Monday, July 09, 2007

Oil Subsidy Compensation Program FY 2005


In order to reduce the state budget deficit, government launched a spectacular breakthrough. President Susilo Bambang Yudhoyono through President Regulation No. 25 Year 2005, decided to raise up the domestic oil price since March 1, 2005. This policy is applied by government to reduce the oil subsidy in line with the international oil price grows up continuously.

The other reasons are : a) subsidized oil price doesn’t go to poor communities; b) the subsidy doesn’t show the scarcity of resources; c) the poor communities do aware how to fulfill their basic needs; d) to change the subsidized price into programs which helped poor communities is more rational and accepted as well.

Government do realize that this policy has a big impact such as price increasing is done. Therefore government tries to design a policy which can solve the problems overcome. The policy called Oil Subsidy Compensation Program (OSCP).

Basically, this Compensation Program is not a new policy introduced by government. This program has been applied by the previous government. However, today’s program is full of improvement based on the evaluation result in which the program will be financed by switching of the oil subsidy fund allocated before. Hopefully, this program will be enjoyed by poor societies. To realize the wish, the Compensation Program is imposed to reduce poverty through fulfilling all their basic needs in line with the National Strategy for Poverty Relief.

Policy Direction

How the compensation program can work as one of the effort to reduce poverty, a study has been designed to cover what the poor communities wish to alleviate poverty. The results are : 1) economic access : capital,job, resources; 2) education : education cost and quality; 3) infrastructure : electricity, communication, roads, water, sanitation, and irrigation; 4) rule of law : safety and low enforcement; 5) health services and disaster relief. Referring to the study result, the Compensation Program should be implemented by suitable criteria as well. The criteria’s such as : 1) feed availability; 2) access and quality of health services; 3) access and quality of education services; 4) job opportunity and business especially in micro business; 5) water and environment; 6) participation and safety; and 7) housing and sanitation.

Furthermore, how to make the compensation policy to be succeeded, it needs a qualified data and targets. Based on Bappenas’ data, Indonesian people are 17.072.346 in which about 36.146.700 or 16,65% are poor people (Susenas, BPS 2004). Based on BKKBN’s 2003 data, Poor households are about 15,92 million in which 8,38 million are pre-welfare groups and 7,54 million are welfare I group families. Data for education, the total poor students based on education level consist of : 1) elementary and middle level about 8,45 million; 2) dropout students about 2,27 million; 3)discontinued students and never schooled about 3,16 million. Meanwhile, the poor villages are about 26.737 even based on Ministry of Home Affair the amount is 40-50 thousand villages.

How the programs and criteria’s are designed excellently, if they are not supported by other factors, the goals of the programs should be hardly to achieve. The programs have to plan well, socialize informatively, implemented accurately, and supervise tightly. Thus, it needs transparence, participation, and accountability from all stakeholders. Succeeding of the programs depend on the synergism of all factors indeed.

The Compensation Program is directed to switch the price subsidy into development program that useful for poor community. Besides, the programs aim to reduce their burden’s and to give them opportunity to operate some business especially micro business.

The Compensation Programs

In 2005, the Compensation Programs decided by government consist of four divisions : education, health, cheap rice, and sub-urban infrastructure. Total fund allocated to financed this program is about IDR 16.056,4 billion. In which through State Budget FY 2005 has been allocated about IDR 7.140,3 billion and the balance about IDR 9.4180 billion is provided by State Budget Supplementary FY 2005.


Education is one of important things to upgrade the human values. To fulfill the basic need of education is based on state constitution that should be adopted by government in implementing development programs. The main objective of this program is to cover all children in school aging can study well without economic problem, to provide more chance for students to continue their school until next level, to join-in children who never or not yet schooled in the elementary level, to bring in back to school children dropped-out, and to facilitate student graduated from elementary to junior high school and from junior high school to senior high
school level.

In 2005, Education Programs planned to scholars about 9.690.489 poor students, so they can study well,students dropped-out may be back to school and may continue until senior high school. The scholarship covers both direct and indirect cost, such as : fees, books, stationary, costumes, and transportation. Direct cost such as fees is transferred to school directly, so students will be free of charge. While indirect cost such as costumes, books, and transportation is paid to students. Government allocated about IDR 5.601,5 billion for this program. The Ministry of National Education and the Ministry of Religion Affair are responsible for this


According to community’s health in bad conditions, the main purpose of this program is providing health insurance for poor community. So they can be free-in-charge during medication. Through Poor Community Health Insurance (PCHI), Government targeted about 36,1 million people in poor community will afford this program. The fund allocated for this program about Rp2.176,7 billion. This program is managed and
responsible by the Ministry of Health.

