Platform 2: People Welfare

PSI views the State to bear responsibility for realizing the welfare of all its citizens. Outside the State, individuals, families, communities, businesses, religious groups and social institutions also have separate responsibilities. Welfare is understood as a condition of community life characterized by three things. First, a person is able to fulfil his basic needs as a dignified human being. These basic needs include the need to survive as individuals (clothing, food, health, education) and as a community (family, housing, employment). Secondly, if one is able to solve the problems of his life either independently or with the help of the community, social institutions, business and government. Third, if someone is able to develop and take advantage of opportunities to grow and succeed according to the potential and ability of oneself and effort.

PSI’s position on several welfare issues (such as education and civil rights of the poor and minority) is discussed elsewhere. This section specifically highlights the position of the PSI on three welfare sectors, namely population and employment, health, and housing.


  • Population and Employment

In general, the quality of Indonesian people has not yet reached the expected standard. Poverty and unemployment rates are still relatively high. Despite the reduction in poverty, social inequality has also increased. Strategic and systematic steps need to be taken to address these issues, especially to to take a full advantage of demographic bonuses in 2025 and anticipate the effectiveness of the ASEAN Economic Community on 1 January 2016.

Workers (Indonesian citizens working inside and outside the country) are important economic resources. Through the purchasing power it has, workers can encourage consumption and production. They are important taxpayers. Formal labourers still face various problems, such as: work uncertainty (with outsourcing and contracting outlaws), relatively low wages and purchasing power, and low welfare. On the other hand, non-formal workers face even more complex problem in spite of their potential as the driving force of our economy.

In terms of population, Indonesia faces several classic problems, such as relatively high population growth, 1.49 percent / year and uneven distribution of population (58% of the total population is in Java, which is only 7% of the total area). The new problem faced is the demographic bonus (already started since 2012) that directly forces us to deal with at least two major issues: A. The quality of the productive age; B. Inter-regional disparities resulting in the enjoyment of demographic bonus’ advantage in big cities (such as Jakarta).

Another new demographic problem is related to the growing number of Indonesians on a macro basis, where more than half of the population lives in the city, and by 2035, about 66 percent of the population will live in the city. While in the village, although the unemployment rate is not as high as in the city, the poverty rate is twice that of the city. This encourages another population problem, social inequality, combined with the entry of Indonesia into an “aging society”.

The labour force in the non-formal sector reaches 60 percent and 40 percent in the formal sector. Agriculture is still the main employment field with a 40 percent range for people aged 15 and over, followed by trade with 25 percent, services 18 percent, and industry 15 percent (BPS, 2014). The general trend is the decrease in work absorption in informal sector, particularly agriculture, with improvements in the formal sector such as community services and trade, and slightly in the industrial sector. However, most labour issues arise in the formal sector, especially the industry, which is the consequence of more organized labour in this sector.

To that end, the PSI saw three strategic policy themes that could be the government’s priority.

First, the creation and protection of quality employment at home and abroad. Attention should be given to the threat of youth unemployment 19-24 years, the decline in employment created in real sector and deindustrialization in manufacturing sector, the challenges to the national employment due to the implementation of the ASEAN Economic Community in 2016, as well as the strengthening and protection of labor migrants working outside the country. All of these should be planned and executed in the context of taking advantage of the opportunity of demographic bonuses by realizing a link and match between education and industrial sectors.

Second, improving the welfare and quality of life of the workers and their families. The focus is on improving the workers’ purchasing power through increasing wages’ quality, combined with inflation controls, policies supporting the industry – especially the real sector and manufacturing, the effectiveness of health insurance and pension benefits (to maintain purchasing power), and systematically improving skills through a work-facilitated training centre facilitated by the government in collaboration with civil society. The goal is to improve the quality of Indonesian people to move from middle to high income countries through natural resources processing innovations and improve the quality of human resources.

Third, improved labor inspection and quality improvement of industrial relations. Supervision is the root of the problem as well as the solution of the various problems that exist in the context of employment and population, especially since regional autonomy. Social dialogue needs to be strengthened, starting with the verification and strengthening of existing trade unions and employers’ organizations to find “the most representatives”, centralized coordination of supervision by the central government in cooperation with local governments, beginning from the centre and then developed in main industrial regions, enhancement Labour Inspection Committee in accordance with Permenakertrans No. 10/2012.


  • Health

PSI believes that public health is a key requirement for a prosperous and happy Indonesia. Quality economic growth also requires quality public health to create skilled and competitive workers in the national, regional and international workplace.

PSI noted many problems that must be addressed in the health sector. Health budgets should be upgraded. The level of Indonesia’s health spending to GDP is recorded to be the fifth lowest in the world, which is 1.2% in 2014. Indonesia is still experiencing various nutritional problems (Riskardas, 2013). The prevalence of malnutrition in under five increased from 17.9% in 20010 to 19.6% in 2013. While the national figure indicates that 37.2% of children under five suffer from stunting for not receiving enough nutrition to affect the brain development. This means that 1 out of 3 Indonesian children lose the opportunity to get a better education and job opportunities.

