation among nations, countries and institutions. The declaration was agreed
upon by more than 178 nations and international institutions. Indonesia has joined and
signed the MDGs global agenda of alleviating poverty and accomplishing MDG targets
by 2015. The agenda of MDGs has been incorporated into the National Medium-term
Development Plan, 2005–2009, after the stage of reformation and reconciliation, and
post-1998 financial crisis.

Correspondence concerning this article should be addressed to Zulkarnain A. Hatta, School of Social Sciences,
Universiti Sains Malaysia, PPSK, USM, Penang, Malaysia. Email: haqqani@usm.my

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Zulkarnain A. Hatta and Djuni Thamrin Sarkawi Poverty Situation in Indonesia

This paper focuses on Indonesian poverty alleviation programs, with an emphasis on

reviewing the national poverty reduction programs via cash-based support projects for
the poorest of the poor and the highly marginalized, since they are the most likely to be
victimized in the event of financial crisis. The paper starts with a discussion of the impact
of financial crisis and the nature of vulnerability facing individuals, households and
communities. The paper then describes the social protection system working within the
Indonesian government’s policies, especially the cash-based transfers program, illustrat-
ing varied approaches, design and delivery mechanisms, performing an analysis of the
weaknesses and strengths of the existing system, reviewing the roles of highly marginal-
ized groups engaging in the local decision-making processes, and a conclusion regarding
how improvements can be made to assist the marginalized population.

The impact of financial crisis on the poor and highly marginalized groups
The historical path of the poverty reduction and social protection agenda in Indonesia
was influenced by the impact of the financial crisis of 1997–98. Indonesia was the country
hardest hit by the East Asian financial crisis. The country’s developmental programs took
a severe beating and the nation suffered both economically and socially. Decades’ worth
of planning had to be compromised and ⁄ or abandoned. The financial crisis spoiled all
sectors of Indonesia’s development, and has predominantly extended unemployment in
rural and urban areas (Suharto, 2002). More than 47 million people in Indonesia were
affected by the crisis. At its peak in mid-1998, while annual real GDP growth was at 10%
and inflation reached almost 100%, the economy shrank almost 13.7% and the Indone-
sian currency (rupiah ⁄ Rp) dropped from about Rp2000 to the US dollar to Rp18,000
(Hill, 1999; Soesastro & Basri, 1999; Suharto, 2002). As Evans (1998) and Hill (1999)
noted, the decline in the GDP was far sharper than during the country’s recession of the
1980s and even that of the early 1960s, and similar to that which occurred in the United
Kingdom during the worst of the depression years, 1929–32 (Evans, 1998; Hill, 1999;
Suharto, 2002).
Problems of poverty and inequality still exist, and are sharper in rural areas and in
the eastern part of Indonesia. By using the World Bank’s standard poverty line, which is
US$1 per day, the total number of people in Indonesia who are still under the poverty
line was about 40 million people in 2008 (CBS, 2009). The total number of poor people
doubles if the MDG standard (US$2 per day) is used. As the income poverty line method
of calculation remains dubious and the results contested, official estimates reckon that
Indonesia is the country with the third-largest number of people living below the interna-
tional poverty line.
The increase in poverty and inequality is linked to the continued effects of neo-liberal
globalization, which has lead to heightened job insecurity and vulnerability as livelihoods
become more and more precarious. According to the Ministry of Social Affairs (2008),
six out of every 10 workers are unprotected (especially those who are working in informal
sectors such as agricultural workers, fishermen, street vendors, and domestic helpers)
with no access to labor rights or social protection in times of financial crisis.

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Zulkarnain A. Hatta and Djuni Thamrin Sarkawi Poverty Situation in Indonesia

