Social protection reform

Context

Since 1999, the poverty level in Indonesia has halved, reaching 10.7 per cent or 27.76 million individuals in 2016. The World Bank estimates that an additional 24 per cent of the population are at risk of poverty. Although its position places the country above the poverty line, the population only possesses a maximum of 1.5 times the threshold value. What is more, the inequality level has grown rapidly in the last ten years due to geography and social concentration.

In Indonesia, there is a high risk of poverty due to extreme weather events and natural disasters. According to the 2017 World Risk Report, Indonesia ranks 33 out of 171 countries. Poor households are often unable to take preventive measures and thus face existential threats. To date, social protection does not cover these risks, which means that if hit by a disaster, the household falls into poverty. 

There is insufficient social protection coverage for the population and lack of  economic opportunities to get out of poverty. The risks, particularly of falling into poverty or of staying poor due to extreme weather events or natural disasters, which are on the rise as a result of climate change – are substantial and have not been covered so far. Providing access to productive employment remains a daunting challenge, especially for people with disabilities. The social protection system does not sufficiently protect citizens from existential risks and is not able to effectively promote (self-employed) livelihoods for the poor and near-poor.

Objective

The project supports the Government of Indonesia with innovative approaches to complement the existing social protection system for the poor and vulnerable.

Approach

Germany started providing continuous support for the reform of the Indonesian social-protection system back in 2011. 

Aligned with the Indonesian Government's National Medium-Term Development Plan 2015 to 2019, the Project continues to provide technical expertise, capacity development , process facilitation and opportunities within the following areas of intervention: (a) Adaptive Social Protection; (b) Financial inclusion of the poor and vulnerable; and (c) Promotion of employment for people with disabilities. 

Within the framework of the new cooperation, the Project's intervention reinforces and expands upon several approaches to improve risk coverage and promote independent livelihoods for the poor and vulnerable, specifically by providing: (a) policy advice on adaptive social protection at the national level, (b) organisational development for key stakeholders, such as PT Pos Indonesia, and (c) the inclusive design of employment promotion instruments and reform plans for the vocational education and training sector.

The Social Security Adminisration Organisation (BPJS) and the Indonesian post service provider PT Pos continue to play major roles in implementing the Social Protection Programmes, while some new organisations have also come on board. Supported by the team of United Nations Environment, Humanity and Security (UNU-EHS), Munich Climate Insurance Initiative (MCII) and MADIBA consult, the project facilitates multistakeholder partnership collaboration to develop a comprehensive policy design on ASP, the so-called ‘Roadmap’. The National Disaster Management Authority (BNPB), Directorate for Natural Resources and Regional Cooperation in BAPPENAS and the Ministry of Finance sub-department, the National Fiscal Policy Agency (BKF) are among the members of the ASP National Coordination Forum.

The extensive collaboration with the Ministry of National Development Planning and PT Pos Indonesia underpin the efforts to improve access to basic financial services for poor and vulnerable households. This approach ultimately benefits their participation in social-protection systems, reduces transaction costs and promotes graduation from social assistance programmes.

Results

Over the past five years, the Indonesian Government – with the support of the German Government through the Social Protection Programme – has made significant progress in the development of its social-protection system. The most important milestones in this process are as follows:

• Indonesia's health insurance has established itself as the largest contribution-based health insurance in the world, with a current membership of around 223 million (equal to 85 per cent of the population).
• The conditional basic protection programme (Program Keluarga Harapan/ PKH), expanded from one million families in 2011 to 10 million (approximately 40 million poor people) in 2019.
• The President Decree 70/2019 concerning inclusive cross-sectoral development towards Persons with Disabilities (RIPD) was endorsed.
• The accident insurance and the related return-to-work programme have significantly expanded their memberships to include over 49,000 companies by the end of 2019 thanks to appropriate regulations and collaboration with the German development cooperation and the German Social Accident Insurance Agency.
• The digital giro platform as one of inclusive financial distribution platforms in 22 cities in Indonesia expanded and reached out to at least 0.5 million poor and vulnerable groups in October 2019.