Currently access to health services in villages has declined, and over 40% of the population in West Kalimantan, Maluku and West Sulawesi require more than an hour to reach public hospitals, compared to 18% nationally. Only three provinces meet World Health Organization (WHO) recommendations with one doctor per 1,000 residents (Mulyani, 2016)

PSI will continue to promote public health services programs, especially improving access to health for the poor by continuing to improve the BPJS / KIS system. The focus on addressing gaps in access to health by pouring the state budget does not lead to new fiscal traps such as fuel subsidies. However, looking at the structure of the state budget, PSI believes that health budgets should be increased. Health spending to GDP in Indonesia is the fifth lowest in the world, which is 1.2% in 2014.

The state budget also needs to focus on changing people’s behaviour and culture in health (preventive). Clean and orderly living, throwing garbage in its place, washing hands before eating, avoiding ‘junk food’ and so on will have a good long-term impact including reduced state budget for medical expenses (curative).


  • Agriculture

The World Development Report of 2008 states that agriculture is part of a poverty solution in developing countries. Agriculture is still the highest employment field. Indonesia is still an agricultural country. 39.88 percent of the 107.41 million active workforce in agriculture (BPS 2010). This figure is followed by trade 20.68% and services 14.54%. In addition, agriculture also allows the increase of assets and push the price of food. According to the WDR report, the growth of GDP that relies on agriculture in developing countries is twice as effective as reducing rural poverty from non-agricultural economic activities.
Agriculture faces complex complexities, ranging from productivity, market access, farmer self-reliance, and farm’s product prices.

Increasing Production

On the productivity side, our agriculture faces the constraints of high food demand but not accompanied by adequate domestic production. Low-income communities, according to Theodore Schultz, are characterized by high population growth, but food production is low. As a result, the low income society is threatened with food shortages because demand is so large and getting bigger while production keeps decreasing. To overcome this problem, since the 1970s, the Indonesian government initiated the so-called green revolution to increase food production. This revolution is done in two aspects, extensification and intensification of land. In the area of ​​extensification, the government facilitated the massive opening of new agricultural land that resulted directly in severe deforestation. Approximately 4 million ha of forest was converted to traditional agricultural land from 1985 – 1997. In the same period about 2.9 million ha land was converted to palm plantation.

On the other hand, efforts to increase agricultural production through land intensification encourage the use of large-scale chemical fertilizer. According to the 2008 WDP record, there was a sharp spike in the use of chemical fertilizer from year to year. In 1960-1963, the use of chemical fertilizers was only about 6 kilograms per hectare. That number rose to 143 kilograms per hectare in 2000-2002. The use of chemical fertilizers is indeed managed to increase agricultural production within a certain period. But this cannot last long. Soils exposed to chemical fertilizers slowly experience quality degradation. In some areas of Sulawesi cocoa producers, for example, since 2000 experienced problems with shoot death and hardening of cocoa fruit. This forces farmers to cut down their cocoa trees and move to short-term plantations.

Hence, PSI sees the importance of increasing sustainable agricultural production.


One of Indonesia’s biggest agricultural constraints is the lack of integration of agriculture with market. Agriculture is often managed traditionally and through generations regardless of market trends. As a result, it is not uncommon that agricultural products cannot be marketed to the fullest. Two years ago, there was tomato oversupply in West Java. In some roads in Garut, tomatoes were thrown away on the streets because they were not sold.

PSI believes that opening market access for farmers is an effective solution to increase farmers’ income. Through market access, farmers can read market movements and customize their production based on their respective production advantages. PSI views the importance of state intervention to facilitate traditional farmers in improving product quality to achieve market or supermarket standards.

In addition, traditional farmers need to be equipped with additional capabilities on how to do product processing to add value to agricultural produce that will ultimately increase their prices.


  • Agro industry

Although its contribution to GDP continues to decline, agricultural sector still plays an important role in the economy and the people of Indonesia. The development of rural-based agro-industries can bridge the manufacturing with the agricultural sector that largely absorbs employment, particularly unskilled labour. Thus, agro-industry can also reduce the rate of urbanization by creating economic centres in regions and not just concentrated in Java. The growth of the urban middle class with a high level of consumption is also a potential market for the development of agro-industry.

Indonesia actually benefits from the natural wealth of the produce and the abundance of labor, but the agro-industry is not efficient enough due to many obstacles. There is also an imbalance between large-scale agro-industry controlled by state-owned enterprises and private sector versus UMKM-scaled agro-industry. With the strength of capital and technology, large agroindustry generates high added value from agricultural products but absorbs fewer manpower than most of small and medium scale industries. Globally, large agroindustry is still less competitive than other countries, exporting more of raw materials such as CPO and not yet focused on its derivative products.