Poverty alleviation programs in Indonesia

From 2000 to 2004, due to the instability of the Indonesian government, there was no sig-
nificant progress on poverty reduction programs. However, some programs on poverty
reduction based on a community-driven development (CDD) approach were introduced.
Poverty programs with safeguarded dimensions and supported by multilateral institu-
tions were intensified and their presence gave the country a space of balance between
growth and distribution. The Kecamatan Development Program (KDP), a rural anti-
poverty program, started in 1998, and the Urban Poverty Program was also started in
1999. These two CDD programs are the embryo for the Program Nasional Pemberdayaan
Masyarakat (PNPM) Mandiri program.
To overcome the impact of the crisis on the poor, the Indonesian government
launched a social safety net program (called the Jaring Pengaman Sosial [JPS] program)
in 2001. This program has covered 21 million of the poorest people in the country. The
JPS continued until 2005, and some parts of this program, in particular concerning rural
infrastructure development, health and education have also been modified and continued
until 2007.
Table 1 below lists the various social safety net (JPS) programs established by the
government of Indonesia to mitigate the social impact of the crisis. These programs were
intended to help protect the pre-crisis poor as well as the newly poor as a result of the cri-
sis through a four-fold strategy: (i) ensuring the availability of food at affordable prices;
(ii) supplementing purchasing power among poor households through employment crea-
tion; (iii) preserving the access of the poor to critical social services, particularly health
and education; and (iv) sustaining local economic activity through regional block grant
programs and the extension of small-scale credit.
In general, the targeting for these programs was based on a combination of geo-
graphic and household targeting mechanisms, except for the subsidized rice program
which used only household targeting. The targeting for some programs was based on a
household classification created by the National Family Planning Coordination Board
(Badan Koordinasi Keluarga Berencana Nasional [BKKBN]). According to this classifica-
tion, households are divided into six welfare status groups: pre-prosperous family (kel-
uarga pra-sejahtera or KPS), prosperous I family (keluarga sejahtera I or KS I), KS II,
KS III, KS IV and KS V. Of those six categories, the KPS and KS I are often joined
together as eligible targets for most of the abovementioned programs, and are generally
classified as being poor.
In 2004, with a population of 220 million, the poverty rate in Indonesia was 16.7%.
The tsunami and earthquake in Aceh and North Sumatra at the end of 2004 has affected
the country and its position in the world, and created new poor in the country. Almost
1.2 million new poor affected by the disaster have been added to the number of poor peo-
ple in Indonesia. The food and oil price hikes in 2005 also created new poor people.
Hence, the poverty rate in 2006 had increased to 17.8%. In 2005, for the first time,
Indonesia began the unconditional cash transfer (UCT) system, giving cash money to
the poorest, poor and near-poor targeted households. The targeted households were

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Table 1 Areas and major programs of the Indonesian social safety net (JPS) program

Program description and

Area benefits Targeting FY 1998 ⁄ 99 FY 1999 ⁄ 00
Food security Sale of subsidized rice to Geographic None None
targeted households. Household BKKBN list BKKBN list
Eligible households can with flexibility
purchase 10–20 kg of rice at
Rp1000 or USD$0.01 per kg
(market price is
Rp2500–3000 per kg)
Community A ‘‘community fund’’ Geographic Pre-crisis data Updated with
empowerment program that provides block regional data
grants directly to villages for Household Local decision Local decision
either public works or making making
revolving credit funds.
Employment ‘‘Padat karya’’ program is a Geographic None, various Urban areas,
creation loose, uncoordinated ministries based on
collection of several ‘‘labor employment
intensive’’ programs in Household Weak Self-selection
various government self-selection
departments.
Education Scholarships and block Geographic Old data on Poverty data
grants, providing enrolment updated to
scholarships of Rp10,000 1998
per month for elementary Household School School
school (SD) students, committees committees
Rp20,000 per month for applying applying
lower secondary school criteria criteria
(SMP) students, and
Rp25,000 per month for
upper secondary school
(SMA) students block
grants to selected schools.
Health A program providing Geographic BKKBN Pre-prosperous
subsidies for medical pre-prosperous rates updated
services. Operational rates to 1999
support for health Household BKKBN list BKKBN list
centers Medicine and with flexibility
imported medical
equipment Family
planning services
Nutrition (supplementary
food) Midwife services
Source: Indonesian National Planing Board (2010).

