Context

Prior to 1997, social protection was not a government priority and government social spending was concentrated on social services^[1].

The Asia financial crisis in 1997 revealed the vulnerability of the Indonesian economy and the importance of social protection for the whole population. Unemployment, dramatic declines in real wages, and other economic challenges, sent 25% of the Indonesian non-poor population into poverty^[2]. In response to the crisis, the government launched the first nationwide social safety net programme, Jaminan Pengaman Sosial (JPS), in 1998. The programme provided subsidized staple foods, basic education, basic health services, employment opportunities through public works projects, and revolving credit funds.

Following the recovery from the 1997 crisis, Indonesia experienced strong economic growth and a steadily declining poverty rate. The national poverty rate fell from 24.23% in 1998 to 11.96% in 2012^[3].

At present, extreme poverty – defined as living on Purchasing Power Party (PPP) of one US dollar (USD) per day or less – is relatively low in Indonesia. However, 43.3% of the population is on the brink of poverty, living on PPP two USD or less per day^_[4].

Against this backdrop, Indonesia has seen major progress in the last decade towards the extension of social security for all through two important milestones:

• The amendment to the 1945 Constitution regarding the extension of social security to the entire population.

• The enactment of Law No. 40/2004 regarding National Social Security System (Sistem Jaminan Sosial Nasional – SJSN). The social security law is designed to create a social security system covering all Indonesian workers and their dependents in both the formal and informal economy.

 

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