The World Food Programme in Indonesia: An Exit Strategy

 

The World Food Programme in Indonesia

An Exit Strategy

WFP Indonesia

April 2001

                                                           

I.          Introduction:  Indonesia’s Food Security Challenge 

For the better part of the past three decades, Indonesia made steady progress in raising incomes, reducing poverty, and improving living standards.  Per capita food availability increased from around 2000 calories per day in the 1960s to close to 2700 calories per day by the early 1990s (FAO 1996).   The proportion of the population classified as poor fell from 44 percent in the 1970s to as low as 11 percent in 1996.  The combination of higher levels of food availability and a much smaller poor population significantly enhanced food security and nutrition status, at both a national and a household level.

Thanks to steady socio-economic progress, the specter of famine and widespread under-nutrition had largely been erased from Indonesia's policy landscape by the mid-1990s (Van der Eng 1993).  But the crisis that engulfed Indonesia from 1997 threatens to reverse many of the hard fought gains in nutrition and food security.   The crisis--and its adverse effects on food security, poverty and nutrition--has reminded policy makers that food security and nutrition improvement must be a national policy goal.

The crisis, as it is commonly referred to, is a catch-all phrase used to describe a series of adverse shocks that struck Indonesia beginning in 1997.  These shocks were an unanticipated combination of environmental, financial, political, and social events.   Few observers could have imagined a combination of such extreme events in so short a time span (De Tray 1998).  

The first shock to hit Indonesia was the El Niño drought in late 1997 and early 1998.  The drought depressed agricultural production and triggered food shortages in parts of eastern Indonesia.  The combination of dry weather and the use of fires to clear plantation lands led to severe forest fires, which for several months blanketed Indonesia and a wide sweep of Southeast Asia in a cloud of haze. 

The second shock, and by far the most severe, was the monetary crisis.  In September of 1997, financial panic-struck and the government were forced to abandon its efforts to defend the rupiah.  From September 1997 to September 1998, the rupiah lost three-quarters of its value, inflation soared to triple-digit levels and international donors assembled a multibillion dollars economic rescue package. The combination of devaluation and monetary tightening caused widespread distress in both the commercial banks and Indonesia's largest companies. High interest rates, commercial bank failures, and corporate distress sent output and incomes plummeting, by nearly 17 percent in 1998 alone.  Starting in September 1998, the government was able to restore some measure of price stability, after which the exchange rate quickly strengthened.  But the collapse in domestic demand together with the overhang of distressed banks and companies continued to weigh heavily on the economy in 1999 and 2000.

The third set of shocks was political by nature. From mid-1997 to mid-1998, political demonstrations broke out in many parts of the country.  Reports of hoarding and food shortages led to riots and, in some areas, confiscation of private food stocks. Government policies, and especially what became known as KKN (corruption, collusion, and nepotism),  was openly criticized by students and the donor community.  In May 1998, particularly severe riots signaled an apparent breakdown in law and order, and triggered the resignation of President Soeharto.  The eighteen months of President Habibie's protests, demonstrations, and spontaneous actions against the government, including the takeover of contested lands marked "reform" government that followed by small farmers and replacement of unpopular local government officials.  After what has been described as a festival of democracy, the 34-year rule of the New Order Government was drawn to an end in November 1999 and was replaced by a coalition of more democratic, reform-oriented parties.

The fourth set of shocks was regional, religious and ethnic in nature.  In 1998 and 1999, Christian and Islamic places of worship were vandalized in a number of Javanese cities. After violent clashes, the East Timorese voted for independence, and ties between Indonesia and what had been its 27^th province were violently severed.  Independence calls were also issued in Aceh, and fighting broke out between the military and civilians in several parts of that province.  Severe ethnic conflicts also erupted in West Kalimantan, Central Sulawesi, the Mollucas, and Mataram (Lombok).  Regional violence and destruction have left close to 1.1 million internally displaced persons in its wake.  In an attempt to ease regional tensions, the government accelerated the process of decentralization and revenue sharing.  The regional violence has also called into question of the economic and political role of the military, both in terms of its culpability for part of the violence and for its apparent inability to effectively restore law and order and respect human rights.

The crises, and the societies' responses to it, have had profound effects on Indonesia's economic, political, and social landscape. The combination of democratization, greater government accountability, growing press freedom, and economic policy reform is expected to eventually result in a more robust economy and a more just society.  But in the interim, economic collapse, volatile political conditions, and mounting regional uncertainties have taken a heavy toll on the nation.

The food supplies.  El Nino severely disrupted domestic rice production, but thanks to ample imports, food supplies were adequate to ensure national food availability.  Government and the private sector imported nearly 7 million metric tons of rice in 1998 and 5 million metric tons in 1999.  In response to good rains, the rice crop began to recover in 2000, with imports falling to 1.4 million metric tons.  Government responded to the sharp decline in farm gate rice prices during the main harvest season in 2000 with a 30 percent import tariff.

In 2001, national paddy production is estimated to be around 51.5 million tons against the requirement of 53 million tons. The shortfall, equivalent to about 1.5 million tons of rice, is to be met through import on commercial terms or food aid. In addition to rice, Indonesia also imports about 3.3 million tons of wheat. The level of wheat utilization may continue to be lower than in recent years due to low purchasing power and reduced demand for expensive wheat based products.

The economy. Prior to the crisis, GDP grew by an average of 7 percent per annum for nearly two decades.  GDP growth fell to 4.6 percent in 1997 and then declined by almost 14 percent in 1998.  In 1999, the economy was stagnant, with GDP rising by just 0.23 percent. 

Thanks to the upturn in petroleum prices, government spending increased and the economy began to recover in 2000, with GDP rising by 4.8 percent.  Per capita GDP in 2000 is Rp.6.3 million or US$700 at the average markets exchange rate.  Per capita income for the year was $641. With devaluation pressures accelerating towards the end of the year, the World Bank estimated per capita income for the year 2000 at $580.  Growth has slowed in the last quarter of 2000 and the first quarter of 2001, leading many analysts to forecast a fragile and uneven recovery.

Some parts of the country have tended to recover faster than others.  In the year 2000, the high-growth (above 4.78%) provinces included North Sumatra, Riau, West Java, South Kalimantan, North Sulawesi, South Sulawesi, Southeast Sulawesi and West Nusa Tenggara.  Provinces caught up in conflict, such as Aceh, Central Kalimantan, East Kalimantan and Irian Jaya generally recorded low or negative growth.  The majority of the Provinces, including West Sumatra, South Sumatra, Bengkulu, Lampung, Greater Jakarta, Central Java, Yogyakarta, East Java, Bali, West Kalimantan, Central Sulawesi, East Nusatenggara and Maluku, recorded a moderate (between 2 and 5%) rate of growth.
 

In 1998, annualized inflation approached 70 percent, before returning to single-digit levels in fiscal 1999 and 2000.  Since December 2000, inflation has accelerated and is close to 10 percent on an annualized basis.  During the crisis, the combination of soaring food prices and near-stagnant wages priced basic consumer goods out of the reach of large segments of society (World Bank 1999). 

GDP growth for 2001 is forecast to be between 4 and 5 percent.  But how much that will add to domestic purchasing power depends very much on where the exchange rate settles. In the first quarter of 2001, the exchange rate has come under tremendous pressure.  It is fluctuating in a range from Rp.10,700 to Rp.11,000 to the US dollar, compared to approximately Rp. 7, 000 to the US dollar a year ago.  In US dollar terms, GDP per capita for 2001 is forecast at $580, compared to more than $1200 prior to the crisis.  The national debt has now reached US $142 billion, or some 120 percent of GDP.  Most of the extra oil revenues and other export earnings are spent in servicing large domestic loans while repayments of official foreign loans have been rescheduled. 

In 1998/99, public expenditures fell to just 16 percent of GDP as the economic crisis fed through into sharply reduced domestic taxes.  In 1999 and the year 2000, revenues have strengthened thanks in large measure to the sharp upturn in global petroleum prices.  Debt relief, meanwhile, has eased significant pressure on external debt service requirements.  However, Indonesia’s domestic debt service requirements have risen to nearly 4 percent of GDP (approximately 60 trillion rupiah) or close to one-fifth of total public expenditures.  Indonesia’s fiscal constraints are related to the small share of Government in the economy--public spending equal to just 22 percent of GDP; the rising debt service burden (forecast for 2001 at 5.4% of GDP) and the very limited resources available to allocate to development expenditures of any kind (development spending forecast at 3% of GDP in 2001).   For the year 2001, the budget has come under tremendous pressure due to weakening in global petroleum prices, rising domestic interest rates (and debt service burden), currency devaluation and the persistence of high fuel and electricity subsidies.  Until progress is made in reducing the debt overhang and increasing domestic revenues, it is envisioned that the Government will be unable to fully meet its commitments in many critical areas, including the provision of immediate assistance to the hungry poor.

Poverty. Poverty levels increased substantially during the crisis. Studies based on the SUSENAS survey show an increase in the total numbers of poor from 22.5 million in 1996 to 49.5 million in 1998.  In August of 1999, the number of poor was estimated at 37.5 million persons.  The immediate crisis impacts on poverty have been far greater in urban than in rural areas.  The poverty incidence has increased from 12 percent in 1996 to 24 percent in 1998. 

Although poverty has become more severe in the urban areas, close to two-thirds of those classified as poor are in the rural areas.  The rural poor are mainly lands less laborers, farmers with smallholdings in the eastern part of the country and coastal fisherman.  The combination of intense pressure on the natural resource base combined with a lack of access to land and other productive resources contributes to the poverty and food insecurity of this group.  At last count, Government estimated that those classified as poor (or unable to afford a minimum diet) was 25.1 million in the rural areas and 12.4 million in the urban areas (Irawan 2001).

The crisis has caused a dramatic increase in urban poverty and food insecurity.  There are two main reasons for this.  First, real wages declined sharply and most of the urban poor depend on a daily wage to meet their food needs.  Second, the urban poor tended to draw a significant share of their income from construction and manufacturing employment.  These were the sectors of the economies that contracted the most and have, as yet, shown few signs of recovery.  Indeed, many who were working in these sectors are now involved in informal sector, cottage production of similar products (but at lower wages).

