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Social Protection and Labor

Indonesia’s Social Assistance System: Praising Reforms But More Work Ahead

Pablo Acosta's picture



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.