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Poverty, Welfare and Inequality Issues in South East Asia

0900–1030, Thursday 14 April 2016, C1

Putu Geniki Lavinia Natih
Oxford University

Stuart Gietel-Basten
Oxford University

Stuart Gietel-Basten
Oxford University

Ifa Isfandiarni
Vrije Universiteit Amsterdam

In light of the theme of the 2016 Southeast Asian Studies Symposium, “Human and Environmental Welfare in Southeast Asia”, this panel aims to bring together scholars whose research encompasses the issues of both “human” and “environmental” welfare, and to demonstrate how these two crucial issues intersect. This panel has a specific focus on poverty, welfare and inequality issues, within the context of Indonesia, the largest nation in Southeast Asia, with a population of nearly 250 million people and a consumption poverty rate of 10.96% as per September 2014 (Central-Bureau-of-Statistics, 2014).
The first paper within this panel, “Multidimensional Poverty in Indonesia: Sparking Agency Based Evaluation”, attempts to tackle the age long debate and struggle of “how to define poverty”. By conducting a mixed method approach, collecting qualitative data to form a poverty measurement tool based on poverty definitions as expressed by the “people” of Indonesia, policy makers and community members, this paper aims to illustrate the use of a broader definition of poverty to encompass forms of deprivation, other than income/consumption poor; a crucial issue, for as Stiglitz, Sen, and Fitoussi (2010), state “what we measure affects what we do; and if our measurements are flawed, decisions may be distorted”.
As Orshanky states, “There are no particular reasons to count the poor unless you are going to do something about them” (Orshansky, 1969, p. 37). After the conceptual and more theoretical paper concerning definitions of poverty above, the second paper, “Good Intention-Bad Outcome: Social Assistance, Corruption and Inequality in Indonesia”, thus delves more deeply into the effectiveness of policy with regard to poverty alleviation efforts, with a particular focus on Indonesia. Bringing to the fore both the issue of poverty and the problem of corruption, both major concerns within Indonesia, the results in this paper bring to light the importance of integration within different government policy areas; poverty alleviation cannot be achieved without good governance.
Last but not least, the third paper in this panel, “Environmental Consequences of Poverty Alleviation Programs: Evidence from Conditional Cash Transfers in Indonesia” links the issue of “human” welfare with the crucial concern of “environmental” welfare. This third paper tackles the issue of trade-off between policies that promote “human welfare” and aim to reduce poverty and inequality, with policies that aim to increase environmental sustainability. The research within this paper will focus on the implementation of the conditional cash transfer programme in Indonesia (Program Keluarga Harapan) and its impact on deforestation in Indonesia.
It is my hope that, by combining the interlinking issues of human welfare, environmental sustainability and policy, that this panel will spark lively interest and discussion among symposium participants.

Paper 1: Multidimensional Poverty in Indonesia: Sparking Agency Based Evaluation

Putu Geniki Lavinia Natih
Oxford University

Currently the Indonesian government measures poverty using a uni-dimensional monetary measure based on the monetary value of consumption (Central-Bureau-of-Statistics, 2014). Since its first inception in the 1980s, however, the legitimacy of the use of this consumption-based measure has been questioned. Responding to these concerns, this research aims to construct a supplementary approach to consumption poverty by suggesting a poverty measure based on Sen’s Capability Approach, which states that measurement should be based on “the real opportunities we have of achieving things that we can and do value” (Sen, 1993, p. 522). In order to construct this supplementary measure, a mixed methodology is employed, using qualitative interviews and focus group discussions to select dimensions of poverty and their respective weights, and finally, feeding these qualitative findings into the construction of a quantitative index using the Alkire and Foster (2011)methodology. Within the qualitative step, interviews with 11 National level respondents in Jakarta, 9 District level, 13 village level respondents and 7 focus group discussions at the district and village levels in Bali, were conducted, during July–August 2013. Results from these qualitative interviews were then used to select dimensions of poverty available within the 2011 Indonesian National Socio-Economic Survey (Susenas), to construct the quantitative index. By comparing the government’s consumption based measure and the measure based on Sen’s CA, the preliminary findings within this research, although they cannot be generalized to represent Indonesia as a whole, indicate that poverty is multidimensional; it is affected by other dimensions; basing measurement on the monetary value of consumption alone is thus not enough.


