Life or livelihoods? Indonesia’s social policy response to COVID-19

Non-pharmaceutical interventions (NPI) to stop the spread of COVID-19 hit the poor and informal workers in Indonesia particularly hard. Does the government of Indonesia’s (GoI) social protection and labor response consider those most in need?

Government and private actions to contain the spread of COVID-19

As of April 26th, 2020, 8,882 confirmed COVID-19 cases and 743 deaths attributed to the disease were reported (Coronavirus Resource Centre, 2020). After some latency, the GoI set in motion a number of NPIs to slow down the spread of COVID-19 around the archipelago. These actions culminated in the declaration of a public health emergency by President Joko ‘Jokowi’ Widodo on March 31st (Sutrisno, 2020).

The imposed large-scale social restrictions include limitations on a number of persons per location as well as restrictions on transportation and other economic activities (ILB, 2020). Willing or unwilling, formal and informal sectors across the board had to react: large companies like airlines (Mufti, 2020), medium ones like hotels (Khairunnisa SN, 2020) as well as small and micro businesses (Suzuki J, 2020; Suherdjoko & Hari 2020; Eloksari EA, 2020) - e.g. food stalls and textile vendors - alike either limited or temporarily ceased their respective undertakings altogether.[i]

 

Figure 1: Non-pharmaceutical COVID-19 prevention responses and their downstream impact on economies

Source: Adapted from Gourinchas P, 2020

 

The socio-economic fallout of COVID-19 related disruptions of commercial activities

Although reliable data on changes in employment rates or economic activity are still scarce, a number of estimates, predictions and anecdotes have emerged already:

• The Ministry of Finance (MoF) expects its previously envisioned GDP growth rate of 5.3% for 2020 to be reduced by more than half to 2.3% under the expected severe scenario and to -0.4% under an extreme austere scenario (Ministry of Finance, 2020). Within these scenarios, GoI anticipates manufacturing, trade, transportation and hospitality sectors to be most harshly hit by the COVID-19 crisis – with layoffs and bankruptcies to be expected (Ministry of Finance, 2020).
• As a result, GoI predicts unemployment to rise by 5.2 million, while up to 3.78 million to become newly poor (Gobriano MI, 2020).[ii] The SMERU Research Institute’s, in contrast, estimates a range from 1.3 million to 8.5 million people additionally being pushed below the national poverty line. SMERU, therefore, estimates the poverty rate to increase from 9.2% (as of September 2019) to 9.7% under the mild scenario and 12.4% under the severe scenario (Suryahadi S et al., 2020).
• On a more granular level, small business and informal workers who represent approx. 70% of the total workforce (OECD, 2018), report varying degrees of income loss, ranging from 60-80%: from IDR 80k-100k per day down to IDR 30k (Suzuki J, 2020) for app-based ride-hailing providers to 90% reduction in orders for some small and micro businesses (Suzuki, 2020 J; Eloksari EA, 2020). Unsurprisingly, this is troubling news for many working in the most affected sectors (manufacturing, transport, trade etc.), since even before the crisis hit, between 40% and 50% of those working in these sectors already earned less then respective provincial minimum wage (World Bank, 2019).

A hypothetical example to illustrate the impact: An app-based ride-hailing driver in Jakarta Province (DKI), in 2018, earned on average IDR 4.9 million (USD 312) per month (Walandouw P, 2018).[iii] This would place a quintessential driver within Indonesia’s middle class[iv] and above the 40% poorest, who are registered in the national social registry (SIKS-NG/UDB) and thereby potentially have access to some kind social assistance. However, if the above-mentioned anecdotal 80% drop in income holds true, it would signify downward mobility from the aspiring middle class to poor or vulnerable income status, as per World Bank classification (World Bank, 2019).

 

What is the GoI’s social protection and labor response to the socio-economic fallout of COVID-19 related NPIs?

On 1 April 2020, the MoF announced an IDR 405 trillion (USD 25.7 billion) financial stimulus package to counter the economic and social impact on the COVID-19 crisis and its related NPIs (Ministry of Finance, 2020). Amongst others, the package includes also a number of new or adapted social protection and labor market measures totalling IDR 110 trillion (USD 7.1 billion):

 

Table 1: Key characteristics of COVID-19 related GoI SP and labor measures (Gentilini U, et al., 2020; Ministry of Social Affairs, 2020)

Figure 2 below illustrates, how existing and adapted, as well as, new national social assistance programs are ‘staked’ onto each other, by poverty level – for those registered in the national social registry, SIKS-NG (previously known as Unified Database or UDB):

Figure 2: Existing, new and expanded national level social assistance programs for social registry beneficiaries.

Source: Adapted from Socialprotection.org (2020a)

 

Do the measures add up to a coherent and appropriate package?

