ABSTRACT
It was not until the 2004 Law on National Social Security System (Sistem Jaminan Sosial Nasional, SJSN) was issued that the Government of Indonesia started to view social protection through a more comprehensive point of view, where the law mandates social insurance to be universal and mandatory. The integration process from previously fragmented programs into a unified, universal, and mandatory program under the SJSN umbrella is challenging due to differences in mechanism and benefits between the old programs and the new one. The lack of capacity to handle nationwide programs is also a challenge, as is uneven distribution of supply and demand, especially in the health sector. Also, many regions have their own programs – particularly for healthcare, which added to the complexity.
Both social insurance and social assistance programs face some common challenges: the problems of low coverage (both legal and effective), equality due to disparity across regions or income levels, database lacks, and flaws in program design. Low legal coverage is related with fiscal capacity, implementation capacity, and databases. Effective coverage mainly rests on fiscal capacity and the capacity of fund managers (in case of SJSN) to invest in better portfolios. The equality issues concern the facts that the country has uneven distribution of population (60 percent in Java Island whose area is less than 10 percent of Indonesia), geographical challenges, low connectivity, diverse knowledge/education levels and thus literacy and awareness of beneficiaries, as well as diverse income levels, including within the low-income group.
There are ongoing discussions on how Indonesia will adopt the SPF. The current programs are relatively wide in scope, despite missing some elements of ILO’s SPF. Meanwhile, the government of Indonesia is now struggling to achieve the universal social protection coverage – particularly for healthcare as mandated by the SJSN Law – and the first year(s) of the implementation has been proven to be very costly. However, there is clear potential for cost efficiency by improving programs’ design, and strengthening the system. The said cost efficiency may free up fiscal space, and by then the government can move forward to look at the possibility of enhancing the current system by expansion through means of additional relevant programs.
