A higher level of poverty in the country was expected after the 126 percent hikes in fuel prices last October and the inflationary pressures they generated in other sectors.
However, the 11.25 percent or 3.95 million increase in the poverty head count between February 2005 and March 2006 to 39.05 million people, or 17.75 percent of the total population, still came as a surprise. This poverty incidence, although lower than that between 1998 and 2002, was the highest since 2003.
The nearly $1.5 billion the government has given in unconditional cash transfers to more than 19 million poor and low-income households (76 million people) during the past 10 months seemed inadequate to cushion the impact of the tremendous inflationary pressures on these people.
Through the transfers – Rp 100,000 a household a month – the government estimated that those who received the grants would end up with enough additional income to cope with the short-term negative impact of the price hikes. Several analysts, including those of the World Bank, projected early this year that without the transfers, real poverty would increase to 22 percent of the total population or almost 50 million.
This further validates the estimates made by national and international studies last year that more than 50 percent of the total population or 115 million hovered on the brink of the national poverty line, defined as the monthly per capita spending (for food and non-food needs) of Rp 152,847 ($16.50). This, meanwhile, is only half as high as the $1/day ($30/month) per capita spending used by international aid agencies to indicate absolute poverty.
This means more than 110 million people are highly vulnerable to changes in the economic climate. Even the slightest worsening of the economy will push many of them into poverty.
The latest poverty figures, based on the annual socio-economic survey conducted by the Central Statistics Agency in March 2006, did confirm that 19.8 million or 50 percent of the 39.05 million poor people as of March, were chronically poor or those who had been below the poverty line even before the fuel price hike.
The other 19.2 million poor people consist of what is defined as the transient poor (those who are on the brink of poverty) who fell into absolute poverty after the fuel price hikes.
Most important now is how the government incorporates the findings of the survey into its poverty-reduction programs. Without sound data, advice sounds rhetorical, and policy prescriptions ideological. What counts most is to know how to treat the numbers, and to develop the knowledge we need to act on them.
It is encouraging to note that the Cabinet seemed to have advanced copies of the survey reports a few days before the latest poverty profile was disclosed to the public because the salient findings of the survey had been included in the new poverty-alleviation strategy.
The coordinating ministers for the economy and people's welfare announced last Thursday a new strategy, which integrates the Kecamatan (sub-district) development project (KDP) and the Urban Poverty Alleviation Project (UPAP) into a national Community Empowerment Program.
The two projects, which are designed to empower the chronic poor and transient poor to lift themselves out of poverty, are quite different from the unconditional cash transfers and other social-safety net programs, which are meant only for consumption (to meet people's daily needs) and not for investments.
Both the KDP and UPAP projects, which were launched in 1998/1999 with a budget of over $1.5 billion in foreign loans and grants and government funds for 10 years, have so far been the most democratic, bottom-up development programs applied here to specifically reduce poverty. Yet more impressive is that independent auditors Moores Rowland found a low rate of corruption in these projects.
Both projects promote the empowerment and involvement of poor people through a participatory process in conceiving programs, teaches transparent budgeting and procedures, good governance and increased accountability. These community-based poverty reduction projects provide block grants of Rp 500 million to Rp 1.5 billion to sub-districts, which then channel the funds through sound competition to villages.
Villagers are encouraged to take an active part in the participatory planning and decision-making process to allocate the funds for their self-defined development needs and priorities in any activities such as infrastructures, health, water, education and farm businesses, except those that may damage the environments.
The experiences with the two projects so far show that the participatory process ensures that the programs selected for poverty reduction address the most pressing needs of large numbers of people, thereby making them effective and efficient as well as politically sustainable. The rationale is that when people have more access to information about government activities, they are empowered to play a more informed role in the development process.