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Weathering the Storm
The Asia Health Policy Program (AHPP) 2020-21 Colloquium Series Sudarno Sumarto
Indonesia’s Social Protection System Amidst the COVID-19 Pandemic and Beyond
Dai
ly n
umbe
r of n
ew c
ases
New Cases in Indonesia by DayDaily incidence epicurve which characterises the epidemic in Indonesia and other ASEAN statesSource: World Health Organization
Total Cases*
Total Deaths
361,867 12,511
* 19 October 2020
WHO declared COVID-19 as a pandemic
Indonesia declared its first coronavirus case
Schools and most offices in Jakarta closed
Jabodetabek, some kabupaten/kota: Large scale social restriction with different duration
Nationwide school closures
Relaxation of large scale social restriction in Jakarta
Jakarta large scale social restriction
Economic relief measures started: PKH benefits top-up, Program Sembako expansion and benefits top-up, Bansos Tunai, BLT-village fund, Sembako Banpres, electricity bills reduction, Kartu Pra-Kerja
Compared to its neighboring ASEAN states –except the Philippines– Indonesia is not doing too well in putting the virus under control due to low testing rate, suboptimal tracing strategy, and inconsistent lockdown policies.
March April May June July August September October
IDN
PHL
VNM
MYSMYA
The economic crisis brought about by the COVID-19 pandemic was the worst hit experienced by Indonesia in the past 50 years since the 1998 Asian Financial Crisis.
By the 2nd quarter of 2020, Indonesia’s GDP contracted by -5.23%, which impacted various sectors differently. Agriculture was the least impacted sector. However, when compared to 1998, agriculture sector’s role has declined.
GDP by ExpenditureGDP Growth by Sector
Gross Domestic Product (GDP) 2019-2020(Y-ON-Y), (%)
-5.51-7.76 -6.90 -8.61
-11.16-16.96
2.19-2.72
-6.19 -5.39-7.57 -7.35
1st Quarter2018
2nd Quarter2018
3rd Quarter2018
4th Quarter2018
1st Quarter2019
2nd Quarter2019
3rd Quarter2019
4th Quarter2019
1st Quarter2020
-5.32
2.974.975.025.055.07
5.185.175.275.06
4th Quarter2020
Poverty rate went up due to the pandemic, but not as badly as it did in 1998
Num
ber o
f poo
r peo
ple
(mill
ion)
Rat
io o
f poo
r pe
ople
(%)
Source: National Statistical Agency
Note: Calculation method improved in 1996
70.0
054
.20
47.2
042
.30
40.6
035
.00
30.0
027
.20
25.9
034
.01
49.5
047
.97
38.7
437
.87
38.3
937
.34
36.15
35.10
39.3
037
.1734
.96
32.5
331
.02
30.0
229
.89
29.13
28.5
928
.07
28.5
528
.28
27.7
328
.59
28.5
128
.01
27.7
627
.77
26.5
825
.95
25.6
725
.1424
.79
26.4
2
60.0
040
.1033
.30
28.6
026
.90
21.6
017
.40
15.10
13.7
0 17.4
7 24.2
023
.43
19.14
18.4
118
.20
17.4
216
.66
15.9
717
.75
16.5
815
.42
14.15
13.3
312
.49
12.3
611.
9611.
6611.
3711.
4711.
2510
.96
11.22
11.13
10.8
610
.70
10.6
410
.129.
829.
669.
419.
229.
78
-5
5
15
25
35
45
55
65
0
10
20
30
40
50
60
70
80
19
70
19
78
19
81
19
87
19
93
19
98
20
00
20
02
20
04
20
06
20
08
20
10
Sep-1
1
Sep-1
2
Sep-1
3
Sep-1
4
Sep-1
5
Sep-1
6
Sep-1
7
Sep-1
8
Sep-1
9
Number of poor people Ratio of poor people
Source: Indonesia High-Frequency Monitoring of COVID-19 Impacts on Households (World Bank, 2020)
More than 3/4 of primary breadwinners who stopped working in May have resumed working by August and 70% of them returned to the same jobs.
