This book is a very important book about how the central government, local government and civil society in Indonesia are working together to make more funds available to the poor and working families. This is done by designing a pro-poor budget at the regional and national levels and ensuring that the allocated budget is channeled to the poor.
The financial crisis that started in 1997 has left a deep imprint on the Indonesian economy. The rupiah fell rapidly, and until now has not recovered. Although a democratic regime began in 1998, the legal framework for local economic development remains complex. Global direct investment (FDI) has favored China, India and Vietnam over Indonesia, and continued uncertainty in the government sectors is making it more difficult to attract domestic investors. The government predicts that the economy for the next five years will grow by six percent per year. Many people believe that this is an overly optimistic prediction. Slow growth means that Indonesia will remain a country with high poverty rates. Nearly half of Indonesian families live on less than two dollars a day, and about 15 percent are classified as poor. There is an urgent need for poverty alleviation policies that are pro-poor families and communities.
What are the causes of poverty? There is no global consensus on this matter: experts inside and outside Indonesia are arguing. In short, there are at least four factors at work here, and often in the form of a combination of two or more of them. The first and most obvious is a lack of access to the labor market. If a family cannot find work – for whatever reason – in a country without an insurance policy, it will become a poor family. Thus, one of the main strategies for reducing poverty is to create more jobs by growing the economy. Second, poverty is caused by environmental damage and loss of habitat. If a farmer has to sell his land for development purposes or a household does not receive adequate protection against natural and man-made disasters, there is a high probability that they are poor or will become poor. Third, a family can become poor because of inadequate social services. Quality health and education services are still inaccessible in some parts of Indonesia. Government budgets are not always properly allocated or do not reach target households. Corruption and misuse of public funds can also be indirect causes of poverty, because funds that should be used to address poverty do not reach the poor. The fourth reason why some families live in poverty is somewhat more difficult because they only indirectly affect poverty, namely they are not included in the policy process. As argued by Amartya Sen and others, poverty is not only about a lack of material benefits, but also about marginalization, exclusion and lack of empowerment. Thus poverty alleviation should also refer to the fulfillment of needs other than material needs, including social and political needs.
Then what are the policies needed to alleviate and get out of poverty? Basically, there are two schools of thought. The first is the theory that economic growth alone will create sustainable development and help people overcome their poverty (pro-growth). Employment is the main pathway out of poverty, which can only be created through economic growth, and this policy thus focuses on liberalizing economic growth, leaving the "market" to take care of poverty reduction. This is sometimes characterized as the need for pro-growth economic policies that will “trickle down” the poor in the form of jobs and income generation. The government's main effort is to strengthen economic opportunities and economic institutions, and let entrepreneurship and innovation one by one family ensure their economic benefits.
The second school of thought on poverty alleviation is based on pro-poor policies that are sensitive to social and economic differences. This approach argues that markets are not neutral or fair for all. Market forces can create more marginalization and inequality. Certain groups in society remain outside or marginalized by the process of growth. Not everyone starts from the same starting point in life and his life circumstances will affect his luck and wealth (or lack thereof). Pro-growth policies fail to consider how differences in social and economic conditions in different places might affect their impact. There is a need for redistribution policies and affirmative action that actively and explicitly address the inequalities of the free market.
However, there is also evidence that a pro-poor policy that stands alone without growth is difficult to sustain in the long term. Merely protecting the poor in the form of subsidies or grants does not necessarily lift them out of poverty, but can actually maintain their poverty. Sometimes characterized as the “Nanny State”, critics argue that redistribution (in the form of high taxes) and subsidies robs individual entrepreneurship and thereby undermines economic growth. If people can always depend on the state to ensure their well-being, what is the incentive for them to strive and build their own fortunes, holding their destiny in their own hands?
Therefore, a "third way" has emerged which focuses directly on efforts to maintain growth, provide employment and increase the income of the poor through explicit policy interventions in the growth process – a "pro-poor growth policy". For economic growth to create jobs for the poor and eradicate poverty, it must be combined with radical changes in distribution and social reform. More importantly, anti-poverty programs must take into account local circumstances, both locality-based job creation and community capacity building. For economic growth to achieve poverty reduction, social reforms (including programs to empower and improve education and public health) must precede economic reforms. The market cannot do this alone. We need state legislation, legal certainty and democratic values. This will not be possible without a strong state presence that has the capacity and will to limit market power and allocate public funds to the poor. The pro-poor nature is a political and ideological choice and design that involves allocating funds to poor families and communities. Not everyone will support it, because that means intervening with market forces and taking money from the rich to subsidize the poor.