There is also reason to believe that urban poverty and food insecurity will be a more significant problem for Indonesia in the years to come. Stern (2001) forecasts that more than half on Indonesia’s poor will be in the cities by 2010.  Many of Indonesia’s urban poor live in densely populated corridor areas along riverbanks and railways.  Large numbers are illegal squatters who have occupied government or private-land for long periods of time.  Living conditions are highly inadequate; most houses have limited space, lack adequate ventilation and sanitation; few have private toilets and physical security is difficult to enforce. Many of the urban poor are dependent on daily wage labor in the informal sector to meet their food needs.  Intense competition and volatile market conditions mean that they suffer from highly irregular earnings.  Most of the urban poor are not covered by formal social safety net programs, leaving large numbers without assistance.  Compared to the rural areas, opportunities for home gardening are limited and informal community safety nets tend to be weaker than in rural areas. Often legal obstacles prevent the poorest urban households from tapping public assistance.  The return to rural areas is not an option for many as they are from landless families.  Contrary to popular belief, Stern (2001) reports that the vast majority of the urban poor in Indonesia’s major cities are not recent migrants from the countryside, but are families which have already resided for several generations in the urban areas.   Other studies show that only about five percent of Indonesia’s urban poor are, indeed, recent migrants from the countryside.

The slow pace of recovery and a lack of private investment continue to depress urban living conditions in the big cities.  A survey conducted by the University of Indonesia in mid 1999 reported that estimates of the population below the poverty line in Java rose from 23% in 1996 to around 40% in early 1999.

Poverty, and by extension, food insecurity, has a large transitory element. There is a large segment of the population with incomes marginally above the poverty line. The World Bank estimates that, in addition to those classified as poor, nearly one-third of the population runs the risk of falling into poverty one year in three (Pritchett et. al. 2000, World Bank 2001).   Hence the population that is vulnerable to food insecurity is far larger than simply those classified as being poor at any one point in time.  Adding the poor and “sometimes poor” together would imply that nearly half of the population is periodically vulnerable to poverty.

While the crisis has increased the headcount, depth and intensity of poverty in urban areas the most, the geographic incidence of poverty and food insecurity remain much the same as was the case prior to the immediate series of shocks.  The largest numbers of poor, food insecure households are to be found in urban and rural Java.  The highest incidence of poverty, however, is to be found in the eastern islands of Indonesia, especially in many regions, which are remote from major markets.

The Nutrition Situation. The greatest fear, of policymakers and households alike, is that the ultimate burden of the crisis will be borne by those groups that are least able to fend for themselves.  If the costs of the crisis are borne by the nutritionally vulnerable groups, then the adverse effects will linger on for generations to come, in the form of diminished health, nutrition, and educational performance. Impaired human resource development is bound to contribute to a vicious cycle of poverty, low productivity, and social instability.  

The SUSENAS data show that there was no significant change in the prevalence of underweight children (those under five years of age) from 1995 to 1998 and that the prevalence of underweight has decreased from 35 percent in 1992 to 30 percent in 1998 (Jahari et al. 1999).   A comparison of the anthropometric data from 1995 to 1998 shows, however, that there was practically no improvement in infant weight-for-age during these years.  In other words, the steady progress that Indonesia had registered in improving child nutrition from 1980 to 1995 came to a halt during the crisis.  Furthermore, Indonesia's 30 percent prevalence of underweight children remains well above the prevalence (i.e., 20 percent) reported in other parts of Southeast Asia.

The economic crisis has reminded policymakers that Indonesia's nutrition agenda is far from complete.  A detailed analysis of the SUSENAS anthropometric data by Jahari and colleagues finds that the proportion of children who are classified as severely underweight increased from 6 percent in the early 1990s to 10.5 percent during the 1995 to 1998 period.  Children between the ages of 6-23 months in the rural areas recorded the highest prevalence of severe underweight.

A Department of Health analysis of the nutrition status of infants in the urban slum areas found that the prevalence of severe underweight children was far above national norms. Approximately 14 percent of the underweight infants were found to be severely underweight and in dire need of clinical assistance. In early 1999, for example, the Nutrition Surveillance System maintained by the NGO Helen Keller International (HKI) found alarmingly high levels of wasting in the urban slums of the larger cities, ranging from 19% to 29%.   Those children in the slum areas that had received complementary infant food tended to record a far better nutritional performance than those that had not.  A range of biological and anthropological factors, including differences in birth spacing, weaning practices, and the frequency and quality of maternal care, appear to explain the vast differences in nutritional performance amongst infants of similar economic circumstances in several urban slums (Tim Gizi 2000).

What appears to have happened between 1996 and 2000 is that the number of "mildly underweight" children fell as the number of severely underweight children increased.  While the average was little changed, the distribution of weight-for-age by the under-fives became more skewed.  Jahari et. al. (1999) report that in early 1998 there were about 2.2 million children under five years of age suffering from severe underweight, including 700,000 infants (children of 6-23 months of age).

One of the main survival strategies that low-income families have employed is to reduce the consumption of high value foods (meats, dairy, fruits and vegetables) and concentrate their food expenditures more on grains and low-cost pulses. As households reduced their consumption of high-value foods, the prevalence of micro-nutrient deficiencies increased.  Drawing on a number of small surveys, HKI (2000) reports that many children and women also suffer from deficiencies in micronutrients, notably vitamin A, iodine, iron and zinc. The HKI surveys also found that both iron deficiency and Vitamin A deficiency were increasing among young children and their mothers.   The HKI (2000) concludes that the adverse nutrition impact from the economic crisis appeared to be more severe in the urban areas than in the countryside, and that despite modest improvement in food consumption in 1999, high rates of malnutrition persist.

The Government Response. Food Security is critical for the successful management of macro economic crises, yet it is often not given the prominence it deserves in government policy making.  Food security applies to a continuous spectrum -- from the micro perspective of nutritional well being of individuals to the macro perspective that assures regular supplies of food in national, regional and local markets. A key objective is to create an environment where each household has adequate access to purchasing power, nutritional knowledge and health care that will assure adequate demand for food in markets and efficient food utilization.

The dual effects of El Niño and the economic crisis in Indonesia have called into attention the very yardstick by which food security is measured. For the better part of the past three decades food security has been defined in practice as the availability of an adequate supply of rice at an affordable price. Low and stable rice prices were taken as a sign that food security was intact. The fact that Indonesia re-emerged in 1997 as the world's single largest rice importer; that urban areas were racked by food protests and food related riots in 1997 and early 1998, that food prices have been highly volatile and uncertain, suggests that food security was badly compromised.

Prior to 1998, Government’s food security policy was based on encouraging rice self-sufficiency and intervening in the markets to stabilize domestic rice prices.  The rice self-sufficiency goal has largely been abandoned after El Nino.  Attempts to stabilize domestic rice prices failed in 1997/1998, and since then Government has abandoned its grain trade monopoly and relied on the international markets to set domestic food prices.

The crisis has inspired Government to target its food assistance more directly to vulnerable groups.  As part of its social safety net, the government established a food subsidy scheme, the special market operation programme, Operasi Pasar Khusus (OPK). This was targeted at the poor, based on a classification system used by BKKBN, the National Family Planning Coordinating Board.  The OPK programme started in August 1998. Initially it entitled each eligible household to purchase 10 kilos of rice per month at Rp. 1,000 per kilo—less than half the market price. Later the allocation was raised to 20 kilos.  Some 11 million households, mainly in rural areas, were then  provided access to subsidized rice each month by Bulog.

The present Government has a three-pronged strategy for long-term poverty reduction (and enhancing food security) that includes promoting opportunities for the poor, facilitating empowerment and providing an effective social safety net.  With respect to this third element, the Coordinating Minister for Economic Affairs, at the consultative group meeting in October 2000 in Tokyo, has declared (p.4):

            “A functioning social safety net is an important element of a poverty alleviation

            Strategy as it protects the vulnerable from the adverse effects of economic and

            social shocks.  The central government has an important role in financing the

            Social safety, but with decentralization there will be a much greater role of the

            local government in the provision of these programs.  Critical to this process is

            community participation in the decision-making process and oversight by civil

            society”

Food assistance is viewed as an integral component of the social safety net.  Ensuring that the immediate needs of the hungry are met, and that the special requirements of the nutritionally vulnerable are addressed, figures prominently in the Government’s policy on food security and social safety (Bappenas 2001).

II.         WFP in Indonesia

WFP’s regular programme in Indonesia was closed in 1996 after 33 years of presence in the country. In May 1998, the Indonesia WFP office was reopened, at the request of Government, in response to the precarious food security situation caused by the El Nino drought and the subsequent economic crisis.  An emergency operation (EMOP 6006)  for one year and a Protracted Relief and Recovery (PRRO 6195) for eighteen months was approved.  The EMOP provided for a total of 300,000 tons of rice equivalents and 8,600 tons of blended food at a cost of US$145 million.  The PRRO provides 176,000 tons of food, including 163,500 tons of rice and 3,200 tons of beans, 1,600 tons of oil,  268 tons of salt, plus some 7,300 tons of fortified complimentary infant food at a cost of US$68.3 million.. 

In 1998/1999, WFP operations were concentrated in the rural areas.  However, with the rapid recovery in food supply and several Government food assistance programs in rural areas, the programme shifted its support to the urban poor and the IDPs refugees. 

The general trend in food aid  in Indonesia had been to limit food assistance to the rural sector, in the belief that the urban poor are better off than the poor in rural areas.  But with increasing urban poverty, high levels of urban malnutrition, deepening social rifts, rapidly growing urban populations, and few informal or formal options for food assistance in the urban areas, the shift in emphasis from rural to urban areas was timely (Parajuli 2001). 

Over time, WFP’s assistance partnership arrangements have shifted.  In 1998, assistance was provided mainly through collaborating government partners.  Thereafter, WFP began to work in close partnership with a range of international and domestic NGO’s. This was designed to take advantage of the NGO’s capacity to target effectively based on their knowledge of local conditions, greater accountability and transparency of these organizations, and the prospect for leveraging WFP assistance against other resources mobilized by the NGOs (Parajuli 2001).

