Social protection in Indonesia has evolved rapidly since the Asian Financial Crisis, through both a major scale-up of social assistance and “big bang” reforms to social insurance. This chapter charts this trajectory over the past two decades, outlining the main economic, political and legislative drivers of social protection before examining in greater detail the main programmes that have been established during this period. It provides an inventory of existing schemes, analyses their key design features and scale of operation, and discusses how well they meet the present and future needs identified in Chapter 1, as well identifying major gaps in this regard.
Social Protection System Review of Indonesia
OECD Development Pathways
Chapter 2. Social protection coverage
Abstract
Indonesia’s recovery from the far-reaching economic, political and social consequences of the Asian Financial Crisis of 1997-98 is an international success story. Social protection was poorly developed prior to the Crisis but emerged as an important part of the response and has since played an ever-larger role in Indonesia’s development. As the Government of Indonesia (GoI) confronts the challenges identified in Chapter 1 – a marked slowdown in the decline in poverty, the vulnerability of the middle class, major regional disparities and high inequality – social protection is featuring ever-more prominently in national strategies.
Social protection is growing in prominence
The Asian Financial Crisis, which caused widespread unemployment and a substantial increase in poverty in Indonesia, exposed both a lack of social programmes and major shortcomings in the programmes that did exist. Prior to the crisis, Indonesia’s social protection programmes were traditionally been relief-oriented interventions rather than integrated systems of preventive programmes that keep families from falling into poverty (Jellema and Hassan, 2012[1]). Following the crisis, the GoI set about adopting a stronger set of policies addressing poverty alleviation and implementing centralised social protection programmes (Perdana, 2014[2]). Key legislation related to employment was also introduced, for example through the Manpower Act of 2003.
Three presidents have charted the evolution of social protection in Indonesia: Megawati Sukarnoputri (2001-04), Susilo Bambang Yudhoyono (2004-14) and Joko Widodo (2014-present). Their respective administrations took responsibility for scaling up social assistance and for reforming social insurance, although the degree of continuity between governments has varied.
Social assistance reforms have not occurred in a particularly strategic manner. Each administration has prioritised different programmes over others, experimenting with new programmes and rejecting or reforming programmes based on their impact. The evolution of social assistance, particularly under President Yudhoyono, was strongly influenced by the imperative to compensate poor households (and ward off popular discontent) following cuts in fuel subsidies. Although President Yudhoyono’s ten years in office was a period of major policy development in social assistance, it is notable that budgetary allocations did not increase accordingly (Tomsa, Mietzner and Aspinall, 2015[3]).
The development of social insurance has been propelled by big bang reforms in 2004 and 2011 (Bauer and Thant, 2010[4]). President Megawati initiated discussions around the first far-reaching social insurance reforms, which culminated in the 2004 legislation creating the Sistem Jaminan Sosial Nasional (SJSN; National Social Security System) policy framework. President Yudhoyono’s second administration then oversaw passage of another landmark reform seven years later: the 2011 Social Security Provider Law No. 24, which created Badan Jaminan Sosial Nasional (BJPS; National Social Security Administering Body).
BJPS Kesehatan (henceforth BPJS Health), which began operations in January 2014, was made responsible for Jaminan Kesehatan Nasional (JKN; Public Health Insurance) with the aim of achieving universal health coverage (UHC). BPJS Ketenagakerjaan (henceforth BPJS Labour), which began operations in July 2015, is responsible for employment-related social security.
The SJSN reforms recognised a need to establish a social insurance system with much greater expanded coverage than previous arrangements had achieved. As this chapter and Chapter 3 will discuss, the BPJS Health has been much more effective than BPJS Labour in this regard. At the same time, there is growing recognition of the need to create a system of social assistance, which has evolved in a highly fragmented manner with little coherence between the various institutions involved. Overall, 37 programmes social protection programmes were implemented in 2015, up from 30 in 2012 (Adioetomo, Pardede and Quarina, 2012[5]).
The National Medium-Term Development Plan (RPJMN) for 2015‑19 calls for a social protection system to cover the entire population based on comprehensive coverage of all citizens throughout the lifecycle and for special programmes for the poor. The strategy also calls for improved targeting of social assistance to increase coverage among the poor population. An objective under Outcome 2 – Equitable access to social services and social protection – is the ‘integration of several family-based social assistance schemes for poor and vulnerable families that have children, disabled, and elderly in the form of conditional cash transfers and/or through in-kind assistance to support nutrition’.
As this report will discuss, there are many dimensions to establishing a social protection system. These include not only coherence between programmes but also between institutions, information systems, targeting systems and financing arrangements.
Box 2.1. Social protection in rooted in the Constitution
Social protection is recognised as a basic human right by Indonesia’s constitution, which was promulgated in 1945 and amended in 1999, 2001 and 2002.
Article 28 enshrines that:
Every person shall have the right to live in physical and spiritual prosperity, to have a home and to enjoy a good and healthy environment, and shall have the right to obtain medical care.
Every person shall have the right to receive facilitation and special treatment to have the same opportunity and benefit in order to achieve equality and fairness.
Every person shall have the right to social security in order to develop oneself fully as a dignified human being.
Meanwhile, Article 34 stipulates that:
Impoverished persons and abandoned children shall be taken care of by the
The state shall develop a system of social security for all of the people and shall empower the inadequate and underprivileged in society in accordance with human dignity.
The state shall have the obligation to provide sufficient medical and public service facilities.
Social assistance has evolved in a fragmented fashion
Formal social assistance programmes emerged after the Asian Financial Crisis and have since experienced strong growth. Social assistance in characterised by multiple programmes implemented by a number of different line ministries. It encompasses various programmes, from conditional cash transfers (CCTs) to food subsidies and student scholarships. A key impetus behind growth in social protection since 2005 has been the phasing out of fuel subsidies. Social assistance programmes were implemented to cushion the impact of these reforms and were financed by the resultant decline in tax expenditure.
As will be discussed in Chapter 4, social assistance has received relatively low levels of funding; social assistance accounted for 29.7% of total social protection spending in 2015 (Adioetomo, Aninditya and Radjiman, 2016[6]). However, this is starting to change, in part because there is political support for the investment case for social assistance. The administration of President Widodo has placed social protection at the centre of its inclusive growth strategy (World Bank, 2017[7]). As Chapter 3 explains, not many of the programmes outlined in this section are achieving their potential in terms of reducing poverty and inequality.
