Governance and Poverty Reduction: Evidence from Newly Decentralized Indonesia.

Sumarto, Sudarno and Suryahadi, Asep and Arifianto, Alex (2003): Governance and Poverty Reduction: Evidence from Newly Decentralized Indonesia. Published in: SMERU Working Paper

Abstract

This study is the first attempt to systematically examine the impact of bad governance practices in Indonesia on poverty reduction. Indonesia is a country that has endured bad governance for a long period, but also has sustained significant poverty reduction. Prior to the onset of the economic crisis in mid 1997, the problem of bad governance in Indonesia was apparent but mostly ignored because it was compensated by high economic growth. The advent of the economic crisis, however, has highlighted the seriousness of the problem. This study focuses on the impact of bad governance on the poor, the people who are most vulnerable to the impact of bad governance. By assembling scattered anecdotal evidence on how past and current practices of bad governance in Indonesia have hurt the poor, this study shows that the adverse impact of bad governance on the poor is real, systematically affects many people, and undermines the efforts to reduce poverty in the country. More systematic evidence on how bad governance affects poverty reduction indicates that indeed regions that practice better governance experience faster poverty reduction and vice versa.

• Item Type: MPRA Paper
• Language: English
• Keywords: Governance, corruption, poverty, Indonesia.
• Subjects: H - Public Economics > H2 - Taxation, Subsidies, and Revenue; H - Public Economics > H3 - Fiscal Policies and Behavior of Economic Agents > H31 - Household; I - Health, Education, and Welfare > I3 - Welfare, Well-Being, and Poverty; K - Law and Economics > K2 - Regulation and Business Law

References

Blaxall, John (2000), ‘Governance and Poverty’, Paper presented at the Joint Workshop on Poverty Reduction Strategies in Mongolia, The World Bank, Ulan Bator, Mongolia, October 4 to 6. On the web at http://www.worldbank.org/poverty /strategies/events/mongolia/gov.pdf, downloaded on March 22, 2003.

Crook, Richard and Alan Sturia Sverrisson (2001), ‘Decentralization and Poverty Alleviation in Developing Countries: A Comparative Analysis or, Is West Bengal Unique?’ IDS Working Paper #130, February, Institute for Development Studies, Brighton, England.

Dethier, Jean-Jacques (1999), ‘Governance and Economic Performance: A Survey’, Discussion Paper on Development Policy #5, April, Center for Development Research, The University of Bonn, Bonn.

Eid, Uschi (2000), ‘Good Governance for Poverty Reduction’, Paper presented at the Asian Development Bank Seminar on The New Social Policy and Poverty Agenda for Asia and the Pacific, Chiang Mai, Thailand, May 5. On the web at http://www.uschi-eid.de/docs/000505-poverty.htm, downloaded on March 21, 2003.

Gupta, Sanjeev, Hamid Davoodi, and Erwin Tiongson (2000), ‘Corruption and the Provision of Health Care and Education Services’, IMF Working Paper No. 00/116, June, International Monetary Fund, Washington, DC.

Gupta, Sanjeev, Hamid Davoodi, and Rosa Alonso-Terne (1998), ‘Does Corruption Affect Income Inequality and Poverty?’ IMF Working Paper No. 98/76, May, International Monetary Fund, Washington, DC.

Hamilton-Hart, Natasha (2001), ‘Anti-Corruption Strategies in Indonesia’, Bulletin of Indonesian Economic Studies, 37(1), pp. 65-82.

Huther, Jeff and Anwar Shah (1998), ‘Applying a Simple Measure of Good Governance to the Debate on Fiscal Decentralization’, Policy Research Working Paper No. 1894, March, The World Bank, Washington, DC.

Kaufmann, Daniel, Aart Kraay, and Pablo Zoido-Lobaton (1999), ‘Governance Matters’, Policy Research Working Paper No. 2196, October, The World Bank, Washington, DC.

King, Dwight (2000), ‘Corruption in Indonesia: A Curable Cancer?’, Journal of International Affairs, 53(2), pp. 603-624.

Kinuthia-Njenga, Cecilia (date unknown), ‘Good Governance: Common Definitions’, United Nations Human Settlement Programme. On the web at http://www. unhabitat.org/HD/hdv5n4/intro2.htm, downloaded on March 21, 2003.

Klitgaard, Robert (1998), Controlling Corruption, University of California Press, Berkeley, CA.

KPPOD (2002), ‘Pemeringkatan Daya Tarik Investasi Kabupaten/Kota: Studi Kasus di 90 Kabupaten/Kota di Indonesia’ [The Ranking of Investment Attractiveness across Districts/Cities: A Case Study of 90 Districts/Cities in Indonesia], Komite Pemantauan Pelaksanaan Otonomi Daerah, Jakarta.

