JAKARTA (TheInsiderStories)–As Indonesia poverty rate reached a record low, the government wasted time to claim victory while oblivious about the issue of income inequality.
Central Statistics Agency on Monday (16/07) reported Indonesia recorded 9.82 per cent of the poverty rate in March 2018, the lowest since the financial crisis hit the country in 1998. The result would certainly serve as a political ammunition that can lift the President Joko Widodo’s re-election bid in 2019.
One of the most cited by the media is the Finance Minister Sri Mulyani’s statement. The former Managing Director and Chief Operating Officer at the World Bank were happy to hear the poverty rate had declined.
“The first time in the history of Indonesia, the poverty level is below 10 percent,” she added.
In fact, by percentage, Indonesia’s poverty rate may categorize as low compared to the countries in Sub Sahara Africa, such as Angola and Uganda that have a poverty rate of more than 30 per cent, according to the World Bank data in 2018.
But it is a huge number since Indonesia has an enormous population of 262 million people. It means around 25.726 million people still live below the poverty line.
In addition, the poverty rate was only reduced by 0.3 percent during Joko Widodo’s leadership. It extremely low compared to the poverty reduction rate during 1970-1988 under Soeharto leadership that reached 35.8 per cent, 5.02 per cent during Abdurrahman Wahid leadership, and 3.19 per cent under Susilo Bambang Yudhoyono’s second leadership period in 2009-2014.
Furthermore, Indonesia still has a high record of income inequality indicated by Gini coefficient at 0.389 in March 2018. Even though the Gini coefficient was slightly decreased from 0.391 in September 2017, it is still categorized as high.
According to the Oxfam, Indonesia’s income inequality grew the fastest in South-East Asia, which the four richest Indonesian men have more wealth than the 100 million poorest.
The income gap also widened in the rural areas where most of the poor or 15.81 million people live. Gini coefficient in the rural areas widened to 0.324 in March 2018 from 0.320 in September 2017.
The degradation left a big question about rural poverty reduction program conducted by the government. President Joko Widodo has a rural fund program with the amount of funds always rises. In the state budget 2018, the government allocates Rp60 trillion for the rural funds and Rp706.1 trillion for the regional transfer.
Cutting down income inequality is very important to lower the poverty rate, as it slows down the poverty reduction, hurts economic growth, and threatens social cohesion.
The facts shown above indicated that celebrating the poverty reduction is premature, considering there are still many poor people suffered daily struggle to fulfill their basic needs.
The Indonesian government needs to look for more effective poverty reduction strategies. Historically, one of the most effective is by boosting the agricultural sector.
Indonesia’s history shows the fastest poverty rate reduction occurred during the 1970s to 1980s when Indonesia’s economy highly depends on the agriculture sector. The poverty sharply declines from 51.2 per cent in 1970 to 10.2 per cent in 1980.
The agriculture sector has a dominant role in alleviating poverty in Indonesia although its portion of the GDP sharply declines. It contributed to 46 per cent in 1971, sharply fell to 16 per cent in 2000, and 13 per cent in 2016.
This sector played a dominant role in poverty allegation because most of the poor people live in the rural areas that depend on the agriculture sector. It also brings employment to the 50 million people although its share to GDP only around 13 per cent to 14 per cent per year, according to the Indonesian Chamber of Commerce and Industry in 2018.