In Indonesia, social protection can underpin democracy

OECD Development Centre

Health care facility in Surabaya city, East Java, Indonesia. © spotters/Shutterstock

Anyone looking for proof of the valuable role social protection plays in our economies should look no further than Indonesia. After all, here’s a country of over 260 million people living on more than 6,000 islands where administrative and logistical challenges are simply routine. Even Indonesia’s presidential election, held on 17 April, was hailed as an achievement in itself.

Indonesia’s social protection system generates fewer headlines but is no less impressive. It now reaches almost the entire population, helping people escape from poverty, access health facilities, go to school and feed themselves. Whatever the result of the presidential vote, there is no doubting the growing contribution of social protection to Indonesia’s democracy.

According to a new report, the Social Protection System Review of Indonesia, the growth in social protection in Indonesia over the last 20 years has been remarkable. In fact, since the Asian financial crisis in 1997-98, successive administrations have not only expanded the scope of social protection to cover a broad range of risks but have also sought to increase coherence between programmes. Closing gaps in coverage and helping people stay out of poverty is nowadays a key goal in the government’s inclusive growth strategy.

Two programmes in particular clearly show this. The first is the national health insurance programme, Jaminan Kesehatan Nasional (JKN), which as of 1 April 2019 covered 220 million people, or 85% of the population. As our chart below shows, coverage increased rapidly following a reform passed in 2014 that established a single health scheme for all Indonesians. Moreover, contributions were fully subsidised for households classified as poor and partially subsidised for informal workers depending on their income. The new programme faces challenges, not least that the fast growth in coverage, generous benefits and opting-out by younger adults least likely to claim are putting pressure on the system’s finances. However, this progress towards universal health coverage has underlined the fact that a social protection system must reflect diverse individual needs and realities.

The second inclusive programme is the Family Hope Programme, Program Keluarga Harapan (PKH), which is a conditional cash transfer for poor households and whose coverage has also grown rapidly since 2014. In 2018, the number of beneficiary families reached 10 million and, in 2019, the value of benefits they receive will double. Not only is this programme the most effective of Indonesia’s instruments for reducing poverty but it has also been shown to achieve long-term improvements in recipients’ education and health outcomes. In fact, beneficiaries are also entitled to access free health care, scholarships and subsidised food to make sure all needs are covered. However, in practice people do not always receive their entitlements.

Indonesia’s social protection system relies on a registry that comprises the poorest 40% of households across the country. Called the Unified Database (UDB), the registry, in theory, allows poor individuals to be linked to all the programmes they need to escape poverty for good.

However, the fact that people tend to move in and out of poverty makes it hard to keep up-to-date information across Indonesia’s vast geographic area. This undermines efforts to target benefits and means the registry is not always trusted by sub-national administrations. Meanwhile, the government has also introduced a system of social protection cards (which act rather like bank cards) that not only make the system more transparent and straightforward but, also promote financial inclusion.

The expansion of social protection coverage in recent years has coincided with notable improvements in the wider economy. In 2017, income inequality started to decline for the first time in two decades. Although at 0.38 in 2018, the Gini coefficient remains higher than the government would like. Meanwhile, the national poverty rate finally fell below 10% in 2018, having been more or less unchanged for the previous decade. Also notable is a sharp decline in the rate of stunting among children under age five, from 37.2% in 2013 to 30.8% in 2018, which represents good progress even if the rate remains above the average in Asia as a whole, of 23.2%.

Such impacts have encouraged the government to step up its investment in social protection. The allocation to social assistance in the 2019 budget is 26% higher in nominal terms than in the previous year, making it a key driver of overall growth in public spending, although in absolute terms expenditure on social protection remains low by regional standards, at 1.4% of GDP. High levels of informal employment help explain this. Indeed, according to OECD data, Indonesia’s tax-to-GDP ratio was 11.6% in 2016, among the lowest in the region.

To improve further, Indonesia’s social protection system must confront a number of challenges, some old, some new. For instance, rethinking decentralisation would help administrative coordination and make it easier to implement national policies. Meanwhile, the proportion of the population that is aged over 65 will rise steeply within a decade. This poses a challenge for pensions, notably among those in informal jobs. Indonesians’ vulnerability to natural disasters and climate change must also be addressed.

By overcoming such challenges, as our report argues, social protection’s contribution to social cohesion, the economy and democracy will continue strong in the years ahead.


