Sustainable Development Goals (SDG) in Indonesia: Review of Poverty and Inequality Goals

Asep SuryahadiThe SMERU Research Institute

Outline

• Poverty and Inequality in SDG • Trends in Poverty and Inequality• The Causes of High and Increasing Inequality• The Impact of Increasing Inequality• Policy to Reduce Poverty and Inequality

2

Poverty and Inequality in SDG

• Definition– Development that meets the needs of the present without

compromising the ability of future generations to meet their own needs (Brundtland Commission, “Our common future”, 1987)

• Dimensions– Economic dimension: An economically sustainable system must

be able to produce goods and services on a continuing basis, to maintain manageable size of government and external debt and to avoid sectoral imbalances (maintain diversity)

– Environmental dimension: A stable resource base, do not overwhelm the waste assimilative ability of the environment nor the regenerative services of the environment, deplete non-renewables only to the extent we invest in renewable substitutes

– Social dimension: Achieve distributional equity, adequate provision of social services including health and education, gender equity and political accountability and participation

Sustainable Development

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Social Dimension of SDG1. End poverty in all its forms

everywhere2. End hunger, achieve food

security and improved nutrition and promote sustainable agriculture

3. Ensure healthy lives and promote well-being for all at all ages

4. Ensure inclusive and quality education for all and promote lifelong learning

5. Achieve gender equality and empower all women and girls

6. Ensure access to water and sanitation for all

7. Ensure access to affordable, reliable, sustainable and modern energy for all

8. Promote inclusive and sustainable economic growth, employment and decent work for all

9. Build resilient infrastructure, promote sustainable industrialization and foster innovation

10. Reduce inequality within and among countries

11. Make cities inclusive, safe, resilient and sustainable

12. Ensure sustainable consumption and production patterns

13. Take urgent action to combat climate change and its impacts

14. Conserve and sustainably use the oceans, seas and marine resources

15. Sustainably manage forests, combat desertification, halt and reverse land degradation, halt biodiversity loss

16. Promote just, peaceful and inclusive societies

17. Strengthen the mean of implementation and revitalize the global partnership for sustainable development

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Targets of Goal #1: No Poverty

• By 2030, reduce at least by half the proportion of men, women and children of all ages living in poverty in all its dimensions according to national definitions

• Implement nationally appropriate social protection systems and measures for all, including floors, and by 2030 achieve substantial coverage of the poor and the vulnerable

• By 2030, ensure that all men and women, in particular the poor and the vulnerable, have equal rights to economic resources, as well as access to basic services, ownership and control over land and other forms of property, inheritance, natural resources, appropriate new technology and financial services, including microfinance

• By 2030, build the resilience of the poor and those in vulnerable situations and reduce their exposure and vulnerability to climate-related extreme events and other economic, social and environmental shocks and disasters

• Ensure significant mobilization of resources from a variety of sources, including through enhanced development cooperation, in order to provide adequate and predictable means for developing countries, in particular least developed countries, to implement programmes and policies to end poverty in all its dimensions

• Create sound policy frameworks at the national, regional and international levels, based on pro-poor and gender-sensitive development strategies, to support accelerated investment in poverty eradication actions

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Targets of Goal #10: Reduced Inequalities

• By 2030, progressively achieve and sustain income growth of the bottom 40 per cent of the population at a rate higher than the national average

• By 2030, empower and promote the social, economic and political inclusion of all, irrespective of age, sex, disability, race, ethnicity, origin, religion or economic or other status

• Ensure equal opportunity and reduce inequalities of outcome, including by eliminating discriminatory laws, policies and practices and promoting appropriate legislation, policies and action in this regard

• Adopt policies, especially fiscal, wage and social protection policies, and progressively achieve greater equality

• Improve the regulation and monitoring of global financial markets and institutions and strengthen the implementation of such regulations

• Ensure enhanced representation and voice for developing countries in decision-making in global international economic and financial institutions in order to deliver more effective, credible, accountable and legitimate institutions

• Facilitate orderly, safe, regular and responsible migration and mobility of people, including through the implementation of planned and well-managed migration policies

• Implement the principle of special and differential treatment for developing countries, in particular least developed countries, in accordance with World Trade Organization agreements

• Encourage official development assistance and financial flows, including foreign direct investment, to States where the need is greatest, in particular least developed countries, African countries, small island developing States and landlocked developing countries, in accordance with their national plans and programmes

