When the Bank did its first social assistance public expenditure review in Indonesia in 2012, the diagnosis was clear. Despite spending significant amount of resources in “welfare”, most of them were through expensive subsidies (fuel, electricity, rice) that were not necessarily benefiting the most vulnerable segments of the society. General subsidies represented 20 percent of total national budget, but household targeted social assistance programs were already making their way, increasing from 0.3 to 0.5 percent of GDP between 2004 and 2010. Still, there was an overall dissatisfaction on what had been achieved, with the Gini coefficient rose by about 6 percentage points in the period of 2005 to 2012.
With more than 27 million people still considered poor and as one of the countries in the East Asia and the Pacific region that has one of the highest income inequality levels, the coverage expansion and social assistance system strengthening is a must. Fortunately, the situation in the social assistance sector has changed dramatically.
Ketika Bank Dunia melakukan kajian pertama terkait pengeluaran bantuan sosial di Indonesia di tahun 2012, diagnosisnya sudah jelas. Meskipun telah banyak sumber daya yang dihabiskan untuk "kesejahteraan", sebagian besar dari upaya ini dilakukan melalui subsidi yang mahal (bahan bakar, listrik, beras) yang belum tentu bermanfaat untuk segmen masyarakat yang paling rentan. Subsidi umum mewakili 20 persen dari total anggaran nasional, namun program bantuan sosial yang ditargetkan untuk rumah tangga telah berjalan, meningkat dari 0,3 persen PDB menjadi 0,5 persen antara tahun 2004 dan 2010. Namun, dengan koefisien Gini yang meningkat sekitar 6 poin persentase pada periode 2005-2012, masih ada ketidakpuasan dalam pencapaian selama ini.
Dengan adanya lebih dari 27 juta orang yang termasuk golongan miskin dan sebagai salah satu negara di kawasan Asia Timur dan Pasifik yang memiliki tingkat ketimpangan pendapatan tertinggi, maka perluasan cakupan dan penguatan sistem bantuan sosial adalah suatu keharusan. Untungnya, situasi di sektor bantuan sosial telah berubah secara dramatis.
The December export numbers for China showed a 2.8 percent decline from the year before. This was the worst showing in a decade, but better than the 4-5 percent decline expected by the business press. There is still plenty of cause for worry, as economist and blogger Brad Setser wrote in a recent post, "This really doesn’t look good". While Setser is talking about the breath-taking drop in Korean and Taiwanese exports in December, some of those exports normally would be on their way to China for further processing and re-export. So, the grim news from those economies in December probably presages more tough times ahead for China's exports.
In this deteriorating global environment, the Ministry of Finance and the World Bank's Beijing office last week held a seminar with some very good international and Chinese economists to discuss China’s macroeconomic policy options. While the economists had a wide range of views, I took away a pretty strong consensus from them on three things:
|China’s stimulus package, announced this week, focuses on more than just building up the industrial and export capacity. Some investments will also be in housing, schools, and health facilities.|
China announced a massive stimulus package of 4 trillion Yuan (US$570 billion) this week, to aid its ailing economy. The move was quickly welcomed by World Bank President Robert Zoellick: "China is well positioned given its current account surplus and budget position to have fiscal expansion," said the World Bank chief at a news conference. "I am delighted that China decided not only to undertake these steps, but to announce it before the G20 summit," he added.
Basically, I think that the package is very good. It is not as big as it looks at first glance, but then the economy is not as bad as many people think. Real retail sales for October came in at 17 percent growth rate, down trivially from 18 percent in September. Exports in October were up 19.2 percent over the year before. There is definitely evidence of a slowing economy, but nothing too dramatic has happened so far. Worrying signs, such as a sharp drop in growth of electricity demand in October, suggest that heavy industry is slowing. And imports for processing have slowed to a 2-3 percent growth rate, indicating that processing exports will slow down sharply. We have said for some time that China needed to be ready with a stimulus package toward the end of 2008 as global conditions would likely lead to a slowdown, and that time has come. I see the current move as precautionary, in light of some worrisome signals, rather than as reactive to a highly deteriorated situation (as suggested in some of the Western press coverage).
When we visited a poor village in Qingxing county of north Guangdong a few weeks ago to work on a study of inequality, I was struck by the severity of poverty in places only a few hours away from the most dynamic and prosperous Pearl River Delta. One family that we visited had almost no furniture. Another only lived on 90 yuan (US$13) per month from the social assistance program.