Background
Following adoption of the 1945 Constitution, social protection was primarily provided by families and communities rather than centralised government initiatives (Kwon and Kim, 2015[8]). Poverty reduction was not a policy objective until the early 1990s (Perdana, 2014[2]). Social assistance during the New Order administration (1966‑98) was characterised by religious-based protection, Zakat (the social protection institution of Islam), whereby each Muslim is obliged to contribute in cash and in kind at religious festivals to support poorer Muslims. In 1968, Zakat was installed as a semi-governmental operation to distribute welfare to the population (Kwon and Kim, 2015[8]).
Prior to the Asian Financial Crisis, social spending consisted principally of supply-side improvements in health, education and infrastructure (water, sanitation, electrification) (Sudarno and Bazzi, 2011[9]). In the aftermath of the crisis, which led to mass lay-offs and high inflation, an additional 36 million Indonesians were pushed into poverty, driving the poverty rate up to 24%.
At the same time, a political shift towards a more democratic government provided a more conducive environment for national social protection initiatives (Jellema and Hassan, 2012[1]). In 1998, the GoI established a social safety net programme, Jaring Pengaman Sosial (JPS), which offered temporary relief programmes providing access to food, health care and education for those affected by the crisis (Perdana, 2014[2]). The JPS programmes were found to be inefficient due to mis-targeting and low coverage (Mukul, Zen and Dita, 2018[10]).
Over the past two decades, the GoI has transitioned from a traditional relief-response outlook to a longer-term developmental agenda that incorporates social protection more comprehensively. In 2008, the Ministry of National Development Planning (BAPPENAS) introduced the Possible Social Protection Reforms for Indonesia report, which detailed the shortcomings of existing social programmes and committed to developing effective programmes (Kwon and Kim, 2015[8]).
The RPJMN for 2015‑19 focuses on reducing inequality between income groups and between regions as a necessary condition for stronger economic growth and shared prosperity. (Perdana, 2014[2]). Social protection is a critical component of the RPJMN, featuring in two of the four outcomes.
Social assistance programmes
For the most part, the GoI’s budget allocation for social assistance programmes, Dana Bantuan Sosial (Bansos)1 is managed by the Ministry of Social Affairs (MoSA). However, resources for social assistance are also shared with other line ministries and institutions that implement social assistance programmes.
The Bansos fund is intended to cover six functions of social assistance:
1. protect, prevent and handle the risk of social vulnerability among individuals/families/groups/communities so that their basic needs are fulfilled
2. help rehabilitate people with a dysfunctional ability to recover
3. meet the basic needs of the whole population through an institutionalised scheme
4. empower individuals with social problems to meet their basic needs
5. alleviate poverty among people/families/groups/communities not in work or with insufficient work to fulfil their needs
6. disaster preparedness and management programmes and policies.
This section provides information about a range of social assistance programmes intended to protect individuals against the risks identified in Chapter 1. These programmes, which vary substantially in terms of expenditure and coverage, are implemented by a wide range of institutions; in a number of cases, social protection is not their core mandate. A full inventory of social assistance is provided in Annex 2.A.
Food assistance
Rice for the Poor: Rastra
Rastra (formerly Raskin) provides subsidised rice for the poor. The programme was initiated in 1998 to reduce the impact of the rise in food prices following the Asian Financial Crisis by reducing the burden on household food expenditure and stabilising the price of rice. Rice accounts for almost one-quarter of poor households’ total average monthly expenditure (Timmer, Hastuti and Sumarto, 2017[11]). The allocation of subsidised rice was 15 kg per poor household per month in 2017, at a price of approximately IDR 1 600 (USD 0.12) per kg.2
Households eligible for Rastra are registered in the UDB, although not all poor and vulnerable households in the UDB receive Rastra. Since 2013, Rastra covered 15.5 million households, representing 62% of households in the UDB and about one-quarter of all households in Indonesia (Timmer, Hastuti and Sumarto, 2017[11]). In 2017, a reform was initiated to integrate Rastra with an electronic food voucher system, Bantuan Pangan Non Tunai (BPNT).
Through the BPNT, households receive an electronic savings card to be used in E-Warongs – shops appointed by the bank to sell food commodities to BPNT recipients via Electronic Data Capture machines.3 In 2017, the GoI entered into an agreement with Himpunan Bank Milik Negara (The Assemblage of State Owned Banks) to disburse BPNT benefits. Every eligible household receives IDR 110 000 (USD 8.36) per month to buy rice or sugar with the savings card. In 2017, the programme was implemented in 44 cities4 but had not been implemented in rural areas due to infrastructure constraints. Approximately 1.2 million households benefited from the BPNT in 2017, with an allocated budget of IDR 1.6 trillion (USD 0.12 billion) (Kusnaini, 2017[12]). In 2018, the BPNT was expanded to 219 districts, covering 10.3 million households. The full integration of Rastra and BPNT is expected to be completed in 2019, with an expansion to the remaining 295 districts and an additional 5.3 million households (TNP2K, 2018[13]).
Box 2.2. The Unified Database is the basis for a social assistance system
In 2005, the GoI began developing the Basis Data Terpadu untuk Program Penanggulangan Kemiskinan (henceforth Unified Database, UDB), an electronic database containing social, economic and demographic information. This was an important first step in establishing the information architecture for social protection and allows for a major scaling up of social assistance programmes
A Statistics Indonesia survey, the Pendataan Sosial Ekonomi (PSE; Socioeconomic Data Collection), was the starting point for the UDB. The 2005 survey included basic information on 19 million households in the bottom 30% of the income distribution. Surveys conducted in 2008 and 2011 by the newly established Tim Nasional Percepatan Penanggulangan Kemiskinan (TNP2K; National Team for the Acceleration of Poverty Reduction of the Vice President’s Office) increased coverage to 24.7 million households, representing the poorest 40% of the population, or about 96.4 million individuals.
