It is well established that the Coronavirus pandemic (COVID-19) has had a major impact both from a social and economic standpoint globally. In Indonesia the pandemic is the biggest test of the country’s economic order and social welfare system since the 1998 economic crisis. It comes less than a year after Indonesia’s status was elevated to a high Human Development Index (HDI) score based on UNDP HDI report released last December. The country’s challenge now is to prevent HDI from sliding back to a middle position and prevent the current pandemic from exacerbating inequality. Indonesia's HDI would have already been reduced by 17.4 percent if inequalities were factored in. As it is the Covid19 crisis is continuing to drive up inequalities.
How will inequality impact human development after this pandemic?
During the 1998-2000 Asian economic crisis, despite the rapid economic downturn and tens of millions of Indonesians thrown below the poverty line, the level of inequality decreased during the period. This is largely because the crisis affected all economic levels – the poor and vulnerable as well as the business-owners among the upper middle classes. Based on data from BPS in 2013, Indonesia's Gini Ratio trend has declined, which means inequality has been decreasing. However, it is likely that inequality will increase again during this pandemic. COVID-19 is not an ordinary health crisis, it is also an economic crisis with far reaching social impacts. Large-scale social distancing measures have affected workers in the informal sector who dominate the Indonesian economy. As of mid-April, the Indonesian Government noted that 2.8 million people had lost their jobs due to the crisis. This number is expected to rise, with the International Labour Organization (ILO) warning that around 195 million people worldwide will lose their jobs due to the COVID-19 pandemic. Rising inequality due to Covid-19 is not just a matter of economics but also covers other aspects.
As confirmed in last year's HDI report, inequality must be viewed beyond income, beyond averages and beyond today. Inequality is not only bad for the economy, but also affects all aspects of human development. The progress towards achieving the Sustainable Development Goals (SDGs) could stagnate, or even decline. In Indonesia, around 28 million people still live in poverty and tens of millions of others are vulnerable to the health and socio-economic impacts of the corona virus.
Access to health services has certainly been severely affected because the Covid-19 pandemic is a health systems crisis. This is especially true for remote locations that have always been beyond reach and do not currently have access to PPE and ventilators to address the crisis. In addition, with the health system now fully focused on treating Covid-19 positive cases, individuals with other illnesses, including the elderly who require treatment, have more difficulty accessing health facilities and medication. The same applies to access to vaccinations for children. Several maternal and child health centers (Pusyandu) at the community level have been temporarily closed during the crisis reducing vaccine distribution centres and resulting in vaccines being overstocked, according to monitoring by UNDP's Electronic Immunization and Logistics Monitoring System (SMILE). In terms of education, the move to online-based schooling excludes poorer families who have no access to IT equipment or internet connections. As a result, there is likely to be an upsurge in school drop-outs. In addition, there are 21.84 million people with disabilities in Indonesia who are also adversely affected, and without a specific policy to reach out to marginalized groups, the principle of “no one left behind” – which is at the core of the SDGs-- will be difficult to achieve.
Covid-19 has also affected women, and in turn, has large scale implications on gender equality. In addition to the problem of additional workload due to school closures, as found in many countries, large-scale social distancing in which people have to stay at home all day also increases the likelihood of violence occurring in the household. The issue of domestic violence is an important aspect of the current crisis. UNDP specifically supports the development of integrated services for violence against women and children, the formulation of strategies to eradicate domestic violence in the province of Papua and complaint handling services for domestic violence victims.
One of the steps taken by the Indonesian Government to address the economic inequality and other negative aspects on human development is the provision of social aid, which is reflected in the stimulus package that has been provided since early April. This social aid builds on ongoing social protection programmes which are focused on the lower income sections of society. In the current situation these need to be supplemented with additional schemes especially because there is a rising number of new vulnerable populations following recent job loss. The addition of cash-for-work programs and direct cash assistance is therefore very important. Lessons from UNDP's post-disaster experience in Palu in 2018, showed that the cash-for-work program very tangibly helped communities who lost their livelihoods following the earthquake and tsunami. Given the direct benefits of cash transfers during a crisis, many governments across the world, including the Indonesian government are beginning to consider longer term structural changes including introducing policies such as Universal Basic Income (UBI). Several countries, including Spain and Singapore, plan to implement UBI schemes during this pandemic. UBI is a powerful instrument to reduce inequality, and UNDP together with the Fiscal Policy Agency (BKF) under the Ministry of Finance is conducting a study to explore UBI as an alternative safety net, especially in times of crisis such as the COVID-19 pandemic. According to UNDP Director of the Regional Bureau for Asia and Pacific Kanni Wignaraja, and Balazs Horvath, UNDP's Chief Economist for the Asia-Pacific region, to make UBI function effectively, countries need a fairer taxation system, as it will increase fiscal capacity to finance UBI. For Indonesia, UBI should be able to increase taxpayer registration if the system is integrated with the taxation system. Furthermore, countries in the world must work together and share data across borders to stop people and companies avoiding taxes. Another way to increase revenues for cash transfer programmes is to divert monies from other subsidies (e.g. fossil fuel subsidies) towards social assistance, especially in times of crisis. The diversion of these subsidies can provide good social security and at the same time encourage the achievement of SDGs, especially climate change targets.
Technological innovations play an important role in providing solutions for improved information gathering and sharing, improved targeting of beneficiaries and efficient cash transfer mechanisms to
relevant and remote populations in the response to Covid-19. For example, the provincial government of West Java used the Pikobar App to alleviate the burden on its citizens. Of course, all these social protection and innovation programs still need sharpening to ensure affordability, data integrity and analysis that can inform specific strategies for long-term solutions.
The success and accuracy of social assistance programmes is the key to successfully alleviate poverty and inequality during the pandemic and into recovery. Continuous innovation and new strategies related to social protection systems and governance are equally important. Innovation was one of the elements that UNDP recommended in last year's human development report to address inequality. Therefore, innovation in data, channeling information and in deploying alternative financing strategies for country development is part of UNDP’s response action as a partner of the government and the people of Indonesia to jointly address the impact of COVID-19.
By Christophe Bahuet, UNDP Resident Representative in Indonesia