The services offered in health program are treatment in health center, advanced treatment in health center, treatment in hospital, and advanced treatment in hospital third class.

The mechanism for this program as follow : data of poor people are collected from villages in coordination with nurses, family planning officers, and community leaders, finally they approved by the Major. For poor people who recorded as member in the insurance list when they ill and need treatment, so they are free of charge and guaranteed by PT Askes as a unit pointed by Ministry of Health to manage the insurance.

How to control the implementation of the insurance work is done by Health Office monthly. Recording and reporting are made by hospital that give services, and PT Askes sends report to Ministry of Health monthly.

Cheap Rice

Feed availability is basic need for poor communities. While the rice price is still high, so the Cheap rice program is designed to slice-up the poor to fulfill their feed sustainability. This program is applied by government as a commitment in accordance with the law.

Government will supply cheap rice in this program which can be afforded by 8.600.000 poor families group. In 2005, the budget allocated to this program is about IDR 5.438,5 billion. How to decide the poor families group is done by bottom-up process with refers to criteria and guidance of poor families. The recording starts from
villages and district, finally decided by the Major. When poor families in a village are more than the limit, so the poorest of the poor is applied. The poor families group are recorded in list will accept poor card. Through the card, they can buy the rice only IDR 1.000/kg for about 20 kg monthly.

Government pointed Perum Bulog (government enterprise) to manage and implement this program in which during the implementation Bulog collaborates with other units both in center level and local/regional level. In order to guard the distribution process, monitoring and evaluation are done tightly. Community Complaint Unit is developed in each municipal and regency to follow up every complaint about the process. Besides,
government also develop evaluation team both in center and local level to improve the mechanism process for next years.

Sub-urban Infrastructures

The main goals of Sub-urban Infrastructures Development Program are isolated poor villages which lack of infrastructures and scarce of water resources. Hopefully, this development program will provide accessibility, reduce communities spending, increase communities contribution, and grow their income through involving in any activities and job opportunities.

To guarantee that infrastructures development program is useful, so it needs to define criteria as follows :
1) to fulfill emergency infrastructure which proposed by poor society; 2) to provide services for communities especially poor groups; 3) to develop village area oriented; 4) infrastructure area is provided by society; 5) to open job opportunity to local people and to use local material; 6) to use simple or suitable technology that
can be done by it’s society; 7) the infrastructure can be managed by society; 8) to guarantee the infrastructure built functional continually; 9) not to raise negative impact to environment, social, and tradition.

Infrastructures built on this program are infrastructures that support accessibility and open isolation such as : village roads and bridges, canoes deck, and so on. The other infrastructures are small dam, land water, and irrigation built to increase feed production. The last is infrastructure for water supply.

Besides physical development, government also provides supporting activities such as : to empower communities in maintaining infrastructures, to socialize the programs, to accompany and facilitate communities during planning, implementing, and management process, to develop organization in managing problems dealing with their infrastructures.

To convince that the implementation is running well, supervising is done both internally and externally. Internal supervising is conducted by government institution (BPKP), while external supervising is conducted by NGO’s and mass media and pointed universities. Besides, monitoring team from all levels may cross-check
information in accordance with the implementation.

Total villages will be covered in this program are more than 12.000 and the cost index is about IDR 250,- million per village. Government allocated budget about IDR 3.342,1 billion and Ministry of Public Work is responsible for this program.

Direct Grant for Society

Besides four divisions compensation program above, government also allocated budget about IDR 1.182 billion for direct grant for society in which its distribution scheme is similar to Oil Compensation Program. The grant is designed to subsidize the development of simple housing, social services, revolving fund for micro business, and contraception services for family planning.


Housing is one of society basic needs that becomes problem for urban and sub-urban society. On one hand, for urban poor societies live in uncomfortable places such as : river edge and junk yard away from healthy house. On the other hand, in sub-urban it needs to provide housing that cheap and healthy. Government allocated budget for this program about IDR 400,-billion.