Initial categorisation of households involved 14 non-monetary variables to compute a weighted welfare index. Subsequent rounds relied on a proxy means test to score households, constantly improved to targeted outcomes. To improve the UDB’s accuracy and enhance traction at a local level, an update in 2015, which surveyed 28 million households, involved public consultation forums with groups of around 20 villagers and community leaders to decide which households should continue registered, be added and be dropped (World Bank, 2017[7]).
The UDB is the foundation for various programmes, including Beras Sejahtera (Rastra, formerly Raskin; Rice for the Poor), JKN, Bantuan Siswa Miskin (BSM, Cash Assistance to Poor Students), Program Keluarga Harapan (PKH; Family of Hope Programme) and Smart Indonesia Programme, as well as local poverty reduction programmes. PKH is the only programme to fully adopt the UDB to generate quotas and determine eligibility, and to implement an update procedure. TNP2K, BAPPENAS and the MoSA are currently piloting on-demand applications to update the UDB to reduce exclusion errors (World Bank, 2017[7]).
The UDB is currently managed by an inter-ministerial working group lead by the Ministry of Social Affairs, including TNP2K, Ministry of Planning, Coordinating Ministry of Human Development and Culture, Ministry of Education, Ministry of Health, Ministry of Home Affairs (Civil Registry), BPJS, the Central Bureau of Statistics. The working group is organised around three main functions:
1. supporting access to and use of the UDB
2. developing, implementing and maintaining the infrastructure to ensure the availability, security and integrity of UDB data
3. monitoring the use and evaluating the performance of the UDB for targeting, as well as investing in research for continuous improvement of the system.
Education
Assistance for Poor Students: Programme Indonesia Pintar (PIP)
In 2015, President Joko Widodo launched PIP, a collaboration between the Ministry of Education and Culture (MoEC), MoSA and the Ministry of Religious Affairs (MoRA), as an improvement over the previous Poor Student Assistance Programme (see PIP analysis in Chapter 3). The MoEC implements PIP for elementary, junior and senior high school, while the MoRA implements it for religion-based schools: Madrasah Ibtidayah (elementary), Madrasah Tsanawiyah (junior high school) and Madrasah Aliyah (senior high school).
PIP supports school-age children aged 6-21 through cash transfers to reduce education expenses and thereby prevent dropout. In particular, it targets poor and vulnerable households in the bottom quartile. Each eligible student receives a Kartu Indonesia Pintar (KIP; Smart Indonesia Card). Students can register by bringing their Kartu Keluarga Sejahtera (KKS, Family Welfare Card) to the nearest education facility or showing their Surat Keterangan Tidak Mampu (SKTM, Certificate of Poverty) (Ministry of Education and Culture, 2016[14]). Benefit levels range between IDR 450 000 to IDR 1 000 000 per year, depending on the grade. Beneficiaries are encouraged to use these transfers for school supplies, transport and fees. As of 2017, more than 18 million students had benefited.
Student Scholarships: Bidikmisi
The GoI also provides scholarships, or Bidikmisi (Special Assistance for Students), for study at general and religion-based universities to improve access for those with the potential but not the means. The Ministry of Research, Technology and Higher Education (MoRTHE) and MoRA implement Bidikmisi collaboratively. The MoRA implements Bidikmisi for religion-based universities.
Cash transfers
Family of Hope Programme: Program Keluarga Harapan (PKH)
In 2007, the GoI launched PKH, the first conditional cash transfer programme in Indonesia. Administered by the MoSA, it seeks to improve the quality of human capital by providing cash transfers conditional on households accessing specified health and education services. The PKH helps reduce the burden of household/family expenditure for very poor households (the immediate consumption effect), while investing in future generations through improved health and education (the human capital development effect).
PKH provides a combination of short- and long-term assistance (Nazara and Rahayu, 2013[15]). As it encourages beneficiaries to access and use basic health, nutrition and education services, it is expected to promote future generations’ opportunity and productivity (World Bank, 2017[7]). In particular, PKH conditionalities consist of health check-ups for pregnant women, newborns and toddlers, and school attendance for children aged 6‑18.
Beneficiaries are households in the UDB that rank below a certain poverty cut-off and contain one of the following:
a pregnant or lactating woman
at least one child under age 6
children aged 7‑21 attending elementary or high school
children aged 16‑21 who have not yet completed basic education
an older person age 70 or over not covered by other social assistance transfers, or a person with a severe disability (new as of November 2016).
Beyond the cash transfer, PKH also provides Family Development Sessions through monthly meetings targeting mothers. These information sessions aim in particular at improving parenting skills, healthy behaviours, child protection, household financing and productive economy, including saving behaviour, financial literacy and business advice.
PKH recipient households that are no longer categorised as poor, do not meet other criteria or have received benefits for six years are no longer eligible and are considered to have graduated from the programme. Households still qualifying after six years are eligible for a three-year extension (transition period), after which they are considered to have graduated from the programme and to have access to other social assistance programmes, such as Kelompok Usaha Bersama (KUBE; Co‑operative Business Groups), discussed below.
As of 2016, the PKH was the third-largest CCT in the world, with a massive and rapid scale-up in coverage, from 3.5 million families in 2015 to 6 million families (about 9% of the population) by the end of 2016 and 10 million households in 2018 (World Bank, 2017[7]). PKH is among the largest social assistance programmes in Indonesia, estimated to have cost IDR 8 964 billion (USD 681 million) in 2016, of which 89% was spent on benefits (World Bank, 2017[7]).
Neglected Elderly Social Assistance: ASLUT
Under the Asistensi Sosial Lanjut Usia Terlantar (ASLUT), the GoI provides social assistance for abandoned or neglected people age 70 and older (age 60 and older, if bedridden) who do not have a regular income to fulfil basic needs and suffer from sickness or are unable to perform daily activities. Beneficiaries are entitled to IDR 200 000 (USD 15.2) per month. The programme helps caregivers meet beneficiaries’ basic needs and provides for other social rehabilitation services. In 2017, the GoI allocated IDR 61.1 billion (USD 4.6 million) for approximately 30 000 beneficiaries.