• By 2030, reduce to less than 3 per cent the transaction costs of migrant remittances and eliminate remittance corridors with costs higher than 5 per cent

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Trends in Poverty and Inequality

Trends in Poverty and Inequality

9

0

0,05

0,1

0,15

0,2

0,25

0,3

0,35

0,4

0,45

0

2

4

6

8

10

12

14

16

18

20

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Economic Growth (%) Poverty Rate (%) Gini Ratio

Consumption Share of the Poorest 40% and Richest 20%

10

The Underlying Cause: Growth has not been pro-poor

Source: Susenas , 2008-2012

4.87

0.0

2.0

4.0

6.0

8.0

10.0

1 15 29 43 57 71 85 99

Annu

al g

row

th ra

te %

Percentiles

11

The Causes of High and Increasing Inequality

One Third of Inequality is Due to Endowment Factors

Source: World Bank, 2015

13

Technological Change has Increased Demand for Skilled Workers and Led to Increasing Wage Inequality

Source: World Bank, 2015

14

Indonesia is One of Countries with the Highest Wealth Concentration

15

Ineffective Social Protection has Left the Poor Vulnerable to Shocks

Source: World Bank, 2015

16

Commodity boom benefited only the elite groups

0

20

40

60

80

100

120

Jan-

09M

ei-0

9Se

p-09

Jan-

10M

ei-1

0Se

p-10

Jan-

11M

ei-1

1Se

p-11

Jan-

12M

ei-1

2Se

p-12

Jan-

13M

ei-1

3Se

p-13

Jan-

14M

ei-1

4Se

p-14

Jan-

15M

ei-1

5

Monthly Commodity Price Index (2011M1=100)

Coal Copper Palm Oil Rubber

2009-2011 (Commodity boom)

2011-2014 (Falling commodity prices)

0

2

4

6

8

10

12

14

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100

Percentile of expenditure per capita (poorest to richest)

Change in expenditure per person by percentile (%)

Source: Yusuf (2016)17

The Impact of Increasing Inequality

Source: Suryahadi, Suryadarma, dan Sumarto (2009) :

r = -3.699 (1 - i) g + errorr = change in poverty ratei = inequality (Gini ratio) at initial

periodg = economic growth

Economic Growth Gini Ratio Reduction in Poverty Rate1% 0 3.7%1% 0.5 1.85%1% 1 0

PENINGKATAN KETIMPANGAN AKAN MENGURANGI KEMAMPUANPERTUMBUHAN EKONOMI DALAM MENGURANGI KEMISKINANThe Direct Effect of Inequality on Poverty

Reduction

• Economic growth significantly reduces poverty• High inequality reduces growth elasticity of poverty

19

When inequality increases, poverty reduction becomes slower

20

0,31

0,32

0,33

0,34

0,35

0,36

0,37

0,38

0,39

0,4

0,41

0,42

0

0,2

0,4

0,6

0,8

1

1,2

1,4

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Series1 Series2

The Impact of Increasing Inequality on Economic Growth

.02

.04

.06

.08

.1Fi

tted

valu

es

.2 .25 .3 .35 .4average 2000-2005 gini

Fitted values Fitted valuesPeak: 0.3Mean: 0.29

Sumber: Yumna et al., 201421

The Impact of Increasing Inequality on Unemployment

0.0

5.1

.15

Fitte

d va

lues

.12 .14 .16 .18 .2average 2000-2005 edugini

Fitted values Fitted valuesPeak: 0.167Mean: 0.173

Sumber: Yumna et al., 2014 22

The Impact of Increasing Inequality on the Probability of Social Conflict

Source: Pierskalla & Sacks, 201423

Policy Reduce Poverty and Inequality

Government Policy on People’s Welfare

25

Government’s Policy to Reduce Poverty and Inequality

Source: Nazara, 201526

Non-contributory Welfare Programs

Source: Nazara, 2015

27

Reallocations Towards More Productive Government Spending

Source: Parjiono, 201528

But Its Impact on Inequality Depends on Who Benefits Most from the Government Spending

Source: Dartanto, 201529

Productivity must be increased in addition to delivering social assistance

-

2.000

4.000

6.000

8.000

10.000

12.000

14.000Value Added per Worker (2005 PPP$)

1995 2005 2010

-2

0

2

4

6

8

10

Perc

ent

Total Factor Productivity Growth

2011 Percentage point change since 2007

30

Access to Financial Services is Important to Reduce Poverty and Inequality

31