Under the EMOP (ending in June 2001) and the PRRO (ending in Oct 2001 but expected to last until March 2002), WFP is providing food assistance to people affected by the economic crisis in urban centers in Jakarta, Bandung, Semarang, Surabaya and to internally displaced persons (IDPs) and refugees in Central and North Maluku, West Kalimantan, East Java and West Timor.  The West Timor operation has been suspended since October 2000.   These operations encompass 445,000 households through the OPSM programme; 175,000 households through a school feeding programme; 350,000 displaced persons in Maluku and Kalimantan, and will reach 80,000 children and mothers through a complementary infant food and nutrition education program. Lately, IDPs from Central Kalimantan, displaced to Madura Island, are also included in WFP assistance.  More than 80 percent of the beneficiaries from WFP assistance are women are girls, an especially important target group given their vulnerability to hunger and the seminal role they play in meeting household needs.

The Special Market Operation (OPSM-WFP) covers 445,000 households in 750 urban slums in four cities, namely Jakarta, Bandung, Surabaya and Semarang.  OPSM provides eligible beneficiaries with the opportunity to buy 20 kilograms of rice per month at a subsidized price of Rp.1,000 per kilogram (as compared to Rp. 2500 per kilogram at the market price).  The program is structured the same as the Government’s OPK program, but is aimed at those in the urban slums that the Government was unable to reach.  In contrast to the OPK program, the OPSM-WFP is implemented through some 20 local NGOs who deliver 5 kilograms of rice per week to each eligible household.  From the sales proceeds of the rice, WFP provides Rp.150/kg to meet the logistics and administrative expenses of the NGOs.  The balance of the generated funds (i.e. Rp. 850/kg) are used to purchase additional rice, to support a nutrition program that includes the provision of fortified infant foods and other community development activities. Special efforts have been made to strengthen the institutional capacity of the local NGO community, as many of these organizations are quite new and few have had prior experience implementing a large-scale food assistance operation. 

Under the nutrition component of the OPSM-WFP programme, WFP has introduced an affordable, complementary infant food called Delvita.  Delvita is a fortified, soybean-based product (80% soybeans, 15% malt, 5% vitamins and minerals) that is manufactured in two factories.  It can be readily manufactured, using locally available ingredients, throughout Indonesia. The acceptability of the product has been tested and approved for distribution by Government. Delvita is mixed with rice porridge as a complementary infant food for children from 6 to 24 months of age at risk of growth faltering. The field unit of the nutrition project is a Pondok.  In each Pondok, children’s attendance is registered, monthly weight and growth measures are made, 2 sachets of Delvita are distributed, nutrition education is provided and demonstrations on how to cook Delvita are conducted. On-site feeding of the children with Delivita is undertaken once a week.  The field operations of the nutrition programme have been in effect since January 2001.  So far, 1400 PONDOK’s have been established, 26 nutrition officers have been recruited by the NGOs, 370 nutrition educators are operating in the field and 91,000 mothers and children have been assisted. 

Under the school programme, WFP provides 10 kgs of rice to selected students as take home rations, effectively contributing an income transfer equivalent to Rp.20,000-25,000/month.  Started in 1999, the operation covers around 181,000 urban children in 2,960 schools run by the Ministries of Religious and Home Affairs under phase I, 150,000 under phase II and possibly as many as 175,000 under phase III. Operation of the third phase has been delayed due to a lack of counterpart funds for transportation and rebagging costs.

There are an estimated 1.2 million IDP’s in the country, of which close to 500,00 have benefited from WFP assistance.  This includes those in West Timor (150,000 currently suspended), Central and North Maluku (300,000) and Kalimantan (150,000).  WFP is providing rice, beans and cooking oil which is delivered by international humanitarian NGOs to the IDPs in these Provinces.  WFP leads a food assistance working group that draws together different donor agencies and international NGOs involved in providing food assistance to IDPs and refugees.  Through this group, WFP helps to inform the assistance community of IDP and refugee needs and helps to coordinate the external assistance response, including key aspects of both food and non-food assistance.

WFP is also engaged in strengthening Indonesia’s institutional capacity in food security policy making.  Working in close cooperation with the World Bank, partner UN agencies and other multilateral and bilateral donors, the WFP promotes the flow of information through an inter-agency working group on food security.  WFP has undertaken a number of field surveys and policy studies to enhance understanding of the links between food insecurity, livelihood conditions, public policies and evolving socio-economic conditions.  As an advocate on behalf of the poor and food insecure, WFP works closely with key Government and civil society partners to improve their understanding of food security challenges and policy reform options. 

III.        The Goals and Objectives of WFP Indonesia Operations 

WFP has a special and sometimes mis-understood role to play in Indonesia.  Some claim that WFP should provide food to all of those who are hungry or food insecure. By this standard, possibly as many as 100 million persons  (the estimated poor and sometimes poor) in Indonesia should receive at least periodic WFP assistance.  While this would certainly exceed WFP’s limited resources, the reason that this is incorrect is that WFP’s role in Indonesia is to fill those gaps in assisting the hungry that neither Government, civil society or other assistance providers can meet.  Always cautious not to crowd out efforts by communities and government to overcome hunger, WFP aims to ensure that those who otherwise fall through the social safety net does receive support.

Indeed, food aid does play an important role in Indonesia and there is little evidence that it adversely affecting food production incentives or contributes to long-term dependency.   Indonesia’s total food aid receipts from 1998 to 2000 are less than five percent of total food imports, implying little risk of crowding-out commercial trade.  Assistance provided under various food assistance programs (by WFP and other donors) is aimed at vulnerable groups who wouldn’t have adequate purchasing power to meet minimal dietary requirements (i.e. the urban ultra-poor, IDPs and refugees).  Food aid to these groups augments the purchasing power of the hungry poor, increases returns to education and other public investments and does not displace or discourage private market activity.  Food assistance flows comprise less than 2 percent of total annual grain consumption in Indonesia.  But while these flows may be small (relative to consumption and imports), they are important to Indonesia.  Government’s fiscal capacity has become increasingly impaired as a result of the crisis and grant aid flows have fallen to just an estimated $200 million for fiscal 2000.  With an already unsustainable debt overhang, Government is naturally reluctant (and in fact unable) to borrow externally at commercial terms to meet its food assistance requirements.  The provision of food aid grants helps to guarantee that Government does have adequate resources to target to the hungry poor.

While Indonesia is a nation with an enormous number of food insecure households and serious public finance constraints, it is also a nation in which Government, civil society and local communities potentially could address a significant portion of the food insecurity problem. Poor households have developed a variety of livelihood strategies to allow them to cope with short-lived food stress.  Local communities continue long-standing traditions of sharing resources during times of distress. Community and other non-governmental organizations provide some humanitarian assistance during times of need.  The National Food Logistics Agency maintains rice stocks of between 2 and 3 million metric tons, operates a national grain depot network and distributes subsidized rice on a monthly basis to nearly a quarter of the nation’s population through a logistics network of some 45,000 distribution points.  Although unevenly and sporadically, close to half of the internally displaced persons are fed under government programs; government operates a rural school lunch program and numerous other social safety net and nutrition programs.  To fill the food supply gap, the private sector is able to import four to five million metric tons of food grains (rice, wheat, sugar, soybeans) each year on a commercial basis, despite Indonesia’s lingering economic distress.  Even though private imports may be available, the low incomes of a large segment of society mean that the poor cannot afford an adequate diet, even if the food is available in the market.

In some cases, however, the food challenges overwhelm the capabilities of Government and civil society both.  Gaps in coverage expose large numbers of the poor to severe food insecurity.  WFP plays an important role in filling critical gaps in coverage to vulnerable, food insecure households.  In so doing, WFP is complementing public sector initiatives by reaching groups whom otherwise would be missed.  This is demonstrated most clearly in WFP’s programs in urban slums and peri-urban areas, for these are regions hard-hit by the economic crisis which tend to fall through the Government’s social safety net.  This is also the case for a large segment of the IDP’s whom, for reasons of fiscal constraints and limited organizational capacity, Government is unable to reach.    

There are also severe food and nutrition problems, which affect specific segments of the Indonesian population, such as the growth faltering problem affecting infants and toddlers. New and innovative approaches are required to break the inter-generational transmission of malnutrition and impoverishment.  WFP’s complementary infant feeding and nutrition education initiative is aimed at applying an innovative approach aimed at reducing the high incidence of infant malnutrition.   Likewise, efforts to introduce school feeding in the urban slums as a means of combating school drop-outs represent an innovative approach to addressing urban food insecurity problems in the Indonesian context.

The involvement of local non-governmental organizations in the delivery and management of food assistance efforts is also an innovative approach in the Indonesian context.   The activities of local NGO’s were restricted under the New Order Government and responsibility for addressing food insecurity was largely vested with the state.   With the transition to democracy, civil society has begun to play a greater role in meeting humanitarian challenges.   In the case of food assistance, however, there was very little capacity in civil society to mount well-governed food assistance efforts. WFP’s partnerships with NGO’s to develop their capacity to address food insecurity is another example of a complementary, innovative approach to addressing a critical part of  Indonesia’s hunger problem.          

While civil society organizations can undoubtedly play a growing role in combating hunger, Government must continue to bear the main responsibility for combating food insecurity.  This implies a need for a strong policy commitment to food and nutrition security, a clear and coherent policy framework and a set of robust government programs that effectively serve to mitigate food insecurity in the short-run and to eliminate it over time.  Indonesia’s public policies are in a state of flux and pressures for reform are great.  Gaps, deficiencies and inconsistencies in food security policy---both in design and implementation--- contribute to weaknesses in the delivery of public assistance.  WFP’s support for the development of improved food security policy draws on lessons-learned from a wide-segment of donor, NGO and government agencies and uses these to advocate for improvements in policies for the food insecure. 

WFP’s efforts are designed to be complementary to the anti-hunger efforts of Government, civil society, other donors and local communities.  In strategic terms, its main role is to:

·         Fill critical gaps with emergency food aid and subsidized OPSM rice to highly food-insecure, vulnerable households thereby reaching needy people beyond the reach of government and civil society;

·         Develop innovative technical and institutional approaches to combating severe food insecurity; and

·         Advocate on behalf of Indonesia’s food insecure in a way that also assists Government improve its food security policies and programs.

Consistent with this special role, WFP has defined a set of activities and goals for fostering food security.  These include:

·         Increasing access to basic foods for the urban poor excluded from the Government’s food assistance social safety net programme;

·         Help reduce the drop out rate amongst primary school students;

·         Address key nutritional concerns among children aged 6 to 24 months;

·         Provide livelihood support to displaced persons and refugees; and

·         Contribute to a long-term solution through better food security policy.