Paper 2: Good intention-Bad Outcome: Social Assistance, Corruption and Inequality in Indonesia

Teguh Dartanto
University of Indonesia

Indonesia recorded a good experience in combating poverty during 1976-2014. However, the rate of poverty reduction has started to slow down with inequality continuing to rise significantly. The Gini coefficient measured by expenditure (consumption) substantially increased roughly from 0.33 in 2002 to 0.413 in 2013. The national government has made various efforts such as distributing social assistance including cheap rice for the poor (Raskin), Conditional Cash Transfers (PKH/CCT), scholarships for the poor, health insurance for the poor (Jamkesmas), and community empowerment programs (PNPM) to reduce poverty and inequality in Indonesia. The government allocation for social assistance has also expanded significantly from IDR 24.9 trillion (USD 2.5 billion) in 2005 to IDR 73.6 trillion (USD 6.5 billion) in 2013. Moreover, the Ministry of Home Affairs (MOA) through Regulation No. 32/2011 allows the sub-national government to allocate social assistance for such purposes: social rehabilitation, social protection, community empowerment, poverty alleviation and disaster mitigation. Theoretically the transfer to the poor (social assistance) would reduce poverty and inequality following the Pigou-Dalton Transfer Principle. Nevertheless, due to lack of monitoring and evaluation many cases of social assistance are diverted to enrich both government officials and a select portion of the recipients (community).
This study thus aims to examine the relationship between social assistance, corruption and inequality in Indonesia. Does social assistance effectively decrease inequality? Does corruption increase inequality? Unlike many studies that use the corruption perception index as an indicator of corruption, this study utilizes an objective measure of corruption indicated by the amount of state losses due to the corruption of social assistance funds. Cases are randomly selected from the Supreme Court’s decision on an offense of corruption related to social assistance. Observing 386 cases at 146 regencies/cities during 2008-2011 and controlling for budget allocation on infrastructure and human capital development as well as election dummies, our econometric estimations confirm that social assistance significantly decreases inequality in Indonesia, whereas corruption of social assistance significantly reduces the effectiveness of social assistance in curbing inequality in Indonesia. Therefore, great efforts to eradicate corruption would likely have an immediate effect of decreasing inequality in Indonesia. This study provides strong evidence that policies for reducing inequality in Indonesia require a comprehensive approach that is not only dependent on social and economic policies, however, there is also a need to consider good governance policies.


Paper 3: Environmental Consequences of Poverty Alleviation Programs: Evidence from Conditional Cash Transfers in Indonesia

Rhita Simorangkir
Georgia State University

Although the poverty impacts of environmental programs have received some attention from scholars recently, the environmental impacts of anti-poverty programs have received almost no attention. To contribute to this research gap, I investigate the effect of an Indonesian poverty alleviation program on deforestation. Deforestation in Indonesia attracts international attention because of the country’s ecological richness, its huge carbon stocks in above ground biomass, and its forest fires that cause health issues inside and outside its borders. In 2007, Indonesia began a targeted, poverty alleviation program in the form of household conditional cash transfers, called the Program Keluarga Harapan (PKH). To estimate the PKH’s effects on deforestation, I combine a deep understanding of how the PKH was scaled up across space and over time, administrative data, satellite data, and an empirical design that aims to control time-invariant and time-varying sources of confounding through matching methods and panel data estimators. The PKH represents a substantial and persistent income transfer to extremely poor households and thus my study also sheds light on the widely debated effects of income on deforestation.