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Zulkarnain A. Hatta and Djuni Thamrin Sarkawi Poverty Situation in Indonesia

surveyed and recorded by name and address. Although there have been some protesta-
tions and complaints about the inaccuracy of data, the UCT has contributed significant
support for the poor. The income of the poorest household recipients of UCT has
increased by 1.3 times compared to non-recipients. The UCT can be seen as a new bench-
mark for Indonesia to introduce an unconditional cash transfer as a sort of ‘‘shockbreak-
er’’ for the poor affected by the crisis, in order to prevent their living standard from
deteriorating as a result of the crisis.
In 2007, the government of Indonesia began a trial of the conditional cash transfer
(CCT) program known as the Hopeful Family Program (Program Keluarga Harapan –
PKH) in seven provinces: West Sumatra, DKI Jakarta, West Java, East Java, North
Sulawesi, Gorontalo and East Nusa Tenggara. This program is aimed at helping to
increase the education and health of poor communities in an ongoing manner. The idea
of implementing the CCT program emerged initially in early 2005, as an alternative
poverty reduction strategy to counter the major reduction in fuel subsidy. Major donors,
particularly the World Bank, had advocated the program, as previous experience in
several Latin American countries had found it to be a successful policy instrument for
reducing poverty and increasing human development levels.
The CCT program provided poor families with an allowance conditional on their
attention to their children’s education and health. Eligible households must be classified
as chronically poor, and meet one of the following conditions: have a child aged
6–15 years; have a child under 18 years who has not completed primary school; have a
child aged 0–6 years; or have a pregnant ⁄ lactating mother. Cash transfers are made to
households on the condition that certain health- and education-related obligations are
met. The Ministry of Social Affairs is the implementing agency and the Post Office man-
ages the transfer of funds. The money is transferred to the woman in the household to
ensure the program’s effectiveness in improving the quality of education and health. This
could be the mother (wife) or one of the adult women in the household (grandmother,
aunt, or elder sister) who takes care of the children in the family and whose name is writ-
ten on the PKH member card. With this program, women in the community have access
to new resources in the form of the additional cash.
CCT is planned to be the basis of the development of a future social security system,
especially for the poor. The program is to be extended until 2015, and aims to reach
approximately 6.5 million chronically poor families. Every household will receive the
funds for a 6-year period. The program is designed to support demand-side improve-
ments in education and health services for poor families, so that children from chroni-
cally poor families can escape the intra-generational poverty trap.
While improvements were seen in non-consumption poverty indicators such as
infant mortality rate, school participation rate and life expectancy at birth, the negative
impacts of the crisis were severe. The financial crisis suddenly undid these achievements
as the total number of poor people increased dramatically by more than 14 million in
period of 1996–1999. In order to mitigate this disturbing impact, the government of
Indonesia, with the support of many international donors, began to establish an anti-
poverty agenda. Before the crisis, such an agenda had no place in government national
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Table 2 Number of people with social welfare problems in Indonesia

Social welfare problem category Number of people

Neglected and poor older people 2,037,549
People with disabilities 1,156,861
Victims of natural disaster 2,888,141
Victims of social disaster 172,664
Beggars 34,605
Homeless 26,485
Economically vulnerable families 7,092,089
Victims of domestic violence (mostly women) 131,060
Migrant workers 77,846
Prostituted women 50,289
Neglected children (5–18 years) 2,368,540
Neglected children under 5 years old 301,563
Delinquent children (most in conflict with the law) 203,151
Street children 104,497
Drug abusers 112,376
People with HIV ⁄ AIDS 6113
Source: Department of Social Affairs (DSA), Indonesia (2008).

development agendas. As can be seen in Table 2 below, most of those affected are
actually among the poorest of the poor and are the main beneficiaries of social services
provided by the Department of Social Affairs (DSA).
The poor, unemployed, and those in the informal sector rely heavily on the traditional
social safety nets, such as family links and community supports. With emerging capitalist
development towards a modern and urban economy, however, the community-based
social protection systems that supported the local community in the past have been weak-
ened. Therefore, since new social protection systems suited to a modern industrial econ-
omy have not yet been established, the reliance on a growing economy, which proved to
be successful in reducing poverty during the previous three decades, had severe limita-
tions. It made no provision for social security for the old or the newly poor and unem-
ployed (Ranis & Stewart, 1999). In this sense, informal and social networks, such as
households and communities, may moderate the negative impact of the crisis, but they
cannot eliminate it. If many of the members of households and the community are
subjected to the same risks at the same time, the systems of mutual coping strategies may
cease and not be effective as risk sharing mechanisms (Corbett, 1988).