         

The pace and extent to which WFP should exit from its operations depends on five inter-related factors:

1.    The first is the pace at which Indonesia’s economy recovers and the degree to which the hungry poor and food insecure share the benefits of that recovery. 

2.    The second is the degree to which instability, conflict and natural disaster incidents abate. 

3.    The third is the degree to which Government is able to assume responsibilities from WFP, and provide adequate coverage to those urban and IDP groups who tend to slip through the social safety net.

4.    The fourth factor to consider is the degree to which WFP is able to continue its operations in an effective and accountable manner. 

5.    And the fifth factor is the extent to which the international community continues to support provision of food assistance to address Indonesia’s food insecurity problems. 

Each of these factors is discussed in turn. 

     

IV.        The Likely Setting for Future WFP support to Indonesia

Sluggish Economic Recovery.  While Indonesia’s economy shows some tentative signs of recovery, growth remains uneven and volatile, and exchange rate volatility is severe.  Although the authorities were predicting a rupiah to the dollar exchange rate of 7,000 for 2001, the exchange rate is now hovering just above 11,000.   Systemic weaknesses in the banking and corporate sector are still to be addressed and both Government and the private sector are saddled with a debt overhang that now exceeds140 percent of GDP ($142 billion).  Public debt has reached nearly 90 percent of GDP, of which two-thirds is related to the costs of restructuring the banking sector.  Although Government’s external debt has been restructured, nearly a quarter of public expenditures have been allocated to domestic debt service.  With limited domestic revenue sources and strict limits imposed on foreign borrowing, the Government’s resources (after debt service) are on the order of 15 percent of GDP, a relatively small sum for a Government faced with major recovery, security and governance improvement challenges.

 At the current market exchange rate, average per capita incomes for 2001 are forecast to be in the range of US$650 per annum, with close to half of the population having an annual income of less than US$350 per person.  Economic growth continues to be sluggish, with per capita income growth of just 2 to 3 percent forecast for 2001.  The global slowdown in economic growth, and in particular the US slowdown and the Japanese recession, is expected to reduce the pace of recovery in 2002.  With very little productive investment and low levels of investor confidence, medium-term prospects are mixed.  While Government had initially hoped that economic recovery would restore income levels to pre-crisis conditions by 2005, this estimate has now been pushed back to 2008. 

Whether or not living standards can in fact recover to 1996 levels by 2008 is difficult to predict. Medium-term recovery depends on the restoration of investor confidence and there are few signs that confidence is returning. Moreover, with a large debt overhang, the Government’s ability to stimulate economic activity and borrow for public investment purposes will remain highly constrained.        

But it is not only the pace of recovery that will affect the food security needs of the population.  With largely open markets for goods, services and capital, the effects of changing global and domestic market conditions are rapidly transmitted to the poor.  A combination of currency devaluation, imported inflation and sluggish wage adjustment can price basic foodstuffs out of the reach of large numbers of wage earners.  Commodity market fluctuations---such as the 2001 collapse in the international prices of rice and coffee---lead to an immediate decline in the incomes of nearly sixteen million Indonesian farming households, the majority of whom were poor or near-poor to begin with.  Volatility in global and domestic markets and the speed at which this volatility effects the purchasing power of the poor, will continue to contribute to major swings in the numbers and characteristics of food insecure households.

Global grain prices have fallen to historic lows on the world markets.  In the Asia region, rice is trading at $120/ton to $130/ton fob for 25% broken.  These prices are almost half of what they were just two years ago[1].  That world grain price has fallen so low has important implications for WFP’s operations. 

Many policy makers conclude that low global grain prices means that food security, at both a national and household level, is not a priority concern.  They tend to forget that a vast number of households have very little purchasing power to begin with.  Moreover, low global grain prices depress Indonesian farm incomes and reduce farm labor demand, both of which combine to push the poor into the urban slums. With 14 million farm households involved in rice production and many of those poor or near-poor, extraordinary low global rice prices have immediate adverse effects on rural welfare.

Instability and Vulnerability to Natural Disasters.  Many of today’s regional, religious and ethnic conflicts can be thought of as a sort of decompression after a long period of social repression. Optimistically, a short period of decompression will be followed by a period of democratic consolidation and national unity.  However, there are a number of reasons why one might believe that the “decompression” stage might last for some time to come, including:

·         An injustice overhang: There are large parts of the country in which the 12 million transmigrants resettled in the 1970s and 1980s are viewed as being unwelcome “encroachers”.  The land-reallocation that took place in the 1980s and 1990s has yet to be reversed. A legacy of Central Government and Javanese interference in the operation of public administration off-Java adds to inter-ethnic concerns.  The widening gap between living conditions of the elite in urban Java and much of those in the Outer Islands fuels demands for regional rebellion.  

·         Limited civilian control over the military.  The military remains a potent force in Indonesian society.  While its role has been reduced, it’s still a force to be reckoned with. The military’s record in respecting human rights and observing civilian leadership merits improvement.  Military culpability in regional conflict has been acknowledged in East Timor and is a concern in Aceh and other parts of Indonesia. Indonesia’s democratization threatens the degree to which the military can retain its preferential economic position, particularly off of Java.  The military may well respond to counter the simultaneous loss of economic “rents” and prestige.

·         Confrontation Precedents.   The granting of Independence for East Timor has set a precedent for groups in other parts of the nation.  Official local Government support for the expulsion of the Madurese population in Central Kalimantan sets a precedent that other local governments, resentful of their minority populations, might follow.

·         Political Instability.  Frequent cabinet changes, policy shifts impeachment threats and rifts between the political parties suggest a lack of leadership consensus and the possibility of politically connected violence.  Bombings incidents in Jakarta and Surabaya, attacks on various party headquarters and public protests are signs that political instability could turn violent.  

·         Weaknesses in Law and Order: The lack of a credible legal system means that opportunities for peaceful resolution of perceived injustices are limited indeed. In areas marked by long-standing conflicts (Aceh, Irian Jaya, Moluccas), Indonesia’s limited institutional capacity to foster ethnic reconciliation constrains Governments ability to prevent violence.    

While the probability of regional conflict is perhaps higher in certain regions (Aceh, Irian Jaya) than in others, large parts of the archipelago remain at risk. In such an environment, minor incidents can trigger widespread violence. Where and when such triggers will occur cannot be predicted in advance.  What can be said is that large portions of the country could become potential IDP-generating “hot spots” if such triggers were to occur.

It is worth remembering that internal displacement and severe food insecurity also results from natural disasters.  The El Nino drought of 1997-1998 contributed to severe food insecurity in Eastern Indonesia, affecting upwards of 12 million persons. Forest fires resulting from dry El Nino conditions contributed to crop loss and smog-related health problems.

El Nino type droughts tend to reoccur every five to seven years.   Few measures have been taken to prevent or plan for the likely adverse effects of the next El Nino. In the next one to three years, the risk of an El Nino shock disrupting food supplies and livelihoods in eastern Indonesia remains high.   

Government’s ability to cover gaps.  The degree to which the Government is able to assume responsibility for those WFP is now assisting depends on the resources available to them and their institutional capacity to respond effectively to those in need. While there is reason to believe that Government can play a growing role in delivering food security services in the long-run, prospects are more limited in the short-term.

The first and foremost constraint is simply one of severe fiscal constraints.  Public spending is highly constrained by the debt overhang and the high cost of servicing the debt, the small domestic tax base, a widening deficit and political resistance to implementing cost-saving measures. In many regions, fiscal decentralization has contributed to the emergence of wide imbalances between expenditure requirements and revenue availability at the local level.  In 2001, the Government deficit was forecast to be 55 trillion rupiah (or approximately US$600 million) at the start of the year.  Forecasts have now been revised upwards to 85 trillion rupiah (or US$720 million).  Pressures to contain the budget deficit have resulted in long delays in the release of the development budget and under-expenditures on a number of agreed central and local government programs.   The 2001 budget has also been under pressure due to delays in the release of IMF assistance, cancellation of some multilateral assistance and the release of other assistance conditional on IMF support.

Looking ahead, Government is bound to face a very difficult fiscal outlook for at least the next four to five years.   Government has committed itself to major expenditure cuts and revenue enhancements in order to reduce the fiscal deficit and lower the level of public debt (to a target of some 60 percent of GDP). Moreover, the Government’s major donors (World Bank, Asian Development Bank) have expressed their intention to sharply curtail the level of assistance provided to Indonesia in the forthcoming years.  While terms of assistance from the multilateral banks are being softened, the reduction in assistance flows will create an additional gap for Government to finance.  Pressures to eliminate the deficit and slash the public debt mean that all public spending is bound to come under greater scrutiny and cost-cutting pressure. The Government’s ability to secure and ensure timely release of even small amounts of counterpart funding for WFP programs from the budget may be difficult.  What counterpart funding is available for donor-assisted projects from the Government’s development budget is liable to be allocated to the larger projects first. While Government may be willing and mindful of the need to cover the cost of providing lifeline foods to IDPs or ensuring that food security is met in the urban slums, it is unlikely that they will have the fiscal ability to do so.                     

Government also faces internal management and institutional capacity constraints that limit its ability to assume responsibility for those vulnerable households that WFP is now assisting.   Many of those residing in the slums and peri-urban areas of the major cities are either illegal squatters or households without the permits required residing in these cities.   It is still difficult for local Government to offer assistance to those households, especially when it does not recognize their legal rights to reside where they are.  Moreover, with local governments facing severe fiscal constraints, they tend to concentrate their efforts elsewhere.  At the national level, the Government has little ability to prepare for emergencies, to collect and assess information on IDP’s or to respond in a rapid and sustained manner to the needs of the IDPs.  This reflects both the traditional allocation of emergency response responsibilities to local Government (ie. the Governor’s office) and to the sudden emergence of a large number of conflict related IDP communities all at once.

The decentralization process and the desire by Government to foster greater regional autonomy imply a change in the local of public sector decision making.  Local governments now play a greater role in decision making, but the division of labor and authority between local and central government is uncertain and evolving.   This makes it especially difficult to reach decisions that are both approved centrally and implemented locally.