Housing program will build 33 rental twin blocks for 3.168 family groups. The program will take place in 16 major cities with approximate cost about IDR 196,-billion. The twin blocks will be completed by social facility, economic facility, and public facility.

Besides twin blocks, government also facilitates to provide settlement infrastructure which based on society empowerment. The activities consist of transferring revolving fund in kind of loan for material component to build or renovate house. The loan is managed by Community Empowerment Board (BKM) which can be paid off up to 3 years. Society may borrow up to 3 times after paying the loan off.

Infrastructures for housing environment such as roads, drainage, sanitation, and water supply are developed through empower local people. Revolving loan for materials is allocated about IDR 2,4 million/house, for environment about IDR 2,4 illion/house, and community companion about IDR 0,6 million/house, so total loan is about IDR 5,4 million/house.

Government pointed the Ministry of Settlement to manage this program. During implementation, the Ministry collaborates with other units both local and center level.

Social Services

Social problems are hard to solve. However, effort to alleviate social problems have to do continuously. Government allocated about IDR 250,-billion to social disabilities. The activities consist of improving social mess infrastructures, developing business group, and empowering poor and isolated communities.

Improving mess infrastructures consist of activities such as food assistant for 14.250 tenants who live in but serve under minimum standard food index IDR 10.000/person. This program will assist about IDR 4.900/person/day. For social mess ex the Ministry of Social Affair about 110 units that can’t be used comfortably will
be granted up to IDR 400 million each in 28 provinces. Grant for 2.800 units productive Business Economic improvement will be granted up to IDR 25 million in 31 provinces. While business groups for poor family will be provided to 9.000 groups. Grant for improving poor family welfare will be distributed to 16.000 families.
Finally, Isolated Community will be granted up to IDR 450 million in 12 provinces.

During implementation, social program will be handled by the Ministry of Social Affair in associate with Social Institution and other related units. Monitoring and evaluation are conducted in every 2 to 4 month to know if the social services fund transferred accurately.

Micro Business Revolving Fund

The program for Micro Business Revolving Fund is directed to improve poor groups income who involve in productive economic activities in informal sector and micro business scale.

The recipients targeted to receive this program are about 98.000 micro businessmen who came from poor family but have productive economic activities in many sectors. Cooperation runs credit activities and roles as intermediation for about 1.960 units are targeted as well. This program is located separately in 440 municipals and regents especially disadvantage areas.

Government allocates about IDR 200 million and wishes all micro businessmen get enough result. The budget will be managed by the Ministry of Cooperation and Micro Small Business in collaboration with other related institutions both center and local level.

Contraseption Services

In order to improve the Poor’s welfare, it needs to participate in family planning program. Through contraception service program, the access to family planning service including contraception medicine and tools becomes easier. Total targets for this program are to provide contraception tools about 11,8 million for fertile couples.

Providing tools and contraception medicine activities consist of : a) 13,4 million of pills (for 1 million family planning participants); b) 3,4 million injection vials (for 855,6 thousand participants); c) 99,9 thousand implant sets (for 166 thousand participant); d) 387,5 thousand IUD sets (for 387,5 thousand participants); e) 124,5
thousand gross condoms (for 20,4 thousand participants). For fertile couples who don’t want to add kids anymore, they get permanent contraception service through medical surgery. Besides, the services can be afforded such as : pills, injection, IUD, implant, and condoms available at clinics, health center, village polyclinics, nurses, and field officers.

Government allocated about IDR 100 billion to support this contraception program in 2005. National Family Planning Board is pointed to manage and apply the program in collaboration with other institutions both local and center level.


How to conduct the whole programs to be succeeded, it needs quick response from all units. Through qualified safeguarding, the compensation program is hopefully running fast, smooth, transparent, and accountable.

Safeguarding activities consist of : planning coordination, socialization, monitoring and evaluation, community complaint service unit, financial audit and performance, design study, data processing, and safety.

The budget allocated to safeguarding is about IDR 132,0 billion which be managed by several institutions such as : the Coordinator Ministry of Economy, the Coordinator Ministry of People Welfare, Bappenas, BPKP, Police, Intelligence Bureau, Statistic Bureau, and others.

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