The Millennium Declaration that was adopted by 189 nations has eight major goals and targets to be achieved by 2015. These goals are to: eradicate extreme poverty and hunger; achieve universal primary education; promote gender equality and empower women; reduce child mortality; improve maternal health; combat HIV/AIDS, malaria and other diseases; ensure environmental sustainability; and develop a global partnership for development. Taking 1990 as the base year, poverty and hunger will be reduced by a half in 2015.
Developing countries including Indonesia face many problems in meeting the MDGs, as indicated by a slow-down of poverty and hunger reduction programme achievement, wide income disparity between rural and urban populations as well as inconsistent global and local development. The international constraints in achieving the MDGs include globalization, the lack of coherence of developed countries in fulfilling the commitments, and the food and energy crises. The domestic constraints are the poor co-ordination in implementing decentralization development, low capacity in improving food (agriculture) production, low access of the poor to employment opportunities and the failure of poverty reduction programmes, policies and approaches. The achievement of food security, agricultural and rural development programmes will have an impact on the achievement of poverty and hunger reduction.
Based on these justifications, a paper was prepared to analyse the status and identify priority actions for achieving the first MDG target, and to formulate policy recommendations on poverty and hunger eradication in the context of agricultural and rural development.
Status and achievement of the first MDG target
This section discusses the prospects of reducing extreme poverty by half from 1990 to 2015, and progress towards this goal. The analysis used a set of poverty indicators such as the national poverty line generated by Central Bureau of Statistics (CBS) compared with common international poverty criteria of US$ 1 and US$ 2 per capita per day. Other poverty indicators such as the poverty gap index (P1), the poverty severity index (P2), the spatial disparity in poverty, and the food expenditure share by region and income groups, that identify the growth of community welfare were also used.
In 1990 the population living in poverty in Indonesia was 27.20 million or 15.08 per cent of the total population (Table 1). Between 1990 and 1995 the proportion fell by 5.01 per cent per year. Due to the economic crisis, poverty incidence increased from 17.47 per cent (1996) to 23.50 per cent in 1998. In 1999, after two years of economic crisis, the poverty levels decreased. However, during 1998 - 2007, there was a slow-down in poverty reduction in Indonesia: from11.43 per cent per year (1998 - 2000) to 1.92 per cent (2000 - 2007).
The relative poverty reduction trends over the period 1999 - 2003, show a decrease from 23.4 per cent in 1999 to 17.4 per cent in 2003, which indicates that Indonesia is on track to achieve the first MDG target (7.5 per cent in 2015) (GOI and UN System, 2004). Between 1999 and 2003 the decline in the poverty level was 6.89 per cent per year, while in the last seven years, 2000 - 2007, there was a serious deceleration in the rate at which poverty declined, 1.92 per cent per year. A slow-down resulted from the reduction of the fuel subsidy in 2005 of more than 100 per cent In consideration of the slowing 2000 - 2007 trend and the government efforts in overcoming the impact of fuel subsidy reduction in 2008, the poverty level is projected to decrease to about 14.22 per cent in 2015. Therefore, achievement of the poverty reduction target of 7.05 per cent by 2015 requires consistent commitment and greater effort.
The achievement of the first MDG target will be determined by the poverty line chosen. Using the average income of US$ 1 per day, the total population living below the poverty line in Indonesia in 1990 reached 20.6 per cent (GOI and UN System, 2004). In line with this measure Indonesia is likely to reach its MDG-1 target by 2015, as indicated by the decline in the extent of poverty to 10.3 per cent in 1996, and a further decline in 2002, a few years after the economic crisis. However, a contrasting result would result from the use of the US$ 2 per day criteria. Here, the levels of poverty only declined from 71 per cent in 1990 to 54 per cent in 2002, with an anticipated rate of 35.5 per cent in 2015. This analysis shows that this country could reduce extreme poverty but needs to make a greater effort to overcome moderate poverty.