WFP’s Ability to Operate Effectively.  Government will need to actively support food security programs and to facilitate WFP activities if WFP’s assistance is to be efficiently and effectively utilized. To date, the WFP has enjoyed a high level of cooperation and assistance from the authorities, and the working relationship between WFP and its partners in Government is generally good.   But governance is constantly evolving in Indonesia, and changes in political conditions and decision-making processes can occur quickly. Shifts in public policy that could inhibit WFP’s ability to effectively manage its programs include: demands by various Government officials that only locally procured foodstuffs be used for food assistance rather than imported grains; under and late-financing of the counterpart requirements for selected WFP programs; and a national policy decision to discontinue all social-safety net type assistance programs.    While there are some signs of the first two concerns, and periodic threats of the third, the risk that adverse policy changes will happen and inhibit WFP’s ability to effectively operate its programs is considered to be small.  

Continued International Support for WFP Activities. The international donor community has been generous in its support of WFP’s activities in Indonesia.   WFP’s main Indonesia food aid donors do foresee a need for continued support, particularly in light of the sluggish economic recovery, deepening urban poverty and social conflict related risks.  Within the donor community, however, support for food-assistance, or for relief efforts in general, is mixed.  The World Bank, for example, has declared that Indonesia has passed the worst of the crisis and that the immediate challenge is to quickly reduce social safety net spending and focus instead on pro-poor growth oriented poverty-reduction activities.  The Bank has cancelled the second tranche of their Social Safety Net loan. While the World Bank is a highly influential donor, this view is not shared by all of Indonesia’s development partners.  The Asian Development Bank (2001), in its recent poverty assessment, argues that social protection (and safety net programs) should be in place to help the poor and food insecure in both crisis and non-crisis situations.  The debate within the donor community on the merits and demerits of social assistance is bound to continue for some time to come. How it is resolved by the Indonesian authorities is bound to affect the degree of policy support that Government provides for WFP supported food-assistance programs.       

V.         Future Strategic Priorities

Meeting the Emergency Needs of the Internally Displaced Persons

Indonesia’s volatile ethnic, regional and political situation has caused some 1.1 million persons to be either internally displaced or to become refugees within Indonesia’s borders. Until there is democratic consolidation and a significant easing of regional, religious and ethnic tensions, one of WFP’s main roles will be to provide food to meet the emergency needs of the internally displaced persons (IDPs) and refugees.  WFP is currently assisting 350,000 IDPs in Maluku and North Maluku.  Assistance to refugees in West Timor is currently suspended and Government is providing food assistance there now to some 260,000 persons.  It is also planned to provide assistance for 65,000 Madurese IDPs in East Java and for IDPs in Central Sulawesi.

If the security situation improves, it should be possible to bring the assistance programs in West Timor to a close in some two to three years.  While WFP should be prepared to continue providing food to bona fide and eligible refugees in West Timor, there is concern that such assistance does not foster a cycle of long-term dependency.  In the future, WFP should not support the maintenance of refugees in West Timor but concentrate its assistance in repatriation and resettlement packages. WFP should insist that combatant elements are somehow segregated from the civilian populations since the combatants are a security risk, undermine fair relief distribution and WFP is expressly forbidden to provide food assistance to combatants. The main focus of future WFP support in West Timor should be on repatriation and local resettlement.  For repatriation, the main priority is to establish a system in which ration cards are traded-in for a repatriation ration.  In terms of local settlement, WFP support could provide for the food requirements of households establishing their own homesteads for a period not to normally exceed six months.

Given the nature, in which conflicts both erupt and subside in the Malukus, it is impossible to accurately predict the level of food assistance needs in 2001 or beyond.  However, progress currently being made towards reconciliation in North Maluku could reduce the number of IDP’s and thus the need for food aid in that Province.  There is less room for optimism in Central Maluku because little progress has been made towards reconciliation in Ambon and the surrounding islands. 

The latest figure of IDP’s resulting from the Maluku crisis is estimated to be just below 500,000 persons, of whom some 320,000 require external assistance and support.  WFP has fed some 320,000 persons on average in the North and Central Maluku in the first quarter of 2001.  By the end of the year, the total anticipated number of beneficiaries is forecast to be as low as 200,000 persons. 

WFP’s regional planning was based on the assumption that the number of IDP’s that will require its assistance will decline by more than fifty percent at the end of 2001.  In the first two months of 2001, however, the total number of IDPs in Indonesia has increased by some 25 percent, and there are few signs that regional conflict pressures are abating.  Contingency planning missions have been conducted in Aceh and parts of Kalimantan.  Sustained conflicts in either of these Provinces could potentially generate large numbers of IDPs.

Government and WFP are aware that the number of IDPs could increase dramatically and with short notice.  For this reason, the recently introduced agreement between WFP and Government calls for BULOG to maintain a stock of 20,000 tons of rice that could be used for WFP emergency requirements in any part of the country. 

While each IDP situation is entirely unique, the adequacy of the emergency response effort is constrained by, inter alia, a lack of a clear policy framework between Government and WFP outlining the role of the Agency in supporting emergency operations, weaknesses in the central and local Government capacity to engage in contingency planning and other forms of emergency preparation, rigidities in the government budgeting process and a lack of effective coordination of the relief response effort between Government, the international donors and the NGO community.   The combination of a lack of a clear policy framework, limited progress made in  reconciliation and a Government coordination failure contributes to uncertainties regarding the allocation of responsibilities, differences in the coverage and assistance provided to similar groups of IDPs in the same region and a lack of clarity regarding resettlement and repatriation policy.  Added to this is a difficult and often volatile security situation in several of the IDP camps, particularly when combatants are effectively indistinguishable from other IDPs and government is seen to be culpable for the disaster.

In the lack of a strong, government-led IDP coordination effort, WFP is inclined to establish assistance policies for IDPs on a case-by-case basis. WFP’s implicit emergency response policy has been to prepare contingency plans when there are signs of impending need (as in Aceh and Irian Jaya), to try and assess the numbers of IDPs that will be assisted by Government and the main humanitarian international NGOs, and to respond rapidly to supply the food needs of those not covered by other assistance providers.  A food relief coordinating group, chaired by WFP, provides periodic updates of the IDP situation and helps to encourage the exchange of information on the relief situation.

As a first step in improving emergency response, WFP will endeavor to develop a clear letter-of-understanding with Government regarding policies for involving WFP in humanitarian response.  This would serve to establish a policy framework under which WFP’s response to each individual situation will be structured. The remit of such an MOU could include burden-sharing arrangements, emergency-financing procedures, contingency public food stocks and arrangements under which WFP would assist Government to build emergency preparedness capacity.

In the long run, the effectiveness of the emergency response effort would be considerably improved if the agencies in central and local government responsible for IDPs (ie. Bakornas, Satkorlak and the Kanwil Social) were more effective in informing and coordinating humanitarian assistance efforts.  Over the next two to three years, WFP should endeavor to build the institutional capacity of Government to respond effectively to the emergency food requirements of the IDPs.  There appears to be strong donor support for such institution building activities. Assistance could be provided to Bakornas and the local Satkorlak’s in contingency planning, emergency preparation management, assistance provider coordination and the monitoring and reporting of food assistance flows[2]. Efforts need to be made to involve Bakornas, BULOG and the Ministry of Finance in this effort. Accelerating the pace of decision-making on emergency response, including the timely release of funding for IDPs and refugees is also a major concern.  Towards this end, WFP would work closely with Bakornas, the Poverty Reduction Agency, BULOG, the Ministry of Finance and other concerned stakeholders to develop operational mechanisms for policy decision-making that would be more sensitive to the adverse effects of delays on emergency operations.

To date, WFP has worked in partnership with a range of international NGOs in delivering humanitarian food assistance.   While international NGOs have and will continue to play an important role in providing humanitarian relief, there is also a need for Indonesia to develop its local capacities to respond to situations of man-made emergency. 

WFP can help foster greater local civil society capacities to respond to emergency situations by involving local NGOs in the delivery of food relief to IDPs.  A start is being made in this direction with the planned involvement of the Indonesian Red Crescent Society in the delivery of food assistance to Madurese refugees in Java.  Involving local NGOs in the delivery of humanitarian relief will require an element of capacity building on WFP’s part.  But this investment is bound to pay positive returns if, in the future, these institutions become partners with Government in planning and executing relief operations.

The UN System as a whole is planning to enhance its emergency relief coordination efforts. An inter-agency task force, headed by OCHA, is planning to encourage inter-agency contingency planning and help build data bases on IDP needs.  WFP will certainly play an important role in this task force, and the proposed activities can complement WFP’s investment in building disaster mitigation capacity in Government. Moreover, there is a need for contingency planning for “predictable” environmental shocks, such as the next El Nino, that may well strike Indonesia in the next few years.  This could be a suitable topic for the inter-agency task force to address, bearing in mind the lead-time required for a complex undertaking of this sort. 

The OPSM Program and the Urban Food Insecurity Challenge

WFP started OPSM in March 1999 with a pilot project involving two NGOs and reaching 15,000 households in the slums of Jakarta.  Under the emergency operation, during August 1999/ April 2000, OPSM assisted approximately 580,000 households in 750 urban neighborhoods in four cities, Jakarta, Bandung, Semarang and Surabaya, in partnership with 14 local NGOs.  Since October 2000, OPSM-WFP has been operating with 20 local NGO implementing partners to assist a total of 524,000 household in Jabotabek (340,000 households), Bandung (40,000 households), Semarang (53,000 households) and Surabaya (91,000 households).   At the end of the current operations in 2001, WFP hopes to reach around 550,000 households with OPSM-WFP.

A beneficiary impact survey of OPSM-WFP was conducted in November 1999 and March 2000.  The survey concluded that the vast majority of OPSM beneficiaries are working as low-paid factory workers, construction workers and street vendors with irregular income.   The average income of an OPSM-WFP recipient was some 23 percent below the poverty line, and the average household spent 74% of their income on food.  The impact assessment concluded that OPSM-WFP was well-managed, reaching the intended target group, has a significant direct impact on food consumption levels and an indirect impact on the ability of the household to afford education and other household essentials.  That study also concluded that the manner in which OPSM is managed and implemented are worth adopting by Government to improve its OPK program.