LaPorte, Robert, Jr. (2002), ‘Governance: A Global Perspective’, Paper presented at the South Asia Regional Conference of the Hubert H. Humphrey Fellowship Program, Kathmandu, Nepal, February 20. On the web at http://www. fulbrightnepal.org.np, downloaded on March 21, 2003.

LPEM (2001). Construction of Regional Index of Doing Business, Laporan Akhir [Final Report], December, Lembaga Penyelidikan Ekonomi dan Masyarakat, Fakultas Ekonomi Universitas Indonesia, Jakarta.

Mawardi, M. Sulton, Syaikhu Usman, Vita Febriany, Rachael Diprose, Nina Toyamah (2002) ‘Dampak Desentralisasi dan Otonomi Daerah Atas Kinerja Pelayanan Publik: Kasus Kabupaten Lombok Barat, Nusa Tenggara Barat’ [The Impact of Decentralization and Regional Autonomy on Public Services Performance: The Case of West Lombok District, West Nusa Tenggara], Field Report, June, The SMERU Research Institute, Jakarta.

McLeod, Ross (2000), ‘Soeharto’s Indonesia: A Better Class of Corruption’. Agenda, 7(2), pp. 99-112.

Montgomery, Roger, Sudarno Sumarto, Sulton Mawardi, Syaikhu Usman, Nina Toyamah, Vita Vebriary & John Strain (2002) ‘Deregulation of Indonesia’s Interregional Agricultural Trade’, Bulletin of Indonesian Economic Studies, 38(1), pp. 93-117.

PGRI (2001) ‘A National Survey of Corruption in Indonesia’, December, Partnership for Governance Reform in Indonesia, Jakarta. On the web at http://www. partnership.or.id/data/pdf/Indonesia_Final_Report_Dec_2001.pdf, downloaded on March 24, 2003.

Pradhan, Menno, Asep Suryahadi, Sudarno Sumarto, and Lant Pritchett (2000), ‘Measurements of Poverty in Indonesia: 1996, 1999, and Beyond’, SMERU Working Paper, June, Social Monitoring and Early Response Unit, Jakarta.

Rajkumar, Andrew Sunil, and Vinaya Swaroop (2002), ‘Public Spending and Outcomes: Does Governance Matter?’ Policy Research Working Paper No. 2840, May, The World Bank, Washington, DC.

Saadah, Fadia, Menno Pradhan, and Robert Sparrow (2000), ‘The Effectiveness of the Healthcard as an Instrument to Ensure Access to Medical Care for the Poor During the Crisis’, The World Bank, Washington, D.C., mimeo.

Sherlock, Stephen (2002), ‘Combating Corruption in Indonesia? The Ombudsman and the Assets Auditing Commission’. Bulletin of Indonesian Economic Studies, 38(3), pp. 367-383.

Sumarto, Sudarno, Asep Suryahadi, and Wenefrida Widyanti (2002), ‘Designs and Implementation of the Indonesian Social Safety Net Programs’, Developing Economis, 40(1), pp. 3-31.

Suryahadi, Asep, Sudarno Sumarto, and Lant Pritchett (2003) ‘The Evolution of Poverty during the Crisis in Indonesia’, SMERU Working Paper, March, The SMERU Research Institute, Jakarta.

UNDP (1997), ‘Governance for Sustainable Human Development’, January, United Nations Development Program. On the Web at http://magnet.undp.org/policy /default.htm, downloaded on March 21, 2003.

Usman, Syaikhu, Ilyas Saad, Nina Toyamah, M. Sulton Mawardi, Vita Febriany, Pamadi Wibowo (2001a), ‘Regional Autonomy and the Business Climate: North Sulawesi and Gorontalo’, Field Report, September, The SMERU Research Institute, Jakarta.

Usman, Syaikhu, Ilyas Saad, Vita Febriany, Nina Toyamah, M. Sulton Mawardi, Hudi Sartono, Pamadi Wibowo, Sudarno Sumarto (2001b), ‘Regional Autonomy and the Business Climate: Three Kabupaten Case Studies from North Sumatra’, Field Report, May, The SMERU Research Institute, Jakarta.

Usman, Syaikhu, Nina Toyamah, M. Sulton Mawardi, Vita Febriany, Ilyas Saad (2002), ‘Regional Autonomy and the Business Climate: Three Kabupaten Case Studies from West Java’, Field Report, June, The SMERU Research Institute, Jakarta.

World Bank (1992), Governance and Development, The World Bank, Washington, DC.

Woodhouse, Andrea (2001), ‘Fighting Corruption in KDP’, July, The World Bank, Jakarta, mimeo.