Implementation of social protection: Limitations and strengths

The term ‘‘safety net’’ is generally used to refer to relatively short-term interventions
intended to address crisis, such as targeted programs of relief and social assistance. The
term ‘‘social protection’’ is largely used to refer to long-term policies that aim to protect
and promote economic and social security or to improve the well-being of the poor
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Zulkarnain A. Hatta and Djuni Thamrin Sarkawi Poverty Situation in Indonesia

(Holzmann & Jørgensen, 2000). It also provides a buffer against short-term shocks and
enhances the capacity of households to accumulate assets and improve their well-being
over time so that they can be better protected in future times of hardship (Asian Develop-
ment Bank, 2004). Below is an analysis of some major sectors that have been impacted
by the financial crisis.
The labor market situation
The labor markets of Indonesia have depended on the agriculture sector as their main
employment source. Developing the agricultural sector became the focus for job creation.
Even before the economic crisis hit Indonesia, the labor market trend was mainly charac-
terized by a high degree of unemployment and continued predominance of the informal
sector. While significant changes had taken place in the structure of employment in
Indonesia, the rate of employment growth was lower than that of the labor force.
When the economic crisis hit Indonesia, it resulted in heavy economic and employ-
ment contraction throughout the provinces. Indonesia suffered the greatest percentage of
losses in jobs. Unemployment increased by 16.2% from August 2000 to August 2003,
amounting to a total loss of 2.4 million jobs (Central Board of Statistics (CBS), 2009). It
is very important to observe that the trend of male unemployment rates decreased more
than female unemployment rates during the economic recovery in Indonesia.
Another labor market consequence of the economic crisis has been the increase in the
degree of under-employment, defined as working <35 h ⁄ week. This figure is quite consis-
tent with the increase in the share of agriculture in total employment. As an incentive to
lure people to work in the agricultural sector, shorter working hours and job-sharing are
being offered.
In addition to under-employment, due to the high rate of people leaving the rural
areas during the crisis, the percentage of wage and salary workers and non-wage informal
workers among males and females increased. Males were the most affected during the
crisis, forcing them to be displaced in the formal, industrial and plantation sectors.
Consequently, their entry into the informal labor market in 2009 increased. What is sig-
nificant is that this increase was due more to them becoming employees rather than being
self-employed.
The whole picture of passive labor market policies in Indonesia is more seen and
accepted by governments as an effective way to facilitate matching the supply and
demand of labor, especially in a highly segmented labor market. It has provided some
form of assistance to the unemployed as a form of social protection. For example, Indo-
nesia has implemented several initiatives, such as the education system, occupational
health and safety requirements, a minimum wage, and ‘‘link and match’’ job brokerage
programs.
Social insurance
Indonesia has implemented social insurance schemes. Most social insurance in Indonesia
covers formal-sector workers only and builds on a narrow membership base.
The schemes mostly cover medical care, sickness benefit, invalidity benefits, maternity