There continues to be a need for the OPSM-WFP program in the urban areas for the next two to three years at the very least.  Average wages for unskilled workers in the cities, measured in terms of their ability to purchase rice, have recovered in the year 2000 and 2001, but measured in terms of their “rice purchasing power”, these are still some 60 to 70 percent of what they were prior to the crisis.  Moreover, inflation is accelerating in the wake of Indonesia’s recent currency devaluation, pricing food staples out of the reach of the many urban poor.  Prior to the crisis, the vast majority of households living in the urban slums would have been classified as below Indonesia’s poverty line, and hence vulnerable to poverty.  With real wages still far below levels reached prior to the crisis, and little prospect for wages to catch up until the recovery accelerates, private investment resumes and inflation subsides, the “crisis” is far from over for those households in the urban slums that WFP is assisting. 

In the future, there may be a number of ways of improving the impact and effectiveness of the OPSM program.  First, to improve operational efficiency and reduce what seems to be an operating overload on the program’s NGO partners, consideration may be given to switching to a biweekly rather than a weekly rice distribution.  Prior to this switch, a small-scale assessment should be made to assess whether or not a significant number of beneficiary households would be unable to generate the savings needed to meet a Rp.10,000 biweekly co-payment.   Second, targeting should be sharpened using the information available in the latest rounds of the BKKBN welfare surveys.  Those peri-urban areas in Bekasi and Tanggerang that are not now covered may be included, and those regions of Jakarta and Surabaya in which the poverty incidence has witnessed a sharp decline can be phased-down.  To reduce the risk of duplication with the Government’s OPK program, that program should be phased out in Jakarta and Surabaya and WFP given clear authority to implement the program in those cities.  And third, there may be a need to revisit BULOG’s concerns regarding the terms and procedures for swapping “low quality” rice and the procedures used to account for losses and damages with imports.

The OPSM-WFP program was established as an alternative approach for implementing the OPK program in the urban slums. It was intended that Government would progressively absorb OPSM in its OPK program as resources and institutional capacity permit.  WFP should promote the first stage of this hand-over during the next one to three years.  In the first stage, BULOG has indicated its interest in assuming responsibility for OPSM beneficiaries in Bandung.  To effect this hand-over, BULOG will require training in the management and supervision of an NGO-based program.  Mechanisms will also need to be put in place to involve local government in the supervision of the NGO program implementers.  In the second stage, WFP should hand-over responsibilities for the operation of program activities in Semarang.   For the next two to three years, WFP should concentrate its efforts on implementing OPSM-WFP in Jakarta and Surabaya (the two largest urban centres with the highest concentration of urban poor, while actively assisting Government assume responsibilities for OPSM-WFP beneficiaries in Bandung and Semarang.

As presently designed, the OPSM-WFP program is mainly an income transfer scheme.  The longer the scheme continues the greater the risk of beneficiary dependency. Efforts are needed to promote initiatives that will help OPSM beneficiaries work their way out of poverty. 

In 2001, it is estimated that some $ 10 to 12 million will be generated through the sale of subsidized rice and will be available in the OPSM-WFP special fund.  Depending on the success in the pilot test of community development activities, a small amount of fund may be allocated to support community development activities.  This can help test establishing a process of sustainable development to combat hunger and future continued assistance by the government.  

Community development initiatives should be operated and managed by the NGO partners some of which may be already involved in the distribution of the OPSM rice.  These activities should be developed in full consultation with the community beneficiaries.  Proposals for community development projects should be solicited from the NGO partners.  These initially should be limited to investments in simple community infrastructure and essential social services, to ensure that the projects are both manageable by the NGOs and monitorable by WFP.  Guidelines are being prepared for the implementation of community development projects and a pilot-test is to be undertaken this year.  Over the next two to three years, a small amount of funds may continued to be allocated to continue pilot test such an initiative, should the effort from the current operation is proved to be successful.  

From its inception, OPSM-WFP was designed to provide valuable policy lessons to government on the effective management of an urban subsidized food transfer program.  It is important that OPSM-WFP be regularly evaluated and assessed in order to distill these lessons and share those with Government.  The OPK program (i.e. Government’s rice subsidy program) needs to be improved in many respects. Targeting is poor; the division of responsibility and accountability between BULOG and local Government has many short comings.  Monitoring, evaluation and dispute resolution procedures are deficient, and NGOs have yet to be tapped for implementation.   Working closely with BULOG to help design improvements in OPK, and to provide their staff with the training in approaches and methods that will improve the management of that program, can make a significant contribution to the Government’s food security effort.  WFP is the only donor agency working in partnership with BULOG at present, and it is viewed as a well-respected and trusted partner in reforming both the program and the way in which the Agency manages its operations.  This inter-institutional goodwill should be capitalized on to enhance the efficiency and effectiveness of the OPK program.  Ultimately, a well-run OPK effort can replace WFP’s assistance in the urban areas.

The real value of the implicit income transfer afforded by the OPSM-WFP subsidy has been eroded by falling market rice prices and inflation.  In the near-term, consideration could be given to either increasing the implicit subsidy or to increasing the amount of the monthly ration offered to each eligible beneficiary.  Any such change should only be made if Government is willing to make the same change to its OPK program.  BULOG and WFP should jointly assess whether the OPK and the OPSM-WFP implicit subsidy is too low, too high or still suitable relative to the size of the food-income gap (i.e. the amount of income required so that the family can afford a 2100 calorie diet).

Provision of Complementary Infant Foods and Nutrition Education 

Some forty percent of Indonesia’s infants suffer from growth faltering and malnutrition.  This problem is particularly acute amongst the low-income population. Ultimately, it leads to the transmission of poverty from generation-to-generation.   Government has declared that breaking the inter-generational transmission of poverty is one of its highest priorities and a major effort has been made to focus attention on the nutrition needs of Indonesia’s infants. 

Due to limited resources, the Government expects to be able to cover approximately one-half of the low-income households with food supplements for infants provided (at subsidized prices) through the public health service.  The balance is to be covered by support provided by the donor community.  In addition, the private sector is to be encouraged to promote and distribute complementary infant foods on a commercial basis, to boost nutrition awareness and increase the availability of these products in the marketplace.  

Although the nutrition component of the WFP assistance has been implemented for less than four months, project monitoring reports suggest that both the nutrition education and the complementary infant feeding are well-received by the target beneficiary population.   During the next year, the efficacy of DELVITA should be established in both clinical trials and field surveys.  There may also be a need to simplify the program to ensure that coverage can be rapidly expanded.   Further fine-tuning of either the nutrition supplement or the nutrition messages should be based on the results of the efficacy trials.

There is an opportunity to significantly expand the reach of complementary infant foods and nutrition education by teaming-up with UNICEF in this area. WFP and UNICEF have signed an MOU to cooperate in food and nutrition matters.  This MOU provides a framework for cooperation that can be put into practice on the infant-feeding challenge.

Over the next two to three years, WFP and UNICEF should cooperate in developing an infant nutrition program that covers both the main urban areas (where OPSM-WFP is operating) and the 40 rural districts (in which UNICEF operates). WFP should take responsibility for ensuring that the complementary infant food is produced (through local manufacturers) and that it is effectively delivered from the factory to either the ultimate beneficiaries (in the case of OPSM-WFP) or to the health points at which UNICEF operates[3].  UNICEF should be responsible for supervising nutrition education and outreach efforts as well as the provision of any complementary input (weighing scales, health-related inputs).   UNICEF and WFP could make a joint appeal for the food commodities to meet the needs of the infant population in both the urban areas and the 40 districts in which UNICEF operates.

Cooperation with UNICEF on the provision of fortified food offers WFP an important opportunity to significantly expand the benefits of complementary infant feeding to Indonesia’s most vulnerable group.  Moreover, it provides an opportunity to test two different, but complementary approaches, to tackling the infant growth-faltering problem.  For WFP, the urban approach has been to use complementary infant foods to help prevent growth faltering and micronutrient deficiency.  UNICEF, by contrast, prefers to integrate the provision of complementary infant foods more closely with nutrition monitoring in the public health service and to provide these only when there is evidence of growth faltering due to a lack of food or purchasing power.  This could be considered a more “fine-tuned” or curative approach to supplementary infant feeding.  Both approaches may be suitable for different settings----where nutrition information and awareness at the household level is readily available, a curative approach may be more cost-effective.  Where such information can only be obtained at a high cost, or is subject to considerable error, a “preventative” approach may be more cost-effective.  In practice, the two approaches may well prove complementary.

The ultimate challenge, however, is to ensure that all low-income families have access to suitable nutrition education and, where required, affordable complementary infant foods.  This implies that the WFP and UNICEF complementary infant feeding initiatives should be mainstreamed into Government programs as quickly as possible.  WFP and UNICEF should plan in advance to mainstream these initiatives (i.e. have them incorporated into routine government programs) by close involvement of Government agencies (especially the health ministry) in the design and program formulation processes[4]. While “curative” type initiatives might be appropriately mainstreamed into some of the ongoing Ministry of Health programs, “preventative” initiatives might be more suitably mainstreamed into the food subsidy distribution activities that BULOG operates. 

Given the importance of eventually mainstreaming these initiatives, it is essential that the impact and the efficacy of a future infant supplementary feeding and nutrition education effort be carefully monitored and its impact accurately measured.  Hard, well-documented evidence will be needed for the Government to decide whether or not there is merit in mainstreaming and scaling-up these initiatives to cover the nation as a whole, and if so, what form it should take.  

The Urban School Program 

The urban school program is aimed at combating drop-outs in poor urban areas and augmenting the food intake and purchasing power of poor urban children.  The program is in line with WFP’s global initiative to support school feeding.  The program has suffered from delayed releases in counterpart funds which, in turn, have disrupted and delayed the delivery of dry rations to the schools.  This problem has increased over time and now threatens to undermine the third round of program support.  Other problems include difficulties in beneficiary selection, sale of what was intended to be free rice and the use of part of the assistance by the teachers themselves.  

While the latter problems have weakened the efficacy of the program, it has been the late release of counterpart funds that has been most responsible for disrupting the program implementation.  The fact that Government has been unable to provide timely release of counterpart funds reflects the fact that Government’s fiscal situation has become increasingly precarious in the past two years.   There is little sign that this will improve in the future. Indeed, the Government has requesting WFP to fully finance any future school feeding efforts.  Proposals have been submitted by Government for a school feeding plan that would involve the provision of food commodities to private agro-processors who would, in turn, deliver processed food packets to the participating urban schools at no cost to government.

