Indonesia : Poverty, Disadvantage and decentralization

Poverty and Disadvantage

A recent review of the urban sector in Indonesia carried out by the Asian Development Bank (2001) indicates that at least 15.7 million urban dwellers were poor in 1999 out of a total urban population of 81.4 million (using the new SUSENAS 1998 definition of the poverty line). It has been estimated, however, that a much larger percentage of people - in fact, nearly half of the entire population is vulnerable to poverty and struggles to avoid falling back into poverty. It is also clear thai poverty will become an increasingly urban issue - the urban population has been growing al an annual rate of about 4.4% during 1990-99, and, the proportion of Indonesia's population expected to be leaving in urban settlements will increase from about 40% in 1999 to over 60% by 2025. The experience of the 1997 crisis has shown that macroeconomic shocks have a worse impact on urban areas than on rural areas where traditional support networks tend to cushion economic blows more effectively. Studies show that in 1998, GDP in urban areas declined by 18% as compared to a national GDP decline of 14%, with an increase in poverty levels in 1998 that was significantly higher in urban areas than rural areas.

The numbers and percentage of the population under the poverty line is shown in Table 1

Poverty is a multi-dimensional problem. Lacks of income or consumption are not the only indicators of poverty. Inequalities at various levels are the cause as well as consequences of poverty. The nature of poverty in Indonesia is no different; there are two central points:

• The definition of poverty should include all dimensions of human well-being -adequate food, shelter and comfort; reduced vulnerability to external shocks; access to education, health and infrastructure; and the opportunity to participate in social and political life on an equal basis with the rest of the population.
• A poverty reduction agenda necessarily means a governance improvement agenda. This would include: free flow of information to the poor regarding their entitlements and obligations; voice of the poor in decisions regarding allocation of public resources, program design and implementation; and accountability of decision makers for every stage of public program and project planning, budgeting, implementation and monitoring.

Decentralization
The new decentralization Laws 32 and 34 / 2004 came into effect in January 2005. The new laws envision a different definition of roles, capacities and accountabilities for local governments (kota / kabupaten) from the past, placing them squarely in charge of providing services to their citizens. Stakeholder participation and community empowerment has also been made a mandatory feature in the decentralization legislation. The new laws are ambitious in their scope and spirit. However, until now, most of the discussion and analysis has focused on a shifting of power and responsibilities from the central government to local governments, and not to local governance - i.e. the accountability and responsiveness of local governments to communities. The primary goals of decentralization - to provide bolter public services to communities - cannot be achieved without improvements in local governance.
At the center, the future role of central government in poverty reduction is under scrutiny. Similarly, the intergovernmental financial framework is under development. This affects both grant-funded activities at the local level as well as local governments' ability to fund poverty programs through loans. At the local level, there is a general scarcity of development funds across local governments as routine expenditures and salaries of civil servants swallow the major share of their revenue.

Building the capacities of local governments to deliver on these new agendas is an enormous challenge, since local governments do not have the resources to deliver all services at normal standards to their populations. Difficult tradeoffs will be required. The limited services that can be delivered by local governments at the community level will meet the demands of the population only if officials understand community priorities and are accountable to them. This, in turn, will require communities to: be organized: be able to aggregate and prioritize their needs and demands; and be able to articulate these needs and priorities to governments.

Currently, the capacity for carrying these tasks is weak, both at the local government level as well as at the community level.