About 6% of those who kept their jobs in May however had stopped working by August.
Breadwinner
10%Stopped working
90%Continue working
64%Stable/rising income/NA*
47%Reduced income
* Including those who haven’t harvested or couldn’t compare income because of changing type of works
Only 10% of primary breadwinners had stopped working in August which reduced
by half compared to 24% in May.
100 %
76%
24%
90%
10%
Working Stopped working
Pre-outbreak March 2020 August 2020
Community Health Clinics (Puskesmas) remained open during the pandemic . . .
Health Research Agency, Ministry of Health, 2020. Result Of Rapid Assessment (Temporary) Role Of Puskesmas In COVID-19 Pandemic Control In Indonesia.
Chloroquine Azithromycin Antiviral (Oseltamivir)
High Dose Vitamin C
0
1,000
2,000
Puskesmas’ COVID-19 Medications Stock
In stock & sufficient In stock & insufficient Not in stock
n= 2,873
. . . but they may not be fully prepared to handle the pandemic.
Open, but reduced operations
28%
Open72%
The COVID-19 Crisis vs The Asian Financial Crisis
Compared to the 1998 Asian Financial Crisis when Indonesia’s broken banking system and corruption worsened the crisis, this time Indonesia’s economic structure is much better. What Indonesia needs to do now is to retain its many economic and development achievements in the last two decades - from continuing to invest in human resources development to reducing poverty.
A social protection system is already in
place
A social registry covering the bottom 40% to assist
in benefit targeting
01 02
Safety Nets & Safety Ropes are Key in Dealing with the Pandemic
The only expenditure that could be implemented effectively now is social assistance, not tax incentive.
Tax incentive isn’t effective now since the economy is slowing down and tax revenue from businesses wouldn’t have been optimal anyways.
On the other hand, social assistance can increase household demand and speed up economic recovery.
With fiscal expansion, Indonesia broadened its social assistance programs’ scope – both existing and ad hoc -- to reach those beyond the bottom 40% in the current social registry (DTKS).
Focus
01
The expansion of social assistance to
the middle class
02
The provision and distribution of
social assistance
Source: Indonesia High-Frequency Monitoring of COVID-19 Impacts on Households, World Bank (2020)Survey period: 26 May-5 June 2020 (N=4.338 households)
Household Coping Mechanisms during the Pandemic
Reduce non-food expenditure
Reduce food expenditure
Receive assistance: government
Take up activities to increase income
Borrow from friends & family
Rely on savings
Delay payment obligations
Receive assistance: friends & family
Credited purchases
Sell assets
73
68
55
54
35
32
31
29
22
25
0 20 40 60 80
Through ad hoc programs designed to complement existing social assistance, Indonesia was able to reach the poorest 40% – both those recorded in the DTKS and those missed – and even expand coverage to those beyond that.
71,065 villages or95% villages
across Indonesiahave disbursed BLT-
Dana Desa cash transfer.
2,341,750 families or31% of all BLT- Dana Desa
beneficiary familiesare female headed households.
Disabled and elderly people were also prioritized.
1,900,000 families and9,000,000 families
in the Greater Jakarta area and outside of it respectively who
have not received any other assistance received food
assistance and cash transfer.
9,000,000 peoplebecame Kartu Prakerja
beneficiaries. Initially designed as a skilling & re-skilling program,
amidst the pandemic Kartu Prakerja also provides assistance.
However, these assistance programs were still inadequate to maintain the beneficiary families’
consumption level. Moreover, benefit should at least close the gap between household expenditure and
poverty line, but this has not been the case.