At this juncture, it is worth reconsidering both the need and the merits of an urban slum school feeding program.  Research by Oey-Gardiner (1999), World Bank (2001) and the Asian Development Bank (2001) shows that there has been remarkably little change in drop-out rates during the crisis and that aggregate enrollment rates have remained very high indeed, especially at the primary school level.  Apparently, in most urban areas, the vast majority of poor children continue attending primary school despite the enormous deterioration in economic conditions.  Oey-Gardiner argues that this can be explained by a combination of the high value that parents attach to children’s schooling, the provision of school scholarship programs as part of the Government’s social safety net and the relatively low cost of primary school fees compared to other items in the household’s budget[5].   Indonesia’s school feeding program in the rural areas continues to work reasonably well, and this involves a large measure of community participation and the use of locally (and often collectively) cultivated foodstuffs.

There is little merit in undertaking an urban school feeding program in which Government makes no counterpart contribution whatsoever and in which the private sector is obliged to prepare and deliver a range of “pre-cooked” meals.  The lack of a counterpart contribution would mean that such programs are hardly sustainable in the long-run. The fact that the new program concept relies not on the distribution of WFP commodities but on processed lunch-packages makes it difficult to mobilize resources for such an effort and practically impossible to monitor.

A number of Government officials argue that a large-scale school program in Indonesia’s urban schools is perhaps inappropriate at this point in time.  They note that most schools lack cooking and food storage facilities.  The immediate priority for these schools is not to add cooking and food storage facilities, but to repair dilapidated facilities, purchase school supplies and to attract and motivate teachers.  Efforts to upgrade school quality, they argue, would have far more impact on raising returns to education than would the provision of school lunches.

After the current round of the school program is completed, it is recommended that this program be brought to an end.   Consideration could be given to reaching school drop-outs more directly, by supporting establishment of schools for street children and drop-outs as one of the WFP-supported NGOs (PARAM) has already done in Jakarta.   Other donors, such as the ADB, are also providing funding support for a range of street children programs.

Government should be encouraged, as part of WFP’s policy dialogue, to examine a range of options for ensuring that low-income urban children’s school feeding requirements are met.  Linking school feeding to educational achievement and to improvement in school facilities may have some merit, and there is much that can be learned from experience with such programs in other countries.

Vulnerability Monitoring and Analysis

Responses that protect the poor will be considerably easier to design if more is understood on how crises affect food security of different sectors and groups within sectors. Indonesia needs to develop analytical tools that are more helpful in describing the structure of an economy and its sectors, that distinguish more clearly between socio economic groups, gender and age distribution, and that allow us to model the impacts of shocks and the likely outcomes of the policy responses to a much higher degree of accuracy than seems possible at present.    We also need to understand much better the linkage between household vulnerability, coping strategies and livelihood options.  Poverty, food insecurity and malnutrition are related but not identical concepts, and the role of food assistance depends very much on whether or not an inability to afford food is part of the problem. 

Vulnerability analysis becomes even more important now as the Indonesian economy begins to recover.   Such analysis can be used to identify segments of the population that are still likely to be food insecure.  It can also be used to help capture the population shifts from “food secure” to “food insecure” that arise when commodity prices change, exchange rates devalue, government budgets decline or regional conflicts erupt.  In this sense, vulnerability analysis techniques have an important role to play as a tool for better targeting, for contingency planning and for explaining the likely consequences of rapidly changing economic and social conditions.  

One simple “vulnerability” indicator that should be monitored as a leading indicator of urban welfare adequacy is the rice-purchasing power of the daily wage.  Prior to the crisis, urban workers were able to afford 15 to 18 kg of rice with their daily wage.  This has now fallen to 9 to 11 kgs, while the relative price of luxury food and non-food necessities has increased sharply.  Monitoring daily wages, and what that wage can buy in terms of rice offered in the retail markets, will provide an approximate measure of the adequacy of food entitlements for many of the urban households that WFP is assisting.

The WFP has developed a good analytical reputation and has established a useful network of food security contacts for vulnerability analysis.  In the years to come, it can play an increasingly important role in at least three respects.  First, VAM must become intimately involved in evaluating the impact and efficacy of ongoing WFP programs.  In an era of limited resources, WFP must demonstrate that its resources are used as efficiently as possible and are adequate for coping with the food insecurity task at hand.  Indeed, little is known about the efficacy and impact of several of the ongoing WFP programs. Better information can help steer these programs in the right direction.  More importantly, this information can be used to help advocate for incorporating the lesson’s learned from WFP supported initiatives in the Government’s own programs.  Second, the use and refinement of VAM tools can help Government better target its limited OPK (and other food social safety net) resources. Drawing on a sound understanding of the theory, practice and pragmatics of program targeting (See van der Walle 1998, Gelbarth 1998 and World Bank Social Protection Web Site), the WFP can provide a range of useful tools and insights into approaches that can be adopted to enhance the cost-effectiveness of food assistance programs.   Capacity building with BULOG and the Ministry of Agriculture’s BIMAS Food Security Agency on program targeting should be accorded a high priority.   Third, there is an urgent need to work with Government on the development of short and long-term monitoring systems which can deliver timely, accurate data to be put in place as part of any strategy to deal with future crises. Good data must include a list of those persons, households or communities likely to require food assistance at one point of time or another.  Development of a timely, periodically updated “potential beneficiary list” is especially important in the urban and peri-urban areas because scope for self-selection there in food-based social assistance programs is limited.

Food Security Policy Reform 

The experience in Indonesia and many other countries shows that there is a pressing need for governments to reform policies and institutions to deliver an acceptable level of food security to all segments of the society in as cost-effective way as possible. Each of the three dimensions of food security -- food availability, access and utilization -have to be addressed in advance of crises if governments are to be able to respond quickly and overcome acute problems of inadequate food entitlements, malnutrition and starvation. Clearly, the availability of foodstuffs is conditional on the weather, the distribution infrastructure and any constraints on movement of food from surplus to deficit areas that may arise, for example, during civil disturbances. Governments need to secure adequate basic food imports in partnership with the private sector, to build public grain stocks and to have reliable distribution channels to meet the crisis needs. They must be ready to inject foodstuffs into the domestic market to stabilize supply and to have sufficient stocks on hand to meet welfare needs.  They must have robust social protection programs that ensure that vulnerable groups have the purchasing power needed to meet minimal food requirements.  And they must ensure that the special food needs of the vulnerable group, infants, under-5’s and pregnant and lactating mothers—are protected at all times.

WFP assistance in the food security area has improved information exchange and helped strengthen understanding of food security challenges for the vulnerable and the poor. Fostering informed debate, serving as an honest broker, building networks of individuals and agencies concerned with improving food security and advocating on behalf of the food secure should be continued by WFP. WFP advocacy has been important in keeping food insecurity on the policy radar and ensuring that food security concerns are reflected in major national planning documents. 

But despite these efforts, Government’s food security policy is still in a state of flux.  Programs and policies choices appear to be ad-hoc and taken in response to crisis-related shocks rather than by a well thought-out strategy for long-term food security reform.  The “crisis” has, however, sensitized policy makers to the need to restore food security and ensure that the needs of vulnerable groups are met. 

WFP should continue to support effective food security policy debate, but should do so in a way that is both more analytical and policy change oriented.  To enhance the analytical foundations for WFP’s advocacy efforts, more effort needs to be put into monitoring the impact of the various ongoing WFP programs addressing the concern for the poor and the food insecure.  High-quality impact evaluations should be conducted in order to demonstrate (and quantify where possible) the possible implications of such programs on a range of welfare outcomes.  Impact evaluations should also be used to assess and identify options for managing problems that arise with practically any assistance scheme (i.e. targeting error, adverse incentives, moral hazard, and dependency) and to solicit local participation in the assessment of program efficacy.  

Given that WFP activities are well monitored in practice, evaluation work becomes perhaps more important from a policy vantage point than it does from a program management standpoint. Government must be convinced that these programs are effective and efficient before they take over these programs.

Better impact assessment information can also provide a valuable source of practical, experience-based information for public policy advocacy.  Towards this end, WFP should consider assisting in policy work on food and nutrition security, possibly in partnership with agency such as UNICEF. The preparation of a policy paper would provide an excellent opportunity to synthesize what is known about the changing food security and nutrition situation, best practices in tackling food and nutrition insecurity while helping Government identify core policies and programs to bolster food security for the poor in the years to come.   BAPPENAS uses such Papers to stimulate debate and foster shared understanding in public policy reform. Indeed, Bappenas has requested UNSFIR assistance in preparing white papers on five different topics, including one on social policy.  In as much as food and nutrition security is one aspect of the broader social policy nexus, the work outlined above could also provide valuable inputs into the broader UNSFIR effort.  

If the Government has a sound and effective food security policy, this will provide clear program guidance to a number of the Government and civil society organizations involved in delivering food assistance.  By helping Government strengthen its food security policy, WFP is aiming to help Government put such a framework in place.  This, unto itself, will significantly diminish the need for external food assistance.

Alternative Initiatives and Building on Core Competence

In developing this strategy a range of additional initiatives has been considered.  Food-for-work programs, rural food assistance and assistance linked more directly to rural development schemes have been discussed.  In recent years, the Government’s public works programs have had a poor track record, and it is no longer Government’s policy to support such initiatives.  The majority of the hungry poor are in the rural areas.  While WFP does address one segment of this population (the IDPs and refugees), it does not directly provide assistance to the others.  The main reason for avoiding new, rural programs is that the Government already operates a large-scale rice subsidy program (OPK) in the rural areas.  WFP can be most effective in helping the hungry rural population by working with Government to improve the efficacy and impact of its OPK program, rather than by intervening directly to reach this target group.  While there may be some merit in linking food aid more directly to agriculture and rural development, Indonesia's decentralization process makes it impossible, at this point in time, to obtain government concurrence or budgetary support for such initiatives. 

One of the lessons learned by WFP was that the closure of operations in 1996 and the re-start in 1998 was a costly experience.  Precious time was needed after WFP’s operations were re-established to assess needs, recruit staff, engage appropriate partners, design suitable programs and develop trust and credibility with key Government interlocutors.    Given the precariousness of Indonesia’s economic, political and security situation, closing down operations too soon could pose very high costs in the years to come.   At this juncture, WFP has a number of high impact programs that are reaching large numbers of vulnerable, hungry poor.  WFP can build on the solid track record it has set with its assistance programs and build on its core institutional competence to assist Government and civil society gradually assume these assistance responsibilities.