To identify and determine beneficiaries, local/district social offices collect data, and select and document potential beneficiaries and the waiting list. If beneficiaries die, move out or no longer fulfil the criteria, the programme assistant sends an update and details of the beneficiary replacement to the Direktorat Rehabilitasi Sosial Lanjut Usia (Directorate of Elderly Social Rehabilitation). Every beneficiary is given an ASLUT ID Card with information their bank account, name, age, sex and address.
Co‑operative Business Groups: KUBE
KUBE was designed as a strategy for still-poor households graduating from the PKH after six years. Following a recertification process, these households are granted an additional three years of transfers, complemented by additional livelihood and support from programmes like KUBE (a follow-up to the Family Development Sessions) to set up sustainable businesses.
KUBE assists households in building a sustainable path out of poverty during a three-year transition period, providing necessary supports to develop or participate in economically productive activities through cash or in-kind transfers. The programme encourages the creation of group-based microbusinesses by providing capital to groups of seven to ten people from poor households, along with entrepreneurship and business training (World Bank, 2017[7]). Around 20 000 KUBE-PKH groups received grants of up to IDR 20 million (USD 2 000) in 2015 (World Bank, 2017[7]). Recent developments include continued web-based training for PKH facilitators to better support beneficiaries with business proposals and to manage the KUBE-PKH database monitoring their business activities.
The Direktorat Penangan Fakir Miskin Perdesaan and the Direktoran Jenderal Penanganan Fakir Miskin, Kemensos run KUBE. The MoSA administers and finances it through the social assistance budget. In 2017, KUBE reaching 53 600 beneficiaries with a budget of IDR 292 billion (Kusnaini, 2017[12]).
Empowerment of the Indigenous Community: Komunitas Adat Terpencil (KAT)
The GoI recognises 1 128 ethnic groups among its population of 250 million. Some indigenous communities are characterised as KAT if they are geographically isolated. The three-year programme improves access to essential services in these communities by developing housing and providing a living allowance and essentials, such as clothing and bedding. The MoSA implements the programme, investing in basic infrastructure, including roads, transport and electricity, and improving access to information.
Every beneficiary household receives four components of assistance during the three years:
1. residential quality improvement (provision of simple residence/houses)
2. environment facilities (provision of toilets, worship/prayer places, community halls and lighting devices. Construction involves local people)
3. life insurance (to support a focus on mental health mentoring, motivation sessions and other human resource development opportunities)
4. plant seeds, work equipment and household utensils (includes land certification).
In 2017, the GoI allocated IDR 94.9 million (USD 7.2 million) to 2 064 households with limited access to basic social services, dependent on natural resources, marginalised in rural or urban areas, located in the borders, coast or outer and remote islands (Kusnaini, 2017[12]).
Social Assistance for Children and Family Development
This programme provides social services and rehabilitation to fulfil children’s basic needs, such as nutrition, care and schooling. Beneficiaries are children neglected or abandoned, street children, children who commit crimes (juvenile delinquencies), children with disabilities, and children who need special protection (including victims of natural disasters).
In 2017, the GoI allocated IDR 63.8 million to 77 420 beneficiary children. The benefit is up to IDR 1.1 million per year, consisting of IDR 200 000 for eligible children, IDR 200 000 for parents of children with disabilities and children who need special protection, and IDR 700 000 for meeting children’s basic and nutritional needs.
Benefits are disbursed to the organisation that files the application and manages the child’s capacity-building activities. The Social Assistance Fund is transferred to the Lembaga Kesejahteraan Sosial Anak (Child Social Welfare Institution), which submit a proposal for child and family development to the district- or city-level social office, along with a statement of willingness to take care of the children and their families.
Social Assistance for the Severely Disabled: Asistensi Sosial Penyandang Disabilitas Berat (ASPDB)
The ASPDB provides essential services to people with disabilities and those suffering physical or mental deficiencies that limit their ability to conduct physical, spiritual or social functions adequately. Direct cash transfers of IDR 300 000 per person per month are provided only to caregivers or family members of people with severe disabilities to maintain their health and meet their daily basic needs. In 2017, the GoI allocated IDR 67.5 million to 22 500 beneficiaries.
To identify and determine beneficiaries, local or district social offices gather information on the potential beneficiaries and their families, including name, address, type of disability, household socio-economic profile, recipient ID number, full body picture showing physical disability, copy of family registry card,5 copy of ASPDB recipient ID document (if already registered), and copy of household head and guardian ID cards. The MoSA receives information on the potential beneficiary from the community, non-governmental and other grassroots organisations, and mass media selected and verified by social offices at the district and province levels.
Rehabilitation and Social Assistance for Drug Addicts: Rehabilitasi dan Perlindungan Sosial untuk Korban Penyalahgunaan Napza
This programme supports drug and alcohol addiction recovery – rehabilitating beneficiaries to regain and enhance self-confidence, thereby encouraging and enabling them to be more responsible for their lives – through “self-help groups”. The monetary benefit is provided to social development centres and social care centres that conduct the rehabilitation. The 2011 Annual Report of the Ministry of Social Welfare reported 4 810 drug addicts were rehabilitated under the programme for the drug addicts. Beneficiaries increased to 14 394 in 2015.
Social Assistance for Socially Vulnerable People: Perlindungan Sosial untuk Tuna Sosial
This programme targeted the socially vulnerable, such as juvenile delinquents, ex-convicts, victims of drug abuse, the homeless, beggars, people living with HIV/AIDS, transvestites and abandoned people with chronic diseases. It provides support to improve their basic social services through activities that fulfil basic needs or increase social institutions providing assistance and rehabilitation services. The programme assisted 7 967 in 2011 and 7 430 in 2015.
Stimulus Assistance for Housing: Bantuan Stimulan Perumahan Swadaya (BSPS)
Through BSPS, the Ministry of Public Housing (MoPH) provides social assistance to develop new housing, improve the quality of housing, or develop and improve the public facilities, empowering low-income households to build or improve the quality of their homes and ensure a secure dwelling.
BSPS is specifically targeted at low-income households in coastal, remote, natural disaster-prone and slum areas. Assistance is directly transferred to eligible households through community-based institutions. In 2017, the BSPS budget reached IDR 1.8 trillion (USD 139.6 million), covering 110 000 beneficiaries (Kusnaini, 2017[12]).