benefits, survivor’s benefits, employment injury benefits, and retirement pensions.
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The types of social insurance in Indonesia have been designed to meet the risks to
mainly formal workers from illness, disability, unemployment, old age, work accidents,
occupational disease and early death. Reducing these risks allows workers who have lost
their jobs to search for a good alternative, removes some barriers that might otherwise
discourage workers from acquiring education and training, and helps ensure that the
health and education of their children are not sacrificed in an economic downturn.
Tulus and Purwoko (2002) report that in 1977 ASTEK (Asuransi Tenaga Kerja or
workers’ insurance) was implemented and in 1993 changed to become JAMSOSTEK
(Jaminan Sosial Tenaga Kerja or social insurance for workers). It is a law mandating all
employers with 10 or more employees or paying a monthly payroll of not less than one
million rupiah (USD$110) for the whole company to register their employees in the
scheme. However, if an employer has in place better social insurance for their employees
from other private providers then the employers are exempted from mandatory enrol-
ment for the JAMSOSTEK insurance program. This scheme has been introduced as a
social insurance for formal workers, which aims to provide employees’ accident insur-
ance, a provident fund, death and health insurance. Indonesia does not have cash
payments for sickness, maternity, family allowances, and unemployment benefits. A com-
pulsory health insurance scheme for public servants, ASKES (Asuransi Kesehatan or
health insurance), has existed since 1968. The main problem facing Indonesia is the fact
that informal employees and the self-employed are not covered by the formal social
insurance scheme.
Social assistance program
In Indonesia, social assistance, including social rehabilitation, is a very common pro-
gram. The system covers various kinds of assistance, from those who fall victim to natu-
ral disasters like earthquakes, tsunami, flood, riot, and social unrest to those who lack
the ability to sustain a living such as the disabled, orphans, the elderly, migrant, ethnic
minorities, the unemployed and drug addicts. The national policies of social assistance in
Indonesia are to address short-term emergencies that occur rapidly and effect larger por-
tions of the population, often those living just above the poverty line. But on the other
hand, social assistance has often been overlooked as a social policy program because of
the fear that it may create dependency among the poor and vulnerable groups. Another
concern is about the unaffordable budgetary resources to provide social assistance at the
expense of programs designed to stimulate economic growth.
Micro and area-based schemes
In Indonesia, there are four main forms of micro and area-based schemes that are usually
implemented by local communities: (i) micro insurance; (ii) agricultural insurance;
(iii) social funds; and (iv) local disaster preparedness and management. Micro-insurance
that is organized locally can offer the option to insure group members against their
economic risks. Agricultural insurance, mostly crop-insurance programs, provides the
protection necessary to allow trying innovative farming techniques and removing unnec-
essary barriers to rural economic development. Social funds, typically community-based
activities, are very important to retain social capital among the villagers and maintain a
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Zulkarnain A. Hatta and Djuni Thamrin Sarkawi Poverty Situation in Indonesia

