Strategi Pengentasan Kemiskinan

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    Report No. 23028IND

    Poverty Reduction in Indonesia:

    Constructing a New Strategy

    October 29, 2001

    Environment and Social Development Sector UnitEast Asia and Pacific Region

    Document of the World Bank________________________

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    INDONESIA-FISCAL YEARJanuary 1 to December 31

    CURRENCY EQUIVALENTS(As of September 10, 2001)

    Currency Unit = Rupiah

    US$ = Rp. 9,093

    WEIGHTS AND MEASURESMetric System

    ACRONYMS & ABBREVIATIONS

    ADB Asian Development BankBKKBN National Family Planning BoardBPN National Land AgencyBPR/BKD Peoples Credit BankBPS Central Bureau of StatisticsBRI Bank Rakyat IndonesiaBULOG State Logistics AgencyCASER Center for Agriculture Socio-

    Economic ResearchCIMU Central Independent Monitoring UnitDAK Specific Grant AllocationDAU General Grant AllocationDFID Department for International

    DevelopmentDHS Demographic and Health SurveyDPOD Regional Autonomy Advisory CouncilDPR House of RepresentativesDPRD City Council for CitiesDPRD-I Provincial Legislative CouncilDPRD-II Regional Legislative CouncilDU Decentralizing UnitGBHN State Policy GuidelinesGNP Gross National ProductHNP Health, Nutrition, Population

    IBRA Indonesian Bank RestructuringAgencyIEA International Education AssociationIFAD International Fund for Agriculture

    DevelopmentIFES International Foundation for Election

    SystemsIKK Principal City or Town of a Sub-

    districtIMF International Monetary FundINPRES Presidential InstructionISO International Standard OrganizationJIWMP Java Irrigation and Water Management

    ProjectJPKM Community Health Maintenance

    InsuranceJPS (SSN) Social Safety Net

    JPS-BK Social Safety Net-HealthKEPPRES Presidential DecreeKFW/GTZ German Development Cooperation

    KKN Corruption, Collusion, and NepotismKTP Residency PermitKUD Village CooperativesKUT Credit for FarmersLDKPs Village Credit and Fund InstitutionLKMD Community Welfare Organization (at village

    level)LLI Local Level Institution

    LMD Village CouncilMCK Public Bathing, Washing and Toilet FacilityMoF Ministry of ForestryMoH Ministry of HealthMoHSW Ministry of Health and Social WelfareMoNE Ministry of National EducationMPR Peoples Consultative Assembly

    NGOs Non-governmental OrganizationsNTB West Nusa TenggaraNTT East Nusa TenggaraOECD Organization for Economic Cooperation and

    DevelopmentOPK Special Market OperationP4K Income-Generating Project for Marginal Farmers

    and LandlessPAD Local Revenues

    PDAMs Municipal Water EnterprisePDM-DKE Regional Empowerment Program in Overcomingthe Impact of Economic Crisis

    Pimpros Project ManagersPKK Family Welfare OrganizationPosyandu Health Service PostPROPENAS National Development ProgramPTT Temporary WorkerPuskesmas Health ClinicREPELITA Five-year Development PlanSGP Scholarships and Grants ProgramSLTP Secondary School (middle school)SMERU Social Monitoring and Early Response UnitSMEs Small- and Medium-size EnterprisesSUSENAS National Socio-economic SurveyTKK District Coordination TeamVAPs Village Action Plans

    WATSAL Water Sector Adjustment LoanWTM-FADO NGO in East Nusa TenggaraWUA Water User Associations

    Vice President: Jemal-ud-din Kassum, EAPCountry Director: Mark Baird, EACIFSector Director: Zafer Ecevit, EASESTask Managers: Jessica Poppele, EACIQ

    Lant H. Pritchett, EASES

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    CONTENTS

    PREFACE................................................................................................................................. iEnglish Version.......................................................................................................................... iBahasa Indonesia Version...................................................................................................... xxi

    EXECUTIVE SUMMARY ...................................................................................................iii

    English Version........................................................................................................................iiiBahasa Indonesia Version....................................................................................................xxiii

    First Theme: Broadening Poverty - Definitions, Facts, and Goals.................................... 1

    A) Rethinking Poverty: Expanding the Scope and Raising the Stakes............................. 1B) Analysis of Expenditure Poverty.................................................................................. 5C) Goals for Poverty Reduction ........................................................................................ 9

    Second Theme: A Poverty Agenda is a Governance Agenda........................................... 13

    A) Assessing the Strengths and Weaknesses of the Previous Approach......................... 14

    B) Social Capability for Action Exists ............................................................................ 16C) A Program of Pro-poor Sectoral Reform: Reintegrating Society

    and Government.......................................................................................................... 19

    First Area of Action: Economic Policies for Poverty Reduction...................................... 23Resumption of Rapid Economic Growth...................................................................... 25

    A) Growth Policy of Fundamentals ................................................................................. 25B) Elimination of Policy and Petty Corruption ............................................................... 26C) Maintaining Open Internal Trade ............................................................................... 27D) Enabling Small and Medium Enterprises (SMEs) to Thrive ...................................... 27E) Raising Rural Incomes................................................................................................ 31

    Economic Empowerment of the Poor............................................................................ 35A) Labor: The Most Important Asset of the Poor........................................................... 37B) Land: The Critical Asset of the Poor ......................................................................... 38C) Natural Resources....................................................................................................... 41D) Improving Access to Capital and Credit..................................................................... 44Poverty-focused Public Expenditures ........................................................................... 46

    A) Analyzing Poverty Implications of All Government Spending.................................. 46B) Cutting Subsidies That are Inefficient and Inequitable .............................................. 49C) Making Fiscal Decentralization Pro-poor................................................................... 49

    Second Area of Action: Effective Public Services that Reach the Poor .......................... 55

    Putting People First in Governance Policies................................................................. 56

    A) A Government Accountable to the People: Local Elections andCivil Service Structure................................................................................................ 57

    B) Decentralized Budget and Expenditure Decisions and BudgetMonitoring.................................................................................................................. 61

    C) Program Design to Put People First............................................................................ 64D) Spending the Peoples Money Responsibly: Financial

    Management and Competitive Procurement............................................................... 66

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    Looking Toward the Future by Focusing on Education and Health ......................... 68

    A) Pre-crisis Achievements and Challenges.................................................................... 68B) The Crisis and Response............................................................................................. 69C) Challenges in Education and Health........................................................................... 72D) Post-crisis: Decentralization Opens the Door to Reform........................................... 73

    Providing Needed Infrastructure, Access, and Mobility ............................................. 77

    A) Ensuring Access and Mobility: Transport ................................................................. 78B) Water Supply and Sanitation ...................................................................................... 80C) Irrigation ..................................................................................................................... 82Area of Action: Safety Nets for the Poorest, and Coping with Shocks ..................... 84

    A) Deflating the Air Bag Programs............................................................................. 85B) Reaching the Poorest of the Poor: Important, but Not

    Governments Strength............................................................................................... 86C) Helping Households Cope With Risks ....................................................................... 87

    ANNEXES

    1: Land - The Critical Asset of the Poor ............................................................................... 892: Managing Forests Sustainably for All .........................