During the years 1990 to 2004, the poverty gap index (P1) and poverty severity index (P2) fluctuated at average rates of 3.17 and 0.88, respectively. P1 increased from 2.71 to 2.89, and P2 increased from 0.72 to 0.78 (UN System, 2004; Swastika et al., 2007). Thus there was no significant change in expenditure with respect to minimum primary needs (P1) and income disparity (P2) among the poor. Another important indicator is poverty spatial disparity. There is a high concentration of poverty in Java (57.5 per cent) and there has been no significant change during the period 2000-2005. Thus there is a need for an effective model for tackling poverty and continuing to give priority to the regions that have high density of poverty, such as Java, without ignoring Papua and other eastern parts of Indonesia which have high relative poverty and in which half of the population live under the poverty line.
Poverty reduction achievements will be determined by income distribution. Better income distribution among income groups could allow poorer groups to improve their capacity and access to employment opportunities and income sources. There has been no significant change in the national income distribution during the 15 years from 1990 to 2006. Income disparity was stagnant and in a normal position, at a Gini index of 0.33 (Table 2). The expenditure share of low-income households (40 per cent of total households) during 1990-2006 tends to be stagnant with a slowly decreasing rate from 21.31 per cent to 19.75 per cent. The average of expenditure share of high-income households (20 per cent of total households) was 42.31 per cent between 1990 and 2006, and the rate slightly increased from 41.94 per cent to 42.15 per cent.
Table 1. Growth of the rural and urban poor population in Indonesia, 1990 - 2007
Source: Statistik Indonesia (Badan Pusat Statistik), Jakarta.
Table 2. Distribution of expenditure according to income group and Gini index at national level in Indonesia, 1990 - 2006 (%)
Source: National Socio-Economic Survey (SUSENAS), Statistik Indonesia, Jakarta.
Based on data on the prevalence of underweight children the MDG target to eradicate the proportion of people who suffer from hunger (18.3 per cent by 2015), and based on the performance of government development programmes during 1989 - 2002, Indonesia is not likely to reach the first MDG target (GOI and UN System, 2004). In addition, the incidence of malnutrition (daily per capita energy intake of less than 2,100 kcal) is expected to decrease from 69.5 per cent in 1990 to 34.8 per cent in 2015. There was no substantial reduction of these incidences during 1990 - 2002, as indicated by the fluctuation of malnutrition prevalence with an average rate 70 per cent. The impact of fuel subsidy reductions in 2008, meant that achieving the hunger-reduction targets was likely to be difficult. The challenge of decreasing the prevalence of malnutrition and underweight among children under five is complex due to a wide disparity across regions (rural-urban) and gender.
The growth of nutritional status for children under five years of age during 1995 - 2005 is presented in Table 3. It describes an increase in the proportion of malnutrition from 13.1 per cent in 1995 to 16.6 per cent in 1999 and 28.2 per cent in 2003. The ratio stagnated at 28.0 per cent from 2003 to 2005. In 2003 - 2005, the prevalence of moderate and severe malnutrition among children in rural areas was persistently higher than in urban areas, and the proportion of children with normal and over-nutrition decreased (SUSENAS, BPS, Jakarta).
Table 3. Nutritional status of children under five years of age in Indonesia, 1995 - 2005
Source: SUSENAS, Badan Pusat Statistik, Jakarta.
Table 4 describes the average calorie consumption in rural and urban areas from 1996 to 2006. There was no significant change in the average calorie consumption rate of 1,965 kcal per day. The economic crisis had an impact on calorie consumption, which decreased from 2,020 kcal in 1996 to 1,849 kcal per capita per day in 1999. However, the reduction of the fuel subsidy in 2005 did not influence food energy consumption in the rural and urban areas. The food energy consumption of urban communities is higher than rural, 1,998 kcal versus 1,921 kcal per capita per day, but this rate was under the national average per capita energy requirement, 2,000 kcal, as stated in the eighth national workshop for food and nutrition (Hardinsyah and Tambunan et al., 2004). This illustrates that there has been a decrease in people's purchasing power over the last five years, as the national aggregate of calorie availability (3,149 kcal per capita per day) is greater than energy sufficiency rate, (Suryana, 2008).
Table 4. Average calorie consumption in rural and urban areas of Indonesia, 1996 - 2006 (kcal/capita/day)
Source: SUSENAS, Badan Pusat Statistik, Jakarta.