Agustina, Rina et al. (2019, January), “Universal health coverage in Indonesia: concept, progress, and challenges”, The Lancet, Vol. 313, Issue 10166, pp.75-102,

Bland, Ben (2019, April 15), “The World’s Most Complicated Single-Day Election Is a Feat of Democracy”, The Atlantic,

Cahyadi, Nur et al. (2018, April), “Cumulative impacts of conditional cash transfer programs: Experimental evidence from Indonesia”, TNP2K Working Paper Series,

OECD (2018), OECD Economic Surveys: Indonesia 2018, OECD Publishing, Paris,

OECD (2018), Revenue Statistics in Asian and Pacific Economies, OECD Publishing, Paris,  

OECD (2019), Social Protection System Review of Indonesia, OECD Development Pathways, OECD Publishing Paris,

World Bank (2018, December), Indonesia Economic Quarterly, December 2018: Strengthening Competitiveness, World Bank, Washington, DC,

©OECD Observer May 2019

Economic data

GDP growth: +0.6% Q1 2019 year-on-year
Consumer price inflation: 2.3% May 2019 annual
Trade: +0.4% exp, -1.2% imp, Q1 2019
Unemployment: 5.2% July 2019
Last update: 8 July 2019

OECD Observer Newsletter

Stay up-to-date with the latest news from the OECD by signing up for our e-newsletter :

Twitter feed

Subscribe now

<b>Subscribe now!</b>

To order your own paper editions,email

Online edition
Previous editions

Don't miss

  • MCM logo
  • The following communiqué and Chair’s statement were issued at the close of the OECD Council Meeting at Ministerial level, this year presided by the Slovak Republic.
  • Food production will suffer some of the most immediate and brutal effects of climate change, with some regions of the world suffering far more than others. Only through unhindered global trade can we ensure that high-quality, nutritious food reaches those who need it most, Angel Gurría, Secretary-General of the OECD, and José Graziano da Silva, Director-General of the United Nations Food and Agriculture Organization, write in their latest Project Syndicate article. Read the article here.
  • Globalisation will continue and get stronger, and how to harness it is the great challenge, says OECD Secretary-General Gurría on Bloomberg TV. Watch the interview here.
  • OECD Secretary-General Angel Gurría with UN Secretary-General António Guterres at the 73rd Session of the UN General Assembly, in New York City.
  • The new OECD Observer Crossword, with Myles Mellor. Try it online!
  • Listen to the "Robots are coming for our jobs" episode of The Guardian's "Chips with Everything podcast", in which The Guardian’s economics editor, Larry Elliott, and Jeremy Wyatt, a professor of robotics and artificial intelligence at the University of Birmingham, and Jordan Erica Webber, freelance journalist, discuss the findings of the new OECD report "Automation, skills use and training". Listen here.
  • Do we really know the difference between right and wrong? Alison Taylor of BSR and Susan Hawley of Corruption Watch tell us why it matters to play by the rules. Watch the recording of our Facebook live interview here.
  • Has public decision-making been hijacked by a privileged few? Watch the recording of our Facebook live interview with Stav Shaffir, MK (Zionist Union) Chair of the Knesset Committee on Transparency here.
  • Can a nudge help us make more ethical decisions? Watch the recording of our Facebook live interview with Saugatto Datta, managing director at ideas42 here.
  • The fight against tax evasion is gaining further momentum as Barbados, Côte d’Ivoire, Jamaica, Malaysia, Panama and Tunisia signed the BEPS Multilateral Convention on 24 January, bringing the total number of signatories to 78. The Convention strengthens existing tax treaties and reduces opportunities for tax avoidance by multinational enterprises.
  • Globalisation’s many benefits have been unequally shared, and public policy has struggled to keep up with a rapidly-shifting world. The OECD is working alongside governments and international organisations to help improve and harness the gains while tackling the root causes of inequality, and ensuring a level playing field globally. Please watch.
  • Checking out the job situation with the OECD scoreboard of labour market performances: do you want to know how your country compares with neighbours and competitors on income levels or employment?
  • Trade is an important point of focus in today’s international economy. This video presents facts and statistics from OECD’s most recent publications on this topic.
  • The OECD Gender Initiative examines existing barriers to gender equality in education, employment, and entrepreneurship. The gender portal monitors the progress made by governments to promote gender equality in both OECD and non-OECD countries and provides good practices based on analytical tools and reliable data.
  • Interested in a career in Paris at the OECD? The OECD is a major international organisation, with a mission to build better policies for better lives. With our hub based in one of the world's global cities and offices across continents, find out more at .
  • Visit the OECD Gender Data Portal. Selected indicators shedding light on gender inequalities in education, employment and entrepreneurship.

Most Popular Articles

OECD Insights Blog

NOTE: All signed articles in the OECD Observer express the opinions of the authors
and do not necessarily represent the official views of OECD member countries.

All rights reserved. OECD 2019