social livelihood program. Local disaster preparedness is specific to local activities run by
local institutions to anticipate regular natural disasters such as in typhoon-prone areas,
flooding in Java islands, droughts mostly in the east of Indonesia, earthquakes, and
tsunamis. Together with well-designed risk reduction initiatives such as disaster manage-
ment, and community-based support programs, these schemes can reduce vulnerability at
the community level and promote more sustainable rural livelihoods.
The agricultural insurance forms are available for farming communities in Indonesia.
There are many kinds of agricultural insurance in existence, provided by both coopera-
tives and states. These kinds of schemes provide a mantle of protection to farmers against
natural risks that are usually beyond their control. These would be achieved by pooling
together farmers’ risks and resources so that the burden of loss can be distributed. In
Indonesia, there are many kinds of seed banks, a rotated saving and loan mechanism
among the farmers. Some farmers give more attention to cultivating specific varieties,
and others do the same with different local varieties. This mechanism could be re-exam-
ined as an effective tool for rural development.
The main function of community-based schemes is as livelihood security, especially
for rural households. For instance, crop-insurance mechanisms are easy to find in rural
areas in Indonesia. Other informal mechanisms that operate in many rural areas in
Indonesia for coping with difficulties involve borrowing, drawing down savings, selling
assets, mutual support from family and friends, reciprocal arrangements with wealthier
households, and seeking additional income-producing activities. These activities play an
important role in buffering the impact of crisis and regular shocks.
Apart from the informal insurance for health that is provided by households or indi-
viduals at the community level, the neighborhood associations collect an informal tax to
provide welfare assistance in emergencies. For instance, households contribute a cup of
rice or other kinds of food every week or day and these resources are used to help families
who do not have adequate resources in a crisis.
Another popular mechanism is micro-insurance. It involves a voluntary and contribu-
tory scheme for the community, handling small-scale cash flows to address major com-
munity risks. In Indonesia, voluntary village-level organizations are running in many
places to provide local community funds for primary care. Other forms of micro-insur-
ance are replications of the Grameen Bank model in East Java and entire rural areas in
Indonesia. In recent years, groups of workers in the informal sector have set up their own
micro-insurance schemes with assistance from both government and NGOs. There is
great potential for introducing micro-insurance in more parts of Indonesia. It can provide
insurance at affordable prices, and expand its coverage by having a realistic understand-
ing of the problems that the community faces. In Indonesia, for instance, a cooperative
credit program is needed for the further development of commercially based lending to
small-scale rural borrowers and promoting community involvement.
Other forms of micro-insurance are the neighborhood associations, which work with
collected in-kind contributions to provide welfare assistance in emergencies. In some
parts of Indonesia, voluntary village-level organizations provide health aid and insurance
against the costs of primary health care. The Department of Social Welfare of the
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Republic of Indonesia has stated that in Indramayu district there are good local initia-
tives. Indramayu’s village headman provides the people with local health insurance by
issuing identity cards. Hence, all of Indramayu’s villagers are protected by the local
health and death insurance mechanism if they have local identity cards. All Indramayu
villagers are eligible to have local identity cards. They pay Rp7000 (USD$0.80), where
Rp2000 (USD$0.22) is allocated for their health insurance premium. Villages in this
country have been setting up independent schemes to provide local people with social
benefits in the form of medical, life ⁄ funeral, old age, disaster, education, or other benefits.
A certain amount is paid by members in order to maintain the group fund and a group
leader is appointed to manage the fund. These schemes hardly receive any support from
the government.
The community-based social funds are commonly applied in Indonesia as a mecha-
nism to channel public resources to meet pressing social needs. They are typically man-
aged at the local level, empowering NGOs and local governments that provide finance for
small-scale projects such as livelihood programs for community groups and local
economic development projects. These approaches up to now are popular among local
governments and foreign development donors to promote local economic initiatives. Pilot
tests of decentralized management and financing of small-scale infrastructure in some
provinces have also been carried out in order to expand the mechanism (Ortiz, 2002).
Indonesia has a pilot project that has been carried out to implement the social welfare
insurance scheme (Askesos). The project targeted poor workers and the informal sector.
This program is supported by NGOs or self-help organizations. With the administrative
support of an NGO, informal workers are encouraged to save Rp5000 (USD$0.55) per
month for 3 years and while they are doing so the Department of Social Welfare meets
the costs of any hospitalization lasting at least 5 days (to the extent of Rp1,000,000 or
USD$100 per year) and provides a total sum of up to Rp600,000 (USD$66) in the event
of their death (Tulus & Purwoko, 2002; Sarkawi, 2008).
Disaster preparedness and management is an essential task to assist communities in
risk coping and mitigation. These issues have yet to be prioritized in Indonesia. After the
2004 tsunami that hit Indonesia and other Asian countries, these issues have begun to
gain the attention of policy makers. Several countries in ASEAN have established disas-
ter-management centers for assessing hazards, providing emergency assistance and
strengthening local-level risk reduction capacity. A country like the Philippines is a good
example of one that has a well-organized disaster management system.
Child protection scheme
Indonesia’s policy regarding child exploitation has several strategies in place, namely:
(i) early child development programs to ensure the balanced psycho-motive development
of children through basic nutrition, preventative health, and education programs;
(ii) schooling feeding programs and scholarships for children; (iii) waiving of fees for
mothers and children in health services; (iv) street children initiatives programs to refer
children to shelters and homes; (v) child rights advocacy programs against child abuse,
child exploitation and child labor; and (vi) youth programs to avoid social problems in