Future Policy Directions
Policies and programmes on poverty and hunger eradication have a strong relationship with policy for food security and agricultural and rural development. Based on the current status of household income structure and the nature of agricultural development, poverty alleviation strategies should consider the structural transformation of the rural economy through better integration of rural and urban economies in order to speed up the convergence of agricultural and non-agricultural productivity. This section will elaborate on the policy direction of the related aspects of poverty and hunger alleviation. There are at least five major aspects of poverty alleviation policies: macroeconomic policy, the impact of globalization, mainstreaming informal employment and legal empowerment of the poor, improving the capacity of poor people and their access to the economy, and taking a strategic approach to poverty and hunger reduction.
There are four macroeconomic variables that can have a positive impact on poverty alleviation (Pasaribu et al., 2008): gross domestic product (GDP); share of agricultural sector in the overall economy; and, impact of the financial sector, banking services and industrial sector. Additionally, increases in the agricultural development expenditure and the budget for poverty alleviation programmes would have a positive impact. On the other hand, a one per cent increase in the population will raise the poverty rate by 0.28 per cent, ceteris paribus. Therefore, a focus on agricultural and rural development complemented with effective implementation of poverty alleviation programmes without neglecting the growth of non-agricultural sectors will speed-up poverty reduction.
Impact of globalization
A short-run regional analysis found that there is no empirical data indicating a positive impact of globalization on poor people. In line with this, the Wilson Center (2006) recommended some policy options that could be considered to counter the potentially negative impact of globalization on rural economics and poverty. These options include: (a) to minimize the intermediate effect of unemployment and loss of income of the poor by improving education, infrastructure investment, agricultural research and extension services, as well as implementation of social safety net programmes; (b) to improve pro-poor trade policy in developing countries by reducing import tariffs and expanding South-South trade co-operation; (c) for developing countries in which there are constraints on agricultural trade and farmers' capability to realize marketable surplus, increase R&D investment by improving biotechnology (NHYV) to increase yield potential and agricultural productivity; and (d) to generate complementary measures to encourage a fair, open and rule-based trade system supported by capable human resources, and to include trade in the overall agenda for economic growth and poverty reduction.
Informal employment and legal empowerment of the poor
In order to mainstream informal employment and to promote gender equality, policymakers need to consider the following (Chen et al., 2004): (a) raising the voice of informal workers by strengthening their organizations and representation in the relevant policy-making institutions; (b) being sensitive to gender issues and the role of women workers in the informal sector who tend to have lower wages and weak social protection, and need policy support; (c) promoting opportunities for both self-employment and informal paid work by integrating micro-finance service provisions, training, improved technology and other business development services; (d) securing the rights of the self-employed, particularly securing their access to credit and other resources as well as creating equitable policies for formal and informal enterprises; and (e) protecting informal workers through extending existing insurance schemes and/or developing new ones.
Singh (2006) highlighted four key factors that are legally required to empower poor people, build capacity and to overcome poverty. These are: (a) to improve access to the formal justice system and rule of law; (b) to improve poor people's rights to protect their assets, to build trust, to promote access to credit and markets, and to raise productivity; (c) to improve labour rights to encourage the poor to move to the formal labour system; and (d) to stimulate the entrepreneurial skill of the poor. Basically the poor have a strong capacity to engage in existing employment opportunities and they consistently survive although they face big challenges, with minimum facilities and support.
The capacity of the poor and their access to economic opportunities
Improvement in education and health are the most important factors for enhancing the human resource capacity of the poor. A World Bank study in Indonesia found some indicators of human resource development that lag behind the world average (World Bank, 2006). These include: (a) investing in education with a focus on improving the affordability and access of the poor to secondary school and vocational training as well as improving primary school quality and effectiveness; (b) investing in health, improving the quality of primary health services (public and private) and access to higher-level health services; (c) improving efforts to control maternal health care, as Indonesia has a high maternal mortality rate; (d) improving access of the poor to clean water by using separate strategies in rural and urban areas; and (e) improving access of the poor to adequate sanitation.
The World Bank (2006) recommended a strategic policy for improving health care for the poor including: (a) improving the quality of service of the community heath centres; (b) investing in paramedic training especially for those assigned to rural areas; and (c) improving access to health services for the poor by providing direct cash transfers, voucher systems, health card, etc. In this context, consistency among government and related parties in strengthening the capacity, interests, commitments and political will is needed to improve the poor's access to education and health services that will lead to expanded resource capacity.