BEFORE COVID-19
COVID-19 MITIGATION
IDR 134.26 T (0.85% GDP)
• including subsidized national health insurance
• including electricity subsidies
IDR 338.16T (2,14% GDP)
TOTAL AMIDST THE COVID-19 PANDEMIC
(June 2020 Budget)
• excluding subsidized national health insurance
• excluding LPG and electricity subsidies
IDR 203.90 T (1.3% GDP)
Social Assistance Budget as a Share of GDP
(Partially) Weathering the Storm
Expansion of Regular Programs
Conditional Cash Transfer Program - PKH
9.2 million families Min: 900.000 IDR/fam/yr
Max: 10.800.000 IDR/fam/yr
10 million families25% increase per component
Rice Program
15.2 million families150.000 IDR/fam/month
20 million families200.000 IDR/fam/month
Electricity Subsidy
31.1 million familiesSubsidy only for 450VA customers
recorded in DTKS
31,1 million customers450 VA: free of charge
501 thousand customers900 VA: tariff discount
1,3 million customersDiscount for social, business, and some
industrial customers
Rice assistance in Jakarta and surrounding areas1.8 million families
Cash Transfer outside Jakarta9 million families
April-Jun: 600.000 IDR/fam/monthJuli-Des: 300.000 IDR/fam/month
Prakerja Card5.6 million people
3,550,000 IDR/participant
Income Subsidy15,7 million workers600,000/month/worker
Cash Transfer from Village Fund 8 million families
Jun-Sep: 600.000 IDR/fam/month
Health Insurance Subsidy 33.98 million people
Jul-Dec: 16,000 IDR/month/person
Addition of Non- Regular Programs
Indonesia’s Social Programs during the Pandemic
Before Pandemic During Pandemic
Identifying Cracks on the System
Outdated Social Registry
The DTKS is outdated since it was last updated in 2015. It also lacks a dynamic
updating system. As a result, inclusion and exclusion error is rife.
Although Indonesia’s social protection system has continued to improve since the 1998 crisis, the Covid-19 crisis has acted as a stress test, highlighting shortcomings in the social protection system that have stymied its ability to fully weather this storm.
Highly Centralized Social Protection System
A rigid and centralized social protection system means that it lacks flexibility in reaching the
new poor caused by the crisis and in creating new COVID-19 mitigation programs.
Issues in Implementation
TechnicalThe DTKS was last
updated in 2015 and is now outdated.
Since this crisis has two dimensions, economic policies like social protection coverage expansion should go hand in hand with health policies – which unfortunately was not the case in Indonesia. Flexible social
protection policies should have been implemented in tandem with lockdown policies to not only
reach the new poor, but also to give people the means to stay at home
Main issues in social protection implementation entail:
PoliticalA need for better
coordination across the government and better-
clarified direction.
LegacyUnderinvestment in health and a lack of
clear pandemic plan.
BureaucraticA need for better data
sharing and more coherent mandate between
ministries and institutions.
New Challenges
A Lost Generation
Indonesia is at risk of losing two decades of progress as
people lose skills, drop out of schools, and businesses close through no fault of their own.
The COVID-19 pandemic was a wake up call highlighting the importance of tackling existing challenges like outdated data and the lack of a comprehensive system. Additionally, it has
brought about new challenges for the Indonesian social protection system.Reforms – even in the short term – should take into account these issues.
A Changing World
Indonesia’s social protection system needs to evolve into a broader recovery program that not only builds back the same
economy, but to adapt to a permanently changed market.
Future Storms
The reason to expand social protection isn't because of the recovery but because we know that structural crises of this sort
are chronic and will recur.
6th gradeschool
year
7th gradeschool
year
8th gradeschool
year4
5
6
7
Perf
orm
ance
leve
lCu
mul
ativ
e sk
ills
not l
earn
ed
6th gradeskills learned
7th gradeskills learned
8th gradeskills learned
6th gradeskills not learned
7th gradeskills not learned
8th gradeskills not learned
6th gradeskills not learned
7th gradeskills not learned
6th gradeskills not learned
The iceberg problem: How learning gaps accumulate over time
An evaluation on the effect of 14 weeks of school closure following an earthquake in Pakistan by shows that:
• Learning gaps accelerate over time. An instructional focus on grade-level instruction keeps students from addressing unfinished learning from prior school years, causing skill gaps to grow and hindering college and career readiness.
• Learning gaps due to school closure only amounted to 10% of permanent gap.