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teenagers, criminality, sexually transmitted diseases such as HIV ⁄ AIDS, early pregnan-
cies, and drug addiction. There is a need for a wider range of interventions that incorpo-
rate both preventative and curative measures. Investment in children in these areas
represents only a small proportion of the national budget, compared most notably with
expenditure on defense (Conway, de Haan, & Norton, 2000).
Another serious issue is child labor. There are many school-age children working.
While some do it voluntarily, many are forced to work. Some of them are involved in the
most intolerable forms of child labor such as child prostitution, forced labor, slavery,
and jermal (a kind of fish trap consisting of closely spaced stakes behind which the fish
get caught when the tide goes out) in North Sumatra. They have long working hours with
low wage (USD$4–USD$8 per month). They are also isolated from their families for long
periods, and susceptible to accidents.

The struggle and engagement of the poor and marginalized groups

Indonesia now is no longer in transition – the democracy the country has is a democracy
that is based on the Indonesian political economy and structural conditions. There is also
a more optimistic view that holds that there are still many spaces that are contested. Even
though reforms are slow and frustrating, there is room available, at least at the local lev-
els, that can still be fought over. And real achievements are made, through the agency of
committed NGOs, community-based forums and mass organizations.
Improved participation among citizens and marginalized groups has also been a
major outcome. For instance, the Indonesian Popular Governance Institute (IPGI) has
branches in Solo, Dumai and Bandung. In Solo, IPGI has been instrumental in revising
the development planning process that provided space for the poor to engage. For dec-
ades in Indonesia, local government planning has taken place through an allegedly bot-
tom-up process, in which meetings in every village would determine their own priorities.
Based on these, each sub-district would similarly decide their planning priorities that
finally would make it to the district or municipal level for budget allocation.
However, during the authoritarian regime, this system was corrupted. Only members
of the village elite were invited to the village-level meeting and they would often decide
what the sub-district head had asked them to decide. Sub-district and district-level meet-
ings were closed to the public and there was no public accountability. Even had this pro-
cess been open and transparent, it would still not have fed into the budget process, since
that was a separate track.
Several other intervention schemes are about support for forum warga (citizens’
forums). These are multi-sectoral, deliberative and geographically based groups of citi-
zens in a town or village that organize around a common cause. There are hundreds if
not thousands of such forum warga in Indonesia, all established since 1998. However,
there is no single pattern of operation; some work closely with the government, while oth-
ers are more advocacy-oriented on social protection and remain outside the formal politi-
cal sphere. Most groups are formed at the village or sub-district level, but there are a few
forum warga at the district and municipal level. These groups have in common a desire to

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Zulkarnain A. Hatta and Djuni Thamrin Sarkawi Poverty Situation in Indonesia

affect policy-making in areas such as social protection and see public funds reallocated
for the benefit of their constituencies. Even if their members do not wish to become for-
mally involved with political parties, there can be no doubt that they are engaging in local
politics. The forum warga are excellent training grounds for wider political involvement –
through them people learn to argue a case, compromise, relate to a constituency and take
decisions democratically. Meanwhile, the decision-making process has become a bit more
democratic and the deliberations have produced better citizens. It is also a good way to
measure the impact of civil society groups attempting to open and capture public spaces
at the local level.
One of the keys of their success has been, during forum warga meetings, to have some-
one to turn to and ask substantive questions pertaining to the roles of the government
and the Regional Planning Board, the decision-making process taken at the Regional
House of Representatives, views of the street vendors, and roles and contributions of fac-
tory owners. These and many similar, often technical and practical, questions have been
addressed directly during meetings, rather than having to wait for a formal appointment
with some far-away decision-maker. Importantly, this has also instilled in people a sense
of confidence in the government, something which is in great demand in Indonesia at
large.
One of the important achievements is that the poor and marginalized are starting to
understand their basic rights. The poor community and other local marginalized groups
are exercising their rights by becoming involved in the city or district development plan-
ning and budgeting decision-making process. They analyzed and scrutinized the city’s
budget that proposed social protection programs for the poor, and its comparison with
budget allocations for local government unit costs. At the end of the meeting, the poor
understood how much the city’s budget will allocate for their daily lives. Hundreds of
poor and marginalized people, men and women are actively involved in local participa-
tory development planning events. They are also able actively to discuss their rights
with local government units in their own respective villages or kelurahan (village govern-
ment level in city area). By actively participating, they are exercising their rights as citi-
zens.
The community participation is a result of active citizenship exercises that are facili-
tated by IPGI. It emphasizes their claim to create participatory action. Institutionaliza-
tion of participation mechanisms is one of their achievements. For instance, some
exercises have been done with the executive’s decision on giving the poor access to local
economic sources such as the local government bank; legislative ordinances produced in
Palembang, South Sumatra, producing an ordinance on free education and free health
services for the poor as a result of the people’s struggle under the umbrella of FWKP
(Forum Wong Kito Plembang or Our Palembangiase Forum); and some local activists
who came from a people’s forum in Indramayu were able to be elected as village chiefs.
Meanwhile, the others (at least seven persons) are elected as local Members of Parliament
(MPs). Most of those elected both as MPs or village chiefs are maximizing the efforts of
citizen forums and community radio programs in Indramayu city.