Improvement in poor people's capacity in rural and urban areas should be complemented with policy instruments to enhance their access to economic opportunities. Potential options are investment in agriculture and agribusiness in rural areas, improvement of access to agricultural land, support for informal activities, migration and acceleration of labour market convergence. In addition, improving infrastructure, facilities, transportation, accommodation and communication systems as well as financial support are seen to be necessary for enhancing access to economic opportunities.
Approaches for poverty alleviation and hunger
Based on the performance of government programmes and a slow-down of poverty reduction trends, a reorientation of approaches and strategies should be considered (Rusastra and Napitupulu, 2007). Potential reorientation includes: (a) basing approaches and strategies on the complexity of characteristics and problems of the poor; (b) moving towards a holistic multisectoral approach of participative community empowerment and development; (c) strengthening rural development programmes and integrating rural and urban economies through pro-poor economic growth and development; (d) focus on agricultural revitalization, micro-small-medium enterprises, informal employment and gender equality; (e) replication of conditional direct cash transfer programmes, particularly in the region in which multisectoral community-based development programmes have been applied; and (f) acceleration of the structural transformation of the rural economy.
Recommendations for accelerating the structural transformation and inclusive growth of agricultural and rural development are as follows (Timmer, 2006; Henderson, 2007; IFPRI and ADB, 2007): (a) focus on agricultural and rural development without ignoring urban economic growth; (b) accelerate the integration of the agricultural labour market and non-agricultural activity in rural and urban areas with better financial market facilities; (c) improve the economic capacity and access of the poor by promoting rural investment and labour migration; (d) improve innovative supply chain technology; (e) investment in infrastructure and communication systems to reduce spatial disparity and to speed up rural-urban economic integration; (f) support to improve financial services and insurance intervention for the poor; and (g) support improved implementation of effective social safety net and nutritional programmes.
Eradication of poverty and hunger by half in 2015 is a commitment of the Government of Indonesia. Using the one-dollar-a-day poverty line, the country is likely to achieve the target of decreasing extreme poverty, but if the poverty line is raised to two-dollars-a-day, the country has a long way to go and requires strong efforts to address moderate poverty. Based on CBS poverty indicators and the decrease in poverty level during 2000-2007 (1.92 per cent per year) the relative poverty in 2015 is estimated at 14.2 per cent. Due to the complexity of problems and challenges ahead, Indonesia will have difficulties in achieving the poverty reduction target of 7.2 per cent by 2015. Trends of other related indicators such as the poverty gap and severity indexes and the expenditure Gini index for the period of 1999-2006 are stagnant.
Two key indicators relating to hunger, the prevalence of underweight children and malnutrition in children under five, tend to fluctuate with no substantial progress. This indicates that Indonesia would have difficulties in achieving the respective targets of 18.3 per cent and 34.6 per cent in 2015. The nutrition status of the children under five from 1995 to 2005, is supported by respected evidence such as the aggregate energy consumption rates that tend to be stagnant and below the sufficiency rate of 2,000 kcal/capita/day. The energy consumption of the first five groups of eight income groups was below the required energy sufficiency rate (ESR). The ESR decreased from 1996 to 2006. The energy consumption of the first three groups with food expenditure less than Rp 100,000 per capita per month was included in the food insecure category, the consumption rate of which is less than or equal to 80 per cent of ESR.
Recommended policies for accelerating the achievement of the first MDG target are as follows: (a) focus on agricultural and rural development complemented with effective implementation of poverty alleviation programmes; (b) eliminate the negative impact of trade liberalization by minimizing the transition impact, implementing pro-poor trade policy, investing in R&D, and considering a fair, open and rule-based trade system; (c) enhance the roles of the informal sector, gender mainstreaming and legal empowerment of poor people; (d) improve poor people's capacity by improving education and health sectors that are complemented by improved access to wide economic opportunities; and (e) accelerate structural transformation and inclusive growth of agricultural and rural development, with the ultimate goal being the convergence of agricultural and non-agricultural productivity.
(References available upon request)