Cutting fuel subsidies makes space for an ambitious income top-up scheme
BARACK OBAMA signed his health-care programme into law 427 days after taking office. Joko Widodo, Indonesia’s president, took just two weeks to begin honouring his health-care and education promises. On November 3rd his government began issuing cards that will give poor Indonesians access to three programmes—two expanding publicly funded health care and education, and one giving cash handouts of 200,000 rupiah ($15.75) per month. The income top-up scheme is planned eventually to cover 86.4m people in 15.5m households—a third of Indonesia’s population. That would make it the largest such programme in the world.
Poor Indonesians were already eligible for various social programmes, including some scholarships and health care. But Jokowi, as he is known, has something his predecessors lacked: money. Like many countries, Indonesia has long wasted vast sums on subsidising fuel (see chart). But on January 1st Jokowi ended petrol subsidies, which will, according to the finance minister, save the government 200 trillion rupiah per year.
The income top-up is being described as cushioning the impact on consumers. But petrol subsidies benefited rich Indonesians most, since few poor ones own cars. The reality is that Jokowi seized the moment: the recent fall in the price of oil means Indonesia’s newly unsubsidised petrol costs less than subsidised petrol did last month.
The finance minister’s estimate of how much cutting fuel subsidies will save may be optimistic. And not all of the money freed up will go on social spending: more infrastructure investment is also expected. Nor will all those eligible be enrolled straight away. The plan is for 4.5m cards to be issued this year.
And details of how the programmes will work are as yet unclear. The plan is for the income top-ups to be collected using a mobile-phone SIM card at a bank branch or post office. Currently, recipients turn up at government offices and walk out with cash, which makes them vulnerable to crime and the system open to fraud and corruption.
But banks and post offices are thin on the ground in remote regions. And supplying social services in an archipelagic country as vast and sprawling as Indonesia is also difficult. Promises of free health care mean little when clinics lack staff, equipment and medicine.
But as mayor of Solo, a city of 500,000 in Central Java, and then governor of the capital, Jakarta, Jokowi gained a reputation for competence and keeping his promises. Improving social services was one of his main campaign pledges.
In the long run, making Indonesians healthier and better educated will help them become more productive and richer. But the country’s poverty line is 300,000 rupiah per person per month. Cash transfers of two-thirds that amount will lift millions above it.
This article appeared in the International section of the print edition under the headline "Full of promise"