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To support local democracy working, it is not enough to simply open up space. There
is a need for actions that allow new voices to be heard and give power to people to be
involved in governing their communities. Local everyday politics is the foundation for
other forms of politics. A democratic state is based on the concept of governance in
which critically thinking citizens, aware of their rights and responsibilities, are active in
pursuing their interests and values in a pluralistic, tolerant, and transparent manner.
Additionally, collective action is one of the more effective formulas for social change.
Both sides need to be there in order for effective social change to happen. The main
resource of broad-based social and political change must come from the ideas, energy
and determination of people themselves, through collective action. It is the experiences of
hardship and marginalization that must be the driving force and ultimately the argument
for social and political change. In general, poor people know that they cannot depend on
the benevolence of the government (whether national or village) and they must therefore
be given the resources, skills and power to take their future in their own hands.
This should be done through new organization arrangements, with NGOs and other
support organizations using their skills in community organizing to strengthen the capac-
ity of communities to advocate. The poor will be mobilized and organized by groups
from outside. One of the important roles of social justice NGOs is to provide the poor
and disadvantaged with a platform, a megaphone and the skills to critically analyze their
situation.
Citizen groups have been less successful at holding government agencies and actors
responsible for ensuring that government provides those services in the first place,
encouraging them to perform their responsibilities consistently and well. Citizens have
become more aware of local governments’ action and inaction and the argument goes
that this new voice, awareness and engagement (often described as ‘‘empowerment’’) will
strengthen the social and moral claims of the powerless and result in better representation
and hence influence. However, why this should occur without the compulsion for the
powerful and elite to change their behavior and forgo patterns of decision-making that
have long enriched them and their clients is unexamined. This is where accountability is a
necessary complement to voice. Genuine accountability makes the powerful few answer
to the powerless majority in whose name they act, under the threat of sanction. Further-
more, many of the civil society groups with public policy impact are limited to urban and
elite non-governmental organizations.
Weaknesses of corruption eradication in Indonesia include the lack of downward
reach. Many efforts have been case-based and do not touch upon the everyday concerns
of citizens. Large-scale corruption cases are coming to light and some of the corrupt are
convicted. But there are still not enough disincentives or public pressure for potential cor-
ruption at the local level to be prevented. Misuse of public funds can thus take place in
more or less legal ways. These weaknesses are addressed by broadening the corruption
efforts by utilizing and developing existing tools for community-level involvement in
identifying corruption and holding government officials to account, participating in local
governance and holding public officials accountable for their actions.

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Zulkarnain A. Hatta and Djuni Thamrin Sarkawi Poverty Situation in Indonesia

Conclusion
There is a need to have a paradigm shift in addressing poverty and its ramifications.
While the system should be responsive to dynamic and more complex social problems,
the approaches need to celebrate the principles of human rights, democratization, and
the role of civil society, especially marginalized groups, both in the formulation and the
implementation of social programs. This paradigm shift encompasses four broad themes:
1 The benefits of social protection should be universal: in the past, the results of devel-
opment benefited only a small portion of the community, which was the target group
or marginalized groups. Now, the process of development must be reformed to make
it more poor people-oriented by providing chances to people with social problems to
get access to development resources, including easy access to capital, social services
and sustainable social protection schemes. The poverty reduction programs that have
an effect on direct income distribution to the poor need to be expanded, not down-
sized. For example, cash transfer programs such as unconditional cash transfer or
BLT (Bantuan Langsung Tunai) and conditional cash transfer or PKH (Program
Keluarga Harapan) need to be integrated into the National Social Security System
(Sistem Jaminan Sosial Nasional) schemes so that the poor and other citizens can be
protected by the institutionalized social protection schemes.
2 The development strategies must focus on human beings as central: the development
paradigm in the past has been more focused on economic growth and physical
approaches, and considered human being as objects, so it caused dehumanization in
development. The existence of people with social problems as objects of social welfare
development had positioned them as passive recipients of social assistance which was
given as charity. The development paradigm that positions human beings as the main
focus of development will position people with social problems as active players
in activities meant for them and give proper appreciation to their potential and
resources.
3 The approaches to development need to reflect local potentials and culture: in the
past, development tended to use standardized models of development and hence to
ignore local potentials and culture. As a result, people with social problems become
dependent upon external assistance. Therefore, the empowerment of people with
social problems should be implemented by digging out, maintaining and developing
social resources, including local wisdom. Socio-cultural values, such as social solidar-
ity, cooperation, and trust should be optimized as basic resources in creating social
responsibility. The improvements in the well-being of people with social problems
need to involve an active role, and the care and capacity of the people in accordance
with their potentials and culture.
4 Empowerment of people with social problems should be done on an individual,
family, group and community basis, and in an integrated way: in the past, the
emphasis of intervention for people with social problems was on a group approach.
Assistance was uniform, in the form of objects or tools. Empowerment of people with

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social problems should not be done by a group approach only, but also by individual,
family, and community approaches. The facilities to be provided should also be in
various forms in accordance with the potentials and needs of people with social
problems, including access to financial assistance.

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