A thorough analysis in this regard would assess the package’s components along the dimensions of coverage (who has access to benefits?), comprehensiveness (which risks are covered/services provided?) and adequacy (level of benefits/expenses covered?) (Socialprotection.org, 2020). Here, a few overarching remarks should suffice:

• Adequacy and comprehensiveness of benefits for those registered in the national social registry (SIKS-NG/UDB):
  Assessing each benefit/measure on its own in terms of adequacy would provide an incomplete picture, since numerous beneficiaries (especially those who receive the PKH CCT benefits) also have access to other benefits like the Sembako food assistance and waivers to social health insurance contributions and potentially also to (temporary) utility bill waivers. Given that benefit levels have been increased by 25% for PKH and 33% for food assistance, the overall package can be imagined to provide at least a temporary relieve for those who have access to these benefits.
   
• Coverage of informal workers who are not registered in the national social registry (SIKS-NG/UDB):
  Just before the COVID-19 crisis hit the country, the GoI was in early steps to contemplate increasing coverage of ‘the missing middle’ (TNP2K, 2018) i.e. those who were found to be not within the 40% poorest income bracket, but haven’t yet secured a formal, decently paid employment with access to social security. This group – many of them previously earning a living in informal contexts – is at risk of becoming ‘the missing poor’, since they are unlikely to be registered in the social registry and, thereby, won’t have access to the majority of the measures mentioned above in table 1. In fact, many of them will compete to get access to the few programs targeting those who are not registered in the SIKS-NG/UDB. These programs, however, are quite limited vis-à-vis the potential need as well as limited in terms of benefit levels. For instance, the Pre-Employment card’s ceiling is 5.6 million beneficiaries – and specifically targets not just those who lost their jobs, but also previous job seekers like high school and vocational training school graduates and other young people in the age group of 15-24, who are currently not in employment, education or training (approx. 10 million in 2018) (BPS, 2020a; CIA 2020). Those who won’t be able to get access to the Pre-Employment card can only hope to get access to the BLT funds disbursed via the village funds, which exclusively targets rural poor, who are not registered in the SIKS-NG social registry. Otherwise, they will need to rely either on their savings or the goodwill of their family members.

 

Conclusion

GoI made bold moves to protect large segments of the Indonesian population from the severe economic shock that has been induced by the COVID-19 crisis. However, overall, the measures appear to be lacking a coherent approach to ensure no one falls between the cracks of the multitude of programs. This is surprising since the GoI has gathered relatively encouraging experiences (during times of economic hardships in 2005-06 and again in 2008-09) by rapidly rolling out unconditional cash transfers to roughly one-third of the total population even before the existence of the national social registry (UDB).

In more practical terms, it appears GoI is in need of a rapid approach to register and cover those who are newly in need of support. The standard process for needs assessment – a periodic proxy means-based testing of a set of previously tested households – proves impractical to extend coverage to the ‘missing poor’. Against this background, province level authorities, therefore, advocate enlisting the lowest level of local government or community leaders for rapid registration of the newly poor or sudden unemployed (Sammy, 2020). This approach seems to have been envisioned for the registration of rural (newly) poor for the distribution of the above-mentioned BLT via the village funds system (Putri BU, 2020).

An alternative or complementary approach would be on-demand or self-registration via the SLRT (Sistem Layanan dan Rujukan Terpadu/Integrated Service and Referral System), which has yet to develop its full potential as a system of district level one-stop-shops for self-registration into various assistance and service programs (Ministry of Social Affairs, 2017). The SLRT system, however, is currently only sporadically used to register non-UDB (i.e. newly poor) by particularly hard hit urban or semi-urban centers yet (Romadoni M, 2020). Whichever route is taken in the end, the motto should be ‘register and payout now, validate later’ (Socialprotection.org, 2020), since at least some of the newly poor seem desperate (Al Murtadho M, 2020), given the lack of effective access to support.

 

Disclaimer:

Personal capacity contribution. The views, thoughts and opinions expressed in this text belong solely to the author, and not necessarily to any institution or organization the author is affiliated with.

 

References

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[i] A timely study analyzing historical data related to the Spanish Flue’s impact on various US communities, found that those cities that applied strict social distancing measures emerged much stronger economically after the epidemic abated than those cities that abstained from such measures, cf. Correia S. et al. (2020).

[ii] It is not clear, however, whether the mentioned figure of 3.78 million newly poor refers to families – as is usually done by GoI in a poverty related context – or to individuals, as is done with regard to unemployed persons.

[iii] Walandouw’s baseline assumption is a healthy driver, operating on seven days per week, which may or may not be realistic.

[iv] The World Bank classifies anyone as ‘middle’ class who lives between 3.5x and 17x of the respective province’s poverty line (see figure A.31 p. 22 in Word Bank 2019)