Pro-poor growth policies must be sensitive to social and economic differences and actively address these inequalities. Often, policies like these support basic public services: health, education, housing, water, because they explicitly target those who cannot afford to pay for private services (in the private sector these services need to be regulated and managed, but they don't have to be subsidized). . Since poverty is also caused by exclusion, pro-poor policies should enable the poor and disadvantaged families to be involved in public decision-making. Such a pro-poor policy is adopted within the ten basic rights in the National Strategy for Poverty Alleviation in Indonesia: food, health, education, employment, housing, clean water and sanitation, land, natural and environmental resources, human security, and participation. Pro-poor policies include:
- Redistributive policies such as progressive taxes, subsidies and land reform
- Affirmative action policies to address social inequality:
- Sustainable job creation for low-income families
- Access to cheap microcredit (such as Grameen Bank)
- Broad-based and facilitated participatory planning and budgeting, where the needs of the poor are prioritized, with clear performance indicators to ensure that targets are achieved
- Performance-based budgeting departs from programs that have clearly identified activities and indicators and outcome measures, which are targeted at marginal groups.
It should also be noted that there is a "neutral" government policy. This includes general government policies that protect all citizens, such as protecting basic human needs, upholding the rule of law and preventing abuse of power. Such neutral policies are necessary but not sufficient to function as a precondition for pro-poor policies. There are also policies and expenditures that are considered neutral but more profitable for those who are not poor, such as fuel subsidies (a gasoline-hungry jeep owner gets a larger subsidy per month than a motorcyclist). In analyzing government policies and anti-poverty strategies, we must examine carefully the documents in which these strategies were formulated.
And this brings us to the main topic of this book you're holding: pro-poor budgeting. Why is it important to focus on the budget? Because in order to be translated into concrete policies, promises, intentions and plans need to be turned into a budget. One commonly used definition of politics is "the allocation of limited resources among competing demands." In order for a government to implement its policies, it needs funds. Because if not, the beautiful promises of politicians will remain in their original form: namely promises. Because funds are limited, policy makers must make decisions to allocate funds among competing demands. The final product of the allocation decision is the budget. It is in a budget that we can read the intentions of policy makers and the ways they propose to deal with their concerns.
The problem with budgets is that they are often – and this is not uniquely Indonesian – complex and difficult to read. In order for citizens and civil society organizations to read the budget, they need help. And this is where this book is important. In this book you will learn about what pro-poor policies are and how to analyze existing budgets to measure how well they implement pro-poor policies and poverty alleviation.
This book is primarily aimed at civil society organizations (CSOs). There are at least two roles for citizens and CSOs in budgeting. The first is engaging in actual budgeting. In Indonesia, this occurs in Musrenbang meetings at the community and district/city levels. Second, civil society organizations must also hold the government accountable for their plans and policies. This last oversight function needs to be carried out both in the preparation of budget documents as well as in the expenditure/implementation stage. This book provides guidance on how you as a citizen and as a civic activist can play a role in both functions and ensure that public funds are allocated to those who need them most.
One definition of pro-poor budgeting is that it is a conscious way of dealing with inequality and injustice in the ordinary budgeting process. A pro-poor budget is thus sensitive to differences in resources and actively addresses these differences. In the same way that pro-growth economic policies can be insensitive to social and economic differences, leading to different absorptions of outcomes, government budgets – even when viewed as “neutral” – are often gender biased. A pro-poor budget seeks to deal with these negative consequences and allocate public funds to those who have few public service options and who need to be protected. A pro-poor and gender-sensitive budget is thus a tool for allocating funds for the poor and those most in need. It is a process in which poor families are involved in the planning and budgeting process. This requires special efforts and is not easy to achieve, given the prevalence of kinship and control of resources by elite groups. Examples of pro-poor policies include:
- Public funds allocated for basic human services and public infrastructure, such as education, health services and rural roads that will primarily benefit the poor
- Budget allocation to subsidize public services (free health and education services)
- Gender sensitive budget allocation for women (such as midwife training and provision of public daycare)
- Funds set aside for economic empowerment for groups vulnerable to poverty such as fishermen and small cultivators.
- Financial incentives for companies to hire disabled people, build factories outside the city, or train manual laborers. – Emergency fund for disaster management (pro-active, not post-facto.)
As the authors of this book rightly note, a pro-poor budget is a political statement. It is a 'participatory democratic' document that sends a message to the public that the government takes poverty seriously. In reading and analyzing a budget, we can learn about government policies, which in turn can be used to evaluate its performance.
A pro-poor budget has become the “flavor of the month”. There are many training manuals and books on this topic, and it seems donors are trampling one another's toes to prove themselves to be the most sensitive donors to gender and other social differences (see Chapter I of this book for a review of this). Even the Indonesian government responds to this challenge: the Minister of State for PP and PP works together with Bappenas to develop an initiative for a gender responsive budget. All of that is perfectly fine – as long as it's not just a spell or a box to be filled. New published book PraKarsa it adds value to other publications, in the sense that it places pro-poor budgets and gender responsive budgets within their political context: how these two budgets can be used as tools for a welfare state to gain a place in Indonesia. This book is also based on concrete experiences from around the country over the last decade, and as such is a "resource book" for community activists in analyzing and advocating for pro-poor budgets. That's why I encourage all readers to read this book carefully and take advantage of the many helpful suggestions it contains.