The MoPH provides other subsidies for public housing: Facility of House Financing, also known as subsidy for mortgage loans; subsidy for bank interest; and subsidy for down payment fee. To access these, beneficiaries must be Indonesian citizens (proved by national ID Card), not own a house, never have received a government housing subsidy, have a tax ID number, have proof of tax payment, have a monthly income not exceeding IDR 4 million (USD 304.1) for a rumahtapak (ordinary house) or IDR 7 million (USD 532.16) for rumahsusun (flat). Informal workers with uncertain monthly incomes may pay daily or weekly instalments, in accordance with bank regulation.
Uninhabitable House Rehabilitation Programme: Rahabilitasi Rumah Tidak Layak Huni (RS-RTLH)
This GoI programme provides social assistance for PKH beneficiaries and other poor families with social welfare cards to improve their housing and sanitation facilities. The MoSA implements the programme, which was estimated to cost IDR 25 650 000 000 million (USD 1.9 million) in 2017, according to the budget (TNP2K, forthcoming[16]).
Beneficiaries are poor households included in the UDB that meet the following criteria:
receives Rastra benefits or has a KKS, KIS or letter from head of village stating a person or household is poor and eligible to receive SKTM assistance from head of village over duty stamp or is registered in the PKH
has an ID Card or other ID and valid family identification card and/or
has a house on his/her own land, proved by certificate of ownership or other documents.
Social insurance is leading systematisation of social protection
Social insurance in Indonesia has a much longer history than social assistance, with some programmes pre-dating the New Order administration. Historically, public social insurance consisted of four operators: ASKES (mandatory health insurance for civil servants), TASPEN (mandatory old-age security defined benefit programme for civil servants), ASABRI (mandatory old-age security defined benefit programme for the armed forces) and JAMSOSTEK (mandatory retirement, work accident and death benefits for formal workers in the private sector).
An overhaul of social insurance provision began with SJSN Law No. 40 of 2004, which mandated universal social security coverage for all Indonesians, including health care, work accident, old-age savings, pension and death. In particular, the law stipulates entitlements for the entire labour force, including the gradual inclusion of informal workers through a staircase approach, with non-contributory schemes for the poorest, contributory schemes with nominal contributions for the self-employed and informal workers, and statutory social security schemes with contributions set as a percentage of wages for formal workers (Mukul, Zen and Dita, 2018[10]).
The SJSN Law mandated that social security should guarantee the fulfilment of basic needs through an integrated and comprehensive system. Law No. 24 of 2011 and Presidential Regulation No. 109 of 2013 provided the regulatory and policy framework for systematisation (Government of Indonesia, 2011[17]; President of the Republic of Indonesia, 2013[18]). These established BPJS as the implementing agency of social security and outlined the gradual stages of social security programme participation.
BPJS is responsible for specific areas of coverage through two management bodies: (BPJS Health; health care coverage based on the ASKES operator) and BPJS Labour; arising from a merger of TASPEN, ASABRI and JAMSOSTEK) (Mukul, Zen and Dita, 2018[10]). Dewan Jaminan Sosial Nasional (DJSN; National Social Security Board) is the oversight body for BPJS Health and BPJS Labour.
Old-age and work accident programmes
Since July 2015, BPJS Labour has implemented all social security programmes for employees and non-wage or informal workers (PBPU). Coverage has not increased at the same rate as membership of JKN: at the end of 2018, there were 30.5 million members (News Desk, The Jakarta Post, 2019[19]).
Prior to the 2015 reform, JAMSOSTEK administered benefits for private sector workers. TASPEN remains the administrator of benefits for civil servants, while ASABRI administered those for armed forces personnel. ASKES, TASPEN, ASABRI and JAMSOSTEK were hampered by low investment returns, poor governance, limited benefits and low coverage (Mukul, Zen and Dita, 2018[10]).
The Jaminan Pensiun (JP), created in 2014, is governed by the SJSN Law, Articles 39 to 42. It is compulsory insurance for workers in the formal private sector to help participants and their dependents maintain a decent standard of living in case of loss of income due to death, total permanent disability and retirement. It is run on a defined benefit basis, with benefits paid either as an annuity (for those with at least 15 years of contribution) or a lump sum (for those with less than 15 years of contribution. It acts as an old-age pension and disability pension but also covers the family, including the contributor’s parents, spouse and children. Employees and their employers pay contributions (1% and 2%, respectively, to be increased over time to 8% total). PBPU contribute 3% of their income (Mukul, Zen and Dita, 2018[10]).
The Jaminan Hari Tua (JHT; Old-Age Savings) provides a guarantee against social and economic risks upon retirement, resignation, lay-off without active employment, or permanent emigration from the territory of Indonesia. BPJS delivers the programme under the SJSN law, and it is mandatory for all, including informal workers. For formal workers, the employee contribution rate is 2% of wages and the employer rate is 3.7% of wages. The contribution rate for informal workers is defined by the GoI.
JHT benefits are paid as a lump sum upon reaching retirement (minimum age 56 years), the amount corresponding to the accumulated value of contributions plus investment returns (guaranteed at the minimum of average time deposits rate of state-owned banks). One-time partial withdrawal before retirement is allowed for individuals who have contributed for ten years.
The Jaminan Kematian (JKM; Death Benefit) provides for participants upon the death of their wives/husbands/children or for families upon the death of participants. It is paid to heirs if participants die during the active period. This includes a lump-sum compensation, periodic compensation, funeral expenses and scholarships for children. For wage or formal workers (PPU), the premium is 0.30% of monthly wages while for non-wage earners (PBPU), it is set at IDR 6 800 (Indonesian rupiah).
Jaminan Kecelakaan Kerja (JKK; Occupational Accident Benefit) provides protection against the risks of work-related accidents, including those incurred in transit to or from work and illness caused by the working environment. Employers pay the premium, which varies from 0.24% to 1.74% of the monthly wage, depending on the degree of risk of the work. Beneficiaries receive both health treatment and a cash transfer paid to either the affected worker or the family of those who suffer a severe disability.