Down-streaming regulation (hilirisasi) on a number of agro-industry leading commodities based on oil palm, rubber, and cocoa must be deepened with the implementation of the export tax policy of raw materials and industrial tax incentives for derivative products. The commitment to continuously improve the mix of renewable energy (biofuels) can develop agro-industrial downstream from various commodities, such as CPO and cassava. Industrial cluster approach through Special Economic Zones (SEZs) such as oil palm-based Sei Mangke should be supported by infrastructure development and availability of electrical energy. In the case of rattan, China’s success in absorbing most of Indonesia’s exports and became the largest exporter of processed rattan products is worth imitating. The role of creative economy is very strategic to create a diverse product design with good quality.
In small-scale agro-industries, there is a need for policy breakthroughs with UMKM dimension development in rural areas, in addition to the unique constraints associated with agricultural sector (susceptible raw materials, seasonal, and quality varies due to the number of suppliers). The development of technoparks does not only to boost agricultural production, but also the application of research and technology to agro-industry, business incubation, and marketing strategy, especially in product packaging. Small business credit interest subsidies such as KUR that have been running for this can be enlarged for the agro-industry sector. Alternative financing such as venture capital is encouraged for start-up agro-industries. Internet penetration to the countryside is crucial for the expansion of information access and the possibility of an online sales business model for agro-industry products. The amount of village fund allocation can be directed to build infrastructure and create an attractive business climate for agroindustry.


  • Housing

PSI understands that the availability and access to decent housing is one way to improve the welfare of citizens. Decent homes will have a good effect on the growth of children who will end poverty cycle, reducing health impacts, and safe places for retirement.

Demand for homes in Indonesia continues to increase. This is related to population growth and better life expectancy. Until 2015, the needs of homes per year reached 800,000. At the same time the need for housing require more houses to be built that often do not reach target as a result of several factors, ranging from the scarcity of land and the allocation of unbalanced sources of funds. Hence, there is a shortage of home supplies that triggers housing’s price to increase every year, reaching real price’s change to be 6-7% per year.

The increasing demand for housing is not on par with people’s income increase, leaving people of low economic class with no access to housing.

PSI believes that housing problem cannot be approached using only one perspective. Rather, it uses four sides of thinking: production or availability, location, quality and affordability.

Housing availability is the first element to be met. PSI sincerely supports every effort of government, private sector, interest groups, NGOs, and citizens to provide decent housing accommodation. The needs of 800,000 new homes each year must be met. PSI is aware that the state budget has limitations. Therefore, the construction of housing, both landed houses and flats, need to involve as many other parties as possible outside the state.

In addition to the construction of new houses, PSI also encourages rebuilding or renovation of old houses.

With the allocation, for whom the house is provided, PSI holds the principle that in addition to the availability of residential buildings, what is more important is how homeless people or those with unworthy housing could own or stay at home. The allocation of areas for housing needs to be carefully thought through. Building houses is only one aspect in resolving housing issues, i.e. on the availability side. The question of where the house is located should be in synergy with the areas where they need housing.

The PSI views that housing policy should pay serious attention to the increasing urbanization of citizens. In the 18th century, only about 5% of the world’s population lived in the city. In 2007, the urban population increased sharply to 50%, and now it is 54%. It is estimated that by the end of this century, 80% of the world’s population will live in cities (

How about Indonesia? In 2010, according to Central Bureau of Statistics (BPS), 49.8% of our population lives in the city. Five years later, today, urban dwellers exceeded the rural population by 53.3%. By 2035, BPS predicts that city dwellers will reach 66.6% of the total Indonesian population (BPS). In the Jabodetabek megapolitan area, for example, the population is expected to reach 35 million by 2020, up significantly from 2010 of 28 million people.

The city is the future. Urban development, including housing, is crucial to facilitate a wave of urbanization that goes hand in hand with industrialization and changes in people’s income sources.

Home quality. PSI views the quality of housing and residential environments to be properly addressed. A house does not only act as a shelter, but also a place where generations are born and formed. A house is where a quality generation born. Therefore, the quality aspect of the house matters.

Currently, housing in Indonesia is dominated by self-building housing, where the residents themselves build their houses, making healthy and decent home a big question. In the 1970s, one in five houses in Indonesia consisted of only one room and most of the houses had no access to electricity. Until 1998, only 20% of houses had access to clean water. Even up to 2000, only 66% of homes had access to good sanitation.

PSI views that housing policies should include improvements in the quality of newly constructed houses, renovations, and existing houses.

Price. For most, the issue of price is always an obstacle to being able to get a house in a good environment. Therefore, the affordability of prices should also be of concern to stakeholders. This is related to the ability or purchasing power of citizens.

For the poor with the lowest income, the construction of low-rise apartments for the poor should continue. In Jakarta, for example, housing demand reach 70,000 units per year. The problem is that land for housing is very limited. The solution to build flats should continue in urban areas with limited land.

One of the problems with affordability is that young people who have just finished college or new families have difficulty owning a home. PSI will encourage housing’s joint ownership. Here, new families that have not had sufficient income can own a house, even if it is shared jointly with another family.

The state’s intervention on the housing problem comprises twofold: the provision of houses for purchase and for rent. Home rentals should be as important as home purchasing due to the character of a more mobile modern society. The easy mechanism to rent a house will serve as a good option for those with moving jobs.

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