VI.          Implementation Issues  

Program Planning, Monitoring and Evaluation

WFP will be under greater pressure to show that its program plans are sound and to demonstrate results if it is to secure adequate donor and government support for its future activities.  This is especially the case as the program moves beyond an initial to a more extended recovery operation. While it is fortunate that WFP is building on a strong core of effective and innovative programs, fierce competition for assistance resources dictates that rigorous program planning, monitoring and evaluation procedures be adhered to.  

To help focus attention (by donors and WFP’s development partners) on the expected results, goals and objectives of WFP assistance, it is suggested that a logical framework be prepared for each program.  To enhance program governance, information should be widely disseminated, suitable complaint resolution mechanisms need to be established and ample resources devoted to program monitoring and dispute resolution.  Regular process and impact evaluations of WFP programs should be supervised by a panel of in-house and external experts (such as those from the SMERU institute) to ensure that the methodologies are sound and the results credible.

Government food security policy makers should be closely involved in the process of WFP program evaluation, particularly since it is expected that the lessons from these exercises will help better inform food security policy making.  Efforts should be made to ensure that the findings of program evaluation studies are widely disseminated, through the Food Security Working Group, the media and public presentations.

Institutional governance is a problem in Indonesia today but better accountability measures are slowly evolving.  Whether one is working with Government agencies, the private sector or with NGOs, corruption and malfeasance is a concern and must be vigilantly combated. WFP should continue to stress its intolerance on corruption of any kind and the agency’s monitoring, accounting, auditing, financial management and reporting efforts are designed to avoid, detect and combat such problems.  WFP’s implementing partners continue to be periodically reminded of the importance that the agency attaches to accountability and good governance in the delivery of food assistance.  Sound financial management procedures, careful monitoring and objective program evaluation have been found to be effective ways of ensuring program accountability and maintaining the credibility of WFP’s assistance effort. 

Staffing

WFP Indonesia currently consists of 12 international regular and 55 national professional and support staff.  WFP Indonesia has its main office in Jakarta and sub-offices in Surabaya, Semarang, Kupang and Atambua.  By global standards, WFP’s operations are highly cost-effective, with the total costs of food delivered to beneficiaries less than the average domestic cost of the equivalent foodstuffs (or an alpha ratio under 1).

There may be a need to change both the size and composition of the staff in the future.  If the school program is brought to an orderly close and if the Government assumes responsibility for OPSM activities in Semarang, than staff involved in those tasks could be deployed elsewhere.

Greater emphasis on capacity building with Government and NGOs, in the areas of IDP and refugee relief planning, OPSM-hand over and food security policy may require to expand staffing (and use of local and international consultants) in these areas.  WFP may wish to post staff within the counterpart agencies such as Bappenas to assist in food security policy analysis and WFP program management within agencies; BAKORNAS to assist in emergency preparedness planning and relief coordination; and a small number of staff in BULOG to assist in OPK reform.   This can contribute to capacity building in WFP’s key counterpart organizations while also enhancing the operation of WFP’s ongoing programs.

Program Resources    

Generous assistance to WFP has been provided by a wide range of donor agencies.  Australia, France, Germany, Italy, Ireland, Japan, the Netherlands, Norway and the USA have contributed some 284,000 tons of food aid to support the first emergency operation.  In terms of their share of this tonnage, the USA (52%), Australia (21%) and Japan (16%) were the major donors.   A total of 108, 000 tons has been donated to date for the PRRO operation.  Japan (44%) and the USA (55%) are the major donors and the Netherlands has provided support for the purchase of pulses and salt for the IDPs.

The strategy discussed above anticipates the need to provide support for approximately 300,000 low-income urban OPSM recipients for the next few years.  This would require approximately 70,000 tons of rice per annum.  While estimates of IDP and refugee needs remain highly uncertain, and assuming that WFP continues to meet an average of about one third of the food needs of these IDPs (and the Government the remainder), this would imply that some 350,000 IDPs/ refugees will continue to require WFP support.  An additional 50,000 tons of grains would be needed to meet the needs of this group.  For medium-term planning purposes, the total annual rice requirement is estimated at approximately 120,000 tons.  In addition, for the complementary infant feeding programs (ie. Delvita) that WFP and UNICEF are planning to mount, approximately 10,000 tons of fortified food will be needed each year. 

VII.         Conclusions 

Optimistically, the Indonesian economy will recover rapidly, democracy and national unity will be restored, IDPs and refugees will quickly return home and Government will assume all responsibility for addressing the needs of the hungry poor and vulnerable groups.   In such a scenario, WFP could plan to exit Indonesia quite soon, and be confident that the food security challenges facing Indonesia are adequately addressed.

In a worst case scenario, Indonesia’s recovery is delayed for a decade or more by the crushing debt overhang and an inability to mount deep structural reform and restore investor credibility.  Social tensions erupt in various parts of the country triggering a significant expansion in the numbers of internally displaced persons.  Government faces tremendous budget pressures and is simply unable to address the needs of a rising number of hungry poor households.  In this case, WFP would have to concentrate its limited resources on the poorest of the poor, which in this case would be the IDPs and other victims of natural and man-made disaster.

The most realistic scenario, however, is that economic recovery begins in earnest after 3 to 5 years; that a broad-based recovery significantly reduces the number of food insecure households; that social and ethnic conflicts abate in two to three years time; and finally, as progress is made in reducing the public debt overhang and increasing domestic resource mobilization, Government does devote more resources to combating food insecurity.   In this context, WFP should plan to continue operations in Indonesia for another three to five years.

 The program should give highest priority to meeting the emergency needs of the IDPs, both through direct assistance to about half of this population, through ongoing food assistance coordination efforts, by strengthening Governments emergency preparedness capacity and by involving competent local NGOs in the delivery of assistance.  The urban OPSM program should be continued, but its focus should be limited to Jakarta and Surabaya. WFP will draw on the lessons from its success in OPSM to assist Government improve the effectiveness of its large OPK program and to integrate OPSM and OPK activities in the major urban centers.  More attention should be accorded to the nutrition component of WFP, and a potential joint initiative with UNICEF can expand the reach of complementary infant foods to a large segment of the vulnerable population.  Efforts to assist Government improve its food security policies should continue, through a combination of partnership with key agencies involved in generating policy reform recommendations and, at the request of Government and in partnership with UNICEF, assistance in the preparation of a policy paper on food and nutrition security.  These activities are clearly linked to a well-defined set of target groups and to programs that are operating and have been shown to be highly effective.   While Indonesia’s evolving economic and security conditions are difficult to predict, WFP can set the stage for its exit over the next three to five years by assisting in the repatriation and relocation of refugees and IDPs, enhancing the emergency preparedness and response capacity of Government, assisting government to improve the efficacy and impact of OPK (its national food assistance program), scaling-up the complementary infant feeding initiative, involving civil society organizations in all facets of assistance, nutrition and community development in the major urban slums and helping Government forge a more robust food security policy.       

There should be two main objective indicators used to measure the degree to which WFP interventions are needed in the major urban areas and to assist the IDPs and refugees.  For the former, a recovery in the real daily wage will indicate the degree to which those low income households in the urban slums can afford to meet minimum food requirements with what are likely to be casual earnings for some time to come.

Prior to the crisis, the “daily” wage in the major cities could buy 15 to 17 kilograms of rice at retail market prices.  In rice purchasing power terms, this fell sharply in 1998 and 1998 and started to recover in 2000. At present, in Jakarta the average daily wage is sufficient to buy just 10-12 kgs of rice per day, still far below the levels prevailing prior to the crisis.   With respect to the refugees and IDPs, the key exit indicator is the number of persons who are classified as IDPs and for which neither government, other donors or international NGOs, can assist.  If the number of IDPs is reduced to a few hundred thousand, and if Government and other NGOs are adequately assisting this group, emergency operations can be phased out.

 

To pave the way towards an orderly exit, the key challenge is to assist Government and civil society to develop the capacity to assume responsibility for assisting the target groups that WFP is presently concentrating on before WFP ceases operations.  In the case of OPSM, the near-term challenge is to hand over  (and assist in) implementation of that program to BULOG for Bandung and Semarang.  This will need to be coupled with capacity building assistance for BULOG aimed at helping that organization draw on the lessons from OPSM to improve its OPK program.  Over time, the OPK and OPSM efforts could be effectively merged and Government could assume responsibility for distribution of subsidized rice to the poor in both urban and rural areas. 

Likewise, efforts should be made to strengthen Government emergency preparedness and coordination capacity.  If this capacity is put in place, and if appropriate financing and relief management mechanisms are developed, Government should be able to meet the emergency food needs of the vast majority of those internally displaced. 

The nutrition program is to be mounted in partnership with UNICEF.  While this is a very high priority initiative, the tons of food involved are quite small. Once the program has been up and running for two to three years, it should be possible to either turn over responsibilities for coordinating of this activity to UNICEF and for the Government to operate this as a routine nutrition program.

Efforts to assist Government develop a food security policy will be complete if a policy framework that sets forth a medium-term vision and clear set of entitlements and programs is established and approved.  The contribution in the preparation of food security policy paper is aimed at making a substantial contribution towards this objective.

WFP Indonesia

April 2001

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[1] Average food prices fell by 5.2% in nominal terms in 1999 and by 1.4% in 2000.  Similar declines were registered in China.  Modest increases in food prices were registered in all other major Asian states (Farm Foundation 2001).

[2] This is in line with the WFP (2000) global strategy on adopting a strategic approach to disaster mitigation.

[3] These include some of the most densely populated provinces, accounting for close to half of the total rural population and just under two-thirds of the rural poor.

[4] This does not imply that Government agencies would necessarily implement these initiatives.  The choice of the implementing partners, from Government, NGOs, CBOs and the private sector, would depend on which had the likely institutional capacity to undertake these activities in the most effective manner.

[5] For the poorest decile of households interviewed in the SUSENAS survey, school fees accounted for 2 to 3 percent of total household expenditures compared to some 75-80 of household expenditures on food items.  Gardiner (1999) concludes that parents have tended to degrade the household diet, as well as cope in other manners, to ensure that adequate resources were available to meet the school fee requirement.