PT Tabungan Asuransi Pegawai Negeri (PT TASPEN, Civil Servants Insurance Savings) manages the JKK, Old-Age Security, Pension Insurance and JKM/Insurance for retired government workers. Under these schemes, a retired civil servant receives a monthly pension benefit and a lump-sum benefit at retirement age. In 2015, PT TASPEN had 4 402 391 participants, and total expenditure for claims and benefits was IDR 11.15 million (PT TASPEN, 2016[20]). Participants consisted of civil servants from the central government, civil servants in the autonomous region, state officials, state-owned enterprise (SOE) participants, judges and veterans.
Both PT ASABRI and PT TASPEN are to be integrated within BPJS Labour by 2029 (Silaban, 2015[21]). However, this is not yet a plan for how this will occur.
Armed forces and police personnel are also covered by pension and old-age saving benefits with additional occupational injuries benefits and life insurance. Asuransi Angkatan Bersenjata Republik Indonesia (PT ASABRI) manages the savings and insurance programmes for the armed forces. The retirement age for military personnel varies depending on their level: age 53 for the lowest level (Tamtama) and age 58 for officers (Perwira).6 PT ASABRI health insurance covered approximately 1.18 million military and police personnel in 2015 and incurred expenditure of IDR 1.03 trillion.
Health insurance
While the right of all citizens to be physically, mentally and spiritually healthy was included in the Basic Health Law of 1960, the greatest changes in the implementation of the health care system have taken place since 2000, with the ambitious declaration in 2012 to achieve UHC by 2019. The legislative path to UHC has been marked by domestic political concerns, decentralisation and the increasing importance of health services as an electoral issue (Pisani, Maarten and Nugroho, 2017[22]).
Law No. 24 of 2011, which created BPJS Health, was a significant milestone towards UHC. BPJS Health is a non-profit trust fund replacing the PT JAMSOSTEK, Jamkesmas and PT ASKES schemes, which had been controversial and unpopular due to operational dysfunctions, inaccurate targeting and issues in the supply of services (Pisani, Maarten and Nugroho, 2017[22]). BPJS Health’s main mission is to implement JKN, in particular to manage its membership, collect premium from contract providers and make direct payments to providers. It also co‑ordinates with BPJS Labour in cases of road traffic injuries and work accidents.
BPJS Health operations started in January 2014 with 111.6 million members, a number which quickly exceeded the roadmap goal of 121.6 million to reach 133.4 million at the end of 2014. Coverage increased further, to 171.9 million at the end of 2016, and 203 million (75% of the population) in October 2018 (Agustina et al., 2019[23]). To achieve UHC by the end of 2019, JKN would need to cover 257 million individuals, making it the world’s largest UHC plan.
There are two main categories of JKN participant: non-contributory members registered as Penerima Bayaran Iuran (PBI) and contributory members (non-PBI). PBI members are individuals identified as poor and near poor by the UDB who receive a 100% subsidy from the GoI, which pays their premiums directly (Mahendradhata et al., 2017[24]). PBI members receive a Kartu Indonesia Sehat (KIS; Healthy Indonesia Card).7 Total beneficiaries increased from 86.4 million in 2-14 to 117 million in 2018 (including members of locally run schemes).
Figure 2.1. JKN coverage and type of membership
Source: Dewan Jaminan Sosial Nasional, JKN (website), http://sismonev.djsn.go.id/kepesertaan/index.php (accessed December 2018).
Non-PBI members consist of PPU, PBPU and non-workers (BP). PPU include civil servants, military officers, police officers, government officials, government officials with no civil servant status, private workers and workers not included in previous categories but who receive wages, including foreigners who have been working in Indonesia for at least six months. A great majority of these workers had health insurance coverage prior BPJS Health implementation, for instance through PT ASKES and PT JAMSOSTEK. Private sector PPU members contribute 4.5% of monthly wages to JKN, with their employers contributing 0.5%; public sector PPU members contribute 2% and their employers 3% (Mahendradhata et al., 2017[24]).
PBPU are those working without contract (or independent workers), including foreigners who have been working in Indonesia for at least for six months, those with irregular incomes, the self-employed and other individuals who were previously not covered by health insurance but can, under JKN, voluntarily register themselves and their family members. PBPU members can choose among three benefit packages, ranging from IDR 30 000 per member per month for benefits in the third class ward to IDR 51 000 for benefit services in the second class and IDR 80 000 for benefits in the first class ward (Mahendradhata et al., 2017[24]).
BP are investors; employers; pension beneficiaries (retired civil servants, retired military personnel, retired government officials, widowers or orphans of pension beneficiaries); veterans; national independence heroes; widowers; orphans of veterans and national independence heroes; and non-employees not included in previous categories but able to pay the insurance premiums.
The social insurance premium was set at IDR 23 000 per person per month in 2017 (World Bank Group, 2016[25]). Both PBPU and BP are contributory members of JKN and, as such, should pay monthly premiums. However, their contribution habits threaten the system’s sustainability, as discussed in Chapter 4.
JKN benefits have been revised several times since initial regulation in 2013 by the Ministry of Health (MoH). Packages stipulate benefits not covered (vs. those covered), such as services that do not follow procedures, services in non-BPJS-contracted facilities, services covered by the JKK, services abroad, disorders caused by drug or alcohol addiction, self-harm, traditional medicine, experimental procedures and disaster situations (World Bank Group, 2016[25]).
While the expansion of JKN has allowed inclusion of poor and near-poor households in national health insurance as PBI members, an issue arises among households with workers who are not poor but may not be able to afford the premiums to be integrated as PBPU members. Three-quarters of the top 60% of the income distribution work informally and are ineligible as PBI but might face difficulties providing regular contributions.
Segments of the population are thus left unprotected by both social assistance programmes for the poorest households and social insurance programmes for workers able to pay contributions. For example, only 52% of individuals aged between 20 and 35 years in the middle of the income distribution were registered with JKN in 2018 and there are also notable gaps in coverage for children from birth up to the age of four (Agustina et al., 2019[23]).
