Download Why basic income for Indonesia

Why social protection need to
be universal in Indonesia
Presentation for Workshop
Economic development and social protection
Institute of Economics
Federal University of Rio de Janeiro and Celso Furtado
June 28, 2010
Sugeng Bahagijo dan Mickael B Hoelman
INDONESIA
Content
Background
 Three arguments
 The challenges

Background : Growth and poverty
Indonesia is middle income countries: economic pie is
sufficient for social spending - GDP growth is positive 5
percent for the last 10 years (2.300 usd per capita). Indonesia
is part of 20 largest economy – G20.
 Indonesia budget is stable and healthy: 2 percent budget
deficits: annual budget 1000 trilion rupiah (100 billion usd)
 But, a severe poverty and inequality is remain huge and
systematic problem. High rate of maternal and underfive
mortality. Goverment plan to reduce from 13 percent to 8
percent within 5 years (i.e. among women, elderly and
children)
 And, corruption is widespread and systematic, about 30
percent of government and state owned companies
procurements is problematic

Background : Social policy and social
protection
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Limited coverage of social protection, less than 70
million covered by public and health insurance (“you
get what you paid” in health system).
Contributory and Bismarkian type : only for civil
servants and small private sectors
Targeted/selective approach: Health insurance for
poor (jamkesmas) currently cover 70 million
beneficiaries.
Informal sectors and farmers, fisherman etc are
outside the social protection system(i.e health
insurance)
Recents experiences with conditional and
nonconditional cash transfer (PKH and BLT since
2004)
3 arguments for broader social
protection
Minimize the poverty and socio economic
inequality
 Strengthening democracy and trust building
among citizen and between citizen and
government
 Strengthening/complementing the existing
social policy and social protection : more
effective and redistributive social policy in
facing the risk of flexible market and financial
globalization and massive decentralization
(implement Basic Income or BI types as a
universal, citizen rights)

Our proposal; BI types
Universal coverage and monthly basis: but
started for children, women and elderly (at
minimum 150 million beneficiaries)
 2 percent of GDP (Indonesia budget is about
19-20 percent GDP)
 Increase tax revenue target from 13% GDP
to 8% GDP
 Additional tax revenue (0,5 percent of VAT
and 0.01 of all financial/electronic
transaction)
 Better and more effective tax collection
(reduce the massive leakage)

The Challenges
Re designing subsidy : from energy and fuel
subsidy toward social policy and social protection
financing (around 0.5 to 1 % GDP)
 Low level of social spending: less than 1 % GDP
for public health. Less than 1 percent of GDP for
social protection
 Administrative feasibility: PKH-Bolsa familia type
experiment, BLT-direct/unconditional cash
transfer
 Political feasibility: lack of knowledge of social
welfare and social protection. Stagnancy of the
implementation of 2004 Law on social security
(health insurance and pension system)
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