• Most learning gaps were attributed to school re-opening, where students who failed to catch up would have accumulated gaps over time.
• These permanent gaps accounted for 15% of earnings penalty once the child reached adulthood.
School Closures Could Have Permanent Effects
Source: Jishnu Das, et al. (2020)
Widening Education Gap in IndonesiaThe Indonesian government introduced a distance-learning policy in mid-March 2020. Teachers, students and parents are facing many challenges as a result, but children from lower socio-economic backgrounds suffer a proportionally greater loss.
Issues exacerbating learning gaps include:
• Unequal access to facilities and infrastructureeg. poor internet coverage and access
• Differences in remote-teaching abilities
• Students’ environment at home
(SMERU, 2020)
An Opportunity for Reform• Although outdated, Indonesia’s social registry, the DTKS, as a
targeting instrument plays important role. Indonesia is on the right track, since targeted benefit is more cost-effective than universal benefit for a developing country like Indonesia (Hanna and Olken, 2018). Going forward, Indonesia should develop a dynamic social registry to ensure that data is always up to date for greater accuracy and efficiency.
• Indonesia has also set up complementary social protection programs like BLT-DD, and is experimenting with on demand programs like Kartu Prakerja. Self-targeting works well to minimize exclusion error. It yields more benefit than cost from people cheating their way into receiving assistance amidst this crisis. Indonesia should seek a program mix that works at the face of new challenges.
A Foundation for ReformThe current paradigm on social protection is relatively recent as it only emerged around 8 years ago with the National Team for the Acceleration of Poverty Reduction’s (TNP2K) inception
TNP2K plays a central role in Indonesia’s social protection reform in two ways:
1. partnering with universities and institutions around the world to innovate and translate research into policy; and
2. taking a central coordinative role to streamline communication between ministries and institutions in the Economic Cabinet.
The role TNP2K plays demonstrate that social protection reform is not simply a matter of policy and financing as some kind of institutional foundation is key to this process.
12
Weatherproofing the SystemIndonesia is still in the early stages of building a social protection system. It is incomplete and still has both structural and mainly institutional problems.
The question now is what are the right mix of programs for Indonesia’s two main challenges:
getting the current system to work better; and
building a good system for a country going through rapid demographic, spatial, and economic change –looking ahead to 25 years from now.
12
Weatherproofing the System
Dynamic social registryDynamic data updating is needed so that benefit could be disbursed more accurately & efficiently.
A flexible social protection systemA flexible system could give wiggle room for policymakers to expand coverage during major shocks like a pandemic or catastrophe.
Engaging local actorsBLT-Dana Desa’s targeting and disbursement by village governments amidst this pandemic demonstrated local actors’ capacity to partner with the central government in social protection implementation.
A need to keep protecting vulnerable groupsAs programs created during the pandemic that covered vulnerable groups missed by the DTKS are set to end soon, a continued protection for these groups are crucial.
Universal health coverageUniversal health system would protect all Indonesians throughout their lives.
Using Evidence to Improve Social Protection
• Health insurance• Targeting social programs• Private Outsourcing and
Competition: Subsidized Food Distribution in Indonesia
An iterative research process between policymakers and researchers facilitates learning as long term partnerships between the two could help improve social
programs’ design. Moreover, programs could be piloted then scaled or tested at scale based on evidence.
• Transforming in-kind assistance to cash transfer
• Education - KIAT Guru• Life-circle approach to social
protection
Closing Notes• Compared to the Asian Financial Crisis in 1998, today
Indonesia is more prepared to face the crisis. • Prior to the pandemic, Indonesia has had a steady decrease in
poverty numbers and installed a social protection system that could cushion the poor’s fall today. However, this crisis has also impacted the middle class.
• The pandemic has revealed cracks in the Indonesian social protection system, such as program fragmentation and insufficient targeting. This crisis serves as an opportunity to hasten Indonesia’s social protection system reform and to ensure a “weatherproof” system.
• Besides future trends like urbanization and an aging population, Indonesia’s social protection system should also address problems brought about by the crisis such as the loss in learning.
Thank you