Labour market programmes are too small to increase productivity
The GoI’s vision for social protection involves empowering groups that are currently poor or vulnerable to make a full contribution to Indonesia’s economy and share in its prosperity. While social assistance is capable of promoting long-term human capital development and breaking the inter-generational transmission of poverty, active labour-market policies are also important, particularly in the short term, in increasing the skills and productivity of poor, vulnerable and marginalised workers. However, such programmes are currently implemented at relatively small scale, with small budget allocations. Meanwhile, passive labour market policies are better established but compliance with severance pay and minimum wages is uneven.
Active labour market policies
According to the Asian Development Bank, labour market programmes account for a small fraction of Indonesia’s social protection expenditure. In 2012, Indonesia had a Social Protection Index of 0.03 for labour market programmes: expenditure on such programmes averaged over all potential beneficiaries represented only 3% of per capita overall poverty line expenditure (ADB, 2013[26]).
Active labour market programmes are primarily implemented by the Ministry of Manpower, MoEC and Ministry of Agriculture (MoA). The main labour market programme is the Life Skills Education Programme (LSEP), administered by the MoE and funded by the Social Assistance Fund. This programme has two components: Assistance for Community Life Skills Programme and Community Entrepreneurship Education. The LSEP helps dropouts, the unemployed and the poor acquire competitive and improved work skills and secure entrepreneurship opportunities.
Beneficiaries include the following individuals:
aged 16‑40, especially KIP holders
aged 16‑21 with KKS
dropped out of school or not continuing studies (including those attending school equalisation programmes, except for vocation school equalisation programme) and never joined similar programmes
not attending an education programme or similar training funded by the state or provincial budgets
willing to follow an education programme and develop incubator businesses.
Indonesia does not implement a national-level public works programme. However, some 90% of financing from the Village Funds is allocated to small-scale local infrastructure projects (mostly road building), meaning that they have a strong public works rationale. The extent to which they can be classified as social protection programmes varies, however, with some villages placing much more emphasis on employing unemployed individuals (especially youths) that others (Gama, Saget and Elsheikhi, 2018[27]).
The significant expansion of the Village Funds recalls the Program Nasional Pemberdayaan Mandiri (PNPM, Community Empowerment Programme) established by the administration of former president Yudhoyono in 2006 to accelerate the decline in poverty and promote equality. The PNPM, implemented by the Ministry of Home Affairs on a nationwide basis, built on the successes of the Kecamatan Development Programme and the Urban Poverty Project.
The PNPM was aimed at reducing poverty and addressing broader measures of deprivation through community-driven development. Projects were chosen through a participatory process, with a particular emphasis on improving local infrastructure and increasing access to social services, particularly health and education. Micro-credits were also made available to some 30 000 groups (World Bank, 2012[28]; Centre for Public Impact, 2017[29]).
The PNPM was found to be effective at reducing poverty, especially in poor sub-districts, but did not benefit groups that were marginalised for other reasons. It also increased employment and use of health services (including immunisations and ante-natal visits) but had little impact on school enrolment. It is notable that communities considered the programme to be for the community as a whole rather than for poor, vulnerable or marginalised households (World Bank, 2012[28]).
The PNPM’s success has clearly been a driving force behind the Village Funds programme, which has sought to reinforce community ownership and strengthen village-level governance structures. The World Bank has proposed that Indonesia implement a public works programme as part of a shock-responsive social protection system but at present this doesn’t appear to be under consideration.
Passive labour market policies
Passive labour market programmes are prominent in the social protection landscape. Indonesia does not operate an unemployment insurance fund but workers who lose their jobs are, in theory, protected by a system of severance pay. Current severance pay regulations were established by Law No. 13 of 2003 on Manpower, which increased the level of payment that employers were required to make from previous levels.
Under the 2003 legislation, three forms of benefit exist for workers who leave a job: severance pay, a reward for working time and a compensation fee. Eligibility for the different benefits depends on the reason for leaving a job, and the total benefit varies by years of service, as well as whether a worker contributed to a private pension arrangement (ILO, 2017[30]). As a result of this dispensation, severance pay rates are significantly higher in Indonesia than elsewhere in the region; after 20 years if service, employees might be eligible for a lump-sum payment equivalent to 30 months’ salary.
Employers, who are responsible for making these payments, complain that severance pay imposes a significant cost and impacts heavily on their ability to hire or dismiss workers. This was a particularly contentious issue during the Global Financial Crisis and is likely to remain important as Indonesia’s labour market confronts the impact of the Fourth Industrial Revolution.
However, the impact of severance pay arrangements on the efficient functioning of the labour market is diminished by low compliance rates. The World Bank (2012[31]) finds that “approximately one-third of legally-eligible employees actually receive severance pay after a job separation. On average, the ratio of the severance pay received to the legally-entitled amount is below 40%. The product of these two ratios yields a wage-loss protection share of between 10% to 14% of eligible severed workers’ monthly wages.”
A strategy of non-compliance might be advantageous for the functioning of the labour market, but the World Bank report shows that the most vulnerable workers are also the least likely to receive the severance pay to which they are entitled. Moreover, a system that inculcates a culture of non-compliance can also have knock-on effects for other regulations, including social insurance enrolment and even tax compliance
Recent reforms to the JHT have heightened the need to revisit severance pay arrangements. Under the previous dispensation, workers were allowed to withdraw funds from their provident fund whenever they lost their job. A reform in 2015 tightened up the rules on withdrawals to ensure that workers have a reasonable amount in their account when they reach retirement but this was swiftly reversed (ILO, 2017[30]).
Given the malfunctioning of the severance pay system, the GoI should consider the possibility of implementing a system of unemployment insurance. This is important not only for protecting workers’ welfare but also for maintaining aggregate demand. In the absence of such an arrangement, Indonesia’s social protection is highly pro-cyclical, constraining its capacity to support incomes during an economic downturn.
Since the 1970s, Indonesia has also implemented a system of minimum wages. The level of the minimum wage varies by province to take into account different costs of living across the country; under the labour legislation of 2003, the minimum wage is intended to provide an adequate standard of living for a single worker. (OECD, 2018[32]) found that the minimum wage is equivalent to around 90% of the median wage, which is high relative both to countries at a similar income level and OECD countries. This study finds that young workers are most likely to be disadvantaged by the high minimum wage.
The impact of minimum wages on Indonesian firms in the manufacturing sector has been shown to vary by size, causing a reduction in formal employment in firms that are small, labour-intensive and low-skilled but not in large firms (Del Carpio, Nguyen and Wang, 2012[33]). In other sectors, the minimum wage often does not hold, resulting in some 40% of the workforce receiving a salary at or above the minimum wage in 2015 (BAPPENAS, 2014[34]).
The recent changes to social insurance and the looming disruption associated with Industry 4.0 make a review of severance pay and minimum wages timely. (OECD, 2018[32]) proposes that the GoI pilot lower levels of employment protection and discounted minimum wages for youths working in special economic zones, with close monitoring of the results.
Gaps in social protection reflect structural constraints to Indonesia´s development
This Chapter concludes by assessing whether there exist obvious gaps in legal or de jure coverage of social protection, that is to say whether individuals are protected against the risks identified in Chapter 1. This is not the same as effective (or de facto) coverage of social protection, which will be examined (for the largest programmes) in Chapter 3.
The analysis in this chapter (and the inventory below) indicates that Indonesia’s social protection system comprises programmes that cover many of the risks and vulnerabilities identified in Chapter 1, through a combination of social assistance, social insurance and active labour market policies. However, the large number of programmes, and the large number of institutions with responsibility for implementing them, has generated fragmentation and duplication which undermine the system’s effectiveness. This inefficiency is a particular concern given the low levels of financing for social protection, discussed in Chapter 4.
Nonetheless, there are some notable gaps in provision, particularly in three key areas: early childhood development (ECD), programmes for youths not in education, employment or training (NEET) and social assistance for the elderly. Each represents a different challenge for social protection planners.
For example, ECD programmes require a combination of health, education, welfare services and income support (Britto et al., 2017[35]), not to mention physical infrastructure such as clinics and childcare facilities. This demands a degree of co-ordination between different line ministries that is hard enough in itself; it also requires vertical coherence between central and local government to ensure services meet required standards. Both Indonesia’s size and its high level of decentralisation militate against such coherence.
The challenge facing programmes for youths NEET is also, to an extent, one of co-ordination. Indonesia has one of the highest rates of upper secondary school students enrolled in vocational education and training (VET): 45% in 2015, versus 20% in 2005 (Asian Development Bank, 2018[36]). To ensure students receive the skills they need to meet the needs of the economy, MoEC needs to work in close collaboration with the Ministry of Manpower, as well as engagement from employers (OECD, 2018[32]).
To make sure that students from poor families stay in school up to upper secondary level would requires an even stronger policy push and additional expenditure. Indonesia’s demographics make financing a particular challenge greater still: 17.2% of the population was aged between 15 and 24 in 2015, representing enormous potential demand for training (UNDESA, 2017[37]). However, it is also important to note that the unemployment rate for individuals aged 25-34 who have completed secondary education is almost as high as for those who did not reach upper secondary education (OECD, 2018[32]); the return on education might simply not be sufficiently obvious to students or their families to warrant the investment.
Cultural factors play a large role in the lack of social assistance provision for the elderly: families are expected to look after elderly relatives, without their having to rely on public support. Nonetheless, these attitudes are being tested by large-scale internal migration (often to cities), which results in elderly relatives being left behind as their children pursue better economic opportunities (Priebe and Howell, 2014[38]). In the future, demographic trends mean that the number of elderly relative to the size of the working age population will increase, placing further strain on such arrangements.
In addition to these structural deficiencies in the social protection system, Indonesia is also reacting more slowly to the potential of shock-responsive social protection mechanisms than some of its neighbours, such as the Philippines (World Bank, 2018[39]). Faced with a high risk of natural disasters, Indonesia lacks adequate shock response or protective programmes for poor and vulnerable households to prevent them from falling into poverty in the event of shocks (Perdana, 2014[2]). However, the UDB will be a huge asset if and when Indonesia sets about addressing the situation.
Finally, a shortcoming that cuts across the social protection system is its failure to address systemic gender inequalities. Besides maternal health and maternal leave, Indonesia does not have programmes specifically targeting women’s empowerment. As a consequence, women are more at-risk from poverty across their lives. Moreover, Indonesia is not maximising the economic and social potential of a huge part of the population, implying a major constraint to the GoI’s objective of sustained, robust and inclusive growth.
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Annex 2.A. Detailed inventory of social protection programmes
Table 2.A.1. Inventory of social protection programmes
Notes: Table summarises information related to the social protection system described in this chapter. .. = missing value or not available. - = absolute zero. kWh = kilowatt hour. LPG = liquid petroleum gas. SP-36 = superphosphate, 36% P2O5. t = tonne. VA = volt-ampere. ZA = Zwavelzure ammoniak [ammonium sulfate].
Source: This information was collected through a review of annual reports, as well as consultations with line ministries. Numbered sources: 1) BPJS Kesehatan (2016); 2) BPJS Labour Annual Report 2015; 3) BPJS Labour Semester 1 Report 2016; 4) DJSN 2017; 5) PT ASABRI Annual Report 2015; 6) PT ASABRI Annual Report 2016; 7) PT TASPEN Annual Report 2015; 8) consultation with the MoF; 9) consultation with the CMoHDC; 10) consultation with the MoSA; 11) consultation with the MoED; 12) consultation with the MoRA; 13) consultation with the MoRTHE; 14) consultation with the MoPWPH; 15) consultation with the MoA; 16) consultation with the Ministry of Ocean and Fisheries; 17) consultation with the MoEMR.
Notes
← 1. This allocation is regulated under the Ministry of Finance Decrees No. 81 of 2012, No. 254 of 2015 and No. 228 of 2016.
← 2. Coordinating Ministry of Human Development and Culture (CMoHDC), Technical Guidelines of Rastra, 2017.
← 3. Electronic Data Capture machines allow merchants to accept and process credit and debit card transactions.
← 4. In-depth interview with the Deputy Assistance of Social Compensation in the CMoHDC, Jakarta, May 2017.
← 5. A national family identification card with a family ID number.
← 6. 2004 Law No. 34 on Indonesia’s Tentara Nasional Indonesia (armed forces).
← 7. KIS holders consist of PBI members, the homeless, people with disabilities and Penyandang Masalah Kesejahteraan Sosial (people with social welfare problems).