Social protection monitor: Indonesia, February 2023
Summaries below were produced to capture the overall dynamics of Indonesia’s social protection issues. For professional use, please refer to the original articles in Indonesian. The summaries may contain errors and misinterpretations.
Free Lunch Program Funding
Presidential candidate Prabowo Subianto has detailed the funding for a proposed free lunch program, estimated at IDR 460 trillion, intended to benefit 82.9 million people, including students from early childhood to high school, Islamic boarding school students, and pregnant women. The program, which aims to address nutritional needs, will utilize existing budget allocations for education and social protection, totalling IDR 660 trillion and IDR 495 trillion, respectively. The program’s implementation is planned for after Prabowo’s potential inauguration, with preparations spanning from March to October 2024. Despite initial limitations, the program aims for gradual expansion to optimally benefit recipients by the end of the presidential term.
Reference: “Prabowo Sudah Jelaskan, Duit Buat Makan Siang Gratis Rp460 T dari Sini,” Cnbcindonesia.com, 24/02/2024.
New Mandatory Pension Program
The Indonesian government, guided by Law Number 4 of 2023 concerning the Development and Strengthening of the Financial Sector (UU PPSK), is set to introduce a new mandatory pension program to complement the existing BPJS Employment benefits. This initiative aims to align Indonesia’s pension fund benefits more closely with the International Labor Organization (ILO) recommendation of 40% of an employee’s previous income. Current benefits stand at only 20% to 22%, prompting the introduction of an additional pension program outlined in Article 189 paragraph 4 of UU PPSK. The program’s specifics are under development, with a draft government regulation (RPP) in preparation to determine the income brackets eligible for additional pension contributions. This reform aims to increase the pension contribution rate from the current 8.7% to 15%, effectively achieving the ILO’s 40% guideline. To support this overhaul, OJK highlights the necessity of issuing four main government regulations (PPs) by January 12, 2025, covering mandatory insurance, policy guarantee programs, pension program harmonization, and asset liability management to ensure the successful implementation of the new pension framework.
Reference: “Pemerintah Segera Luncurkan Program Pensiun Wajib Baru, Pelengkap BPJS,” Cnnindonesia.com, 20/02/2024.
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Indonesians should seriously participate in this discussion. This pension reform will steer the country towards a welfare state or not in the next few decades. “The global contribution rate of JHT and JP will increase from 8.7 percent to 15 percent. It is estimated that the retirement benefits received will be 40 percent of the last income” I need to comment on this statement as the ILO is quoted to explain the 40% replacement rate and the need for a 15% contribution rate. More precisely, we recommended that the Government increase the ‘JP’ contribution to 15% and make JHT a voluntary program for those who want more money in old age. The ILO Social Security Minimum Convention requires states to guarantee 40% of previous earnings for older people who have worked for 30 years and have retired. The JHT benefit formula is not designed to guarantee 40% for all elderly workers. |
BPJS Employment’s 2024 Strategy
BPJS Employment (BP Jamsostek) reported a 9.77% increase in contribution revenues to IDR 96.94 trillion in 2023 and aims to raise this to IDR 107.86 trillion in 2024. The strategy includes strengthening the agency system, collaborating with community leaders and large companies, and improving compliance through supervision. With managed funds targeted to reach IDR 781.77 trillion covering 53.52 million workers in 2024, these efforts align with the Employment Social Security road map to enhance financial health and coverage.
Reference: “BPJS Ketenagakerjaan Beberkan Strategi Tingkatkan Penerimaan Iuran pada 2024,” Kontan.co.id, 15/02/2024.
BPJS Support for Election Officers
BPJS has committed to supporting the 2024 General Election by ensuring healthcare and compensation for Voting Organizing Group (KPPS) officers facing illness or death risks. With 671,000 General Election Commission (KPU) and 70,000 Election Supervisory Agency (Bawaslu) officers registered, BPJS Employment provides comprehensive healthcare and compensation, including educational scholarships for the children of deceased officers. BPJS Health will handle hospital claims directly, emphasizing their readiness to cover all necessary claims for the 398,153 members at risk.
Reference: “Begini Komitmen BPJS Bayarkan Klaim ke Petugas KPPS yang Sakit dan Meninggal Dunia,” Kontan.co.id, 22/02/2024.
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In a separate article on kompas.id, Kompas reported as follows. “Of the 5.7 million election officers in 820,161 polling stations, only 5.52% had social security coverage.” “In the 2019 election, 894 officers died and 5,175 officers became ill on duty.” In Indonesia, all workers must have an employment injury insurance scheme, no matter what contracts they have or whether or not they work in companies, governments or self-employed. A key question here is what contracts Voting Organizing Group (KPPS) officers had. |
Mass Layoffs in Indonesia
Indonesia experienced significant mass layoffs in 2023, affecting hundreds of thousands of workers across various sectors. The Ministry of Manpower recorded 237,080 layoffs from January to October 2023, with West Java being the most affected province. Factors contributing to the layoffs include low orders and competition challenges. The Indonesian Employers’ Association (Apindo) warns that the trend may continue into 2024, emphasizing the need for government support to strengthen the domestic market and improve industrial competitiveness.
Reference: “Ratusan Ribu Buruh Terkena PHK Massal sejak Setahun Terakhir, Berlanjut di Tahun 2024?” Bisnis.com, 01/02/2024.
Industry Layoffs and Economic Impact
In 2023, Indonesia witnessed a drastic increase in layoffs, with 358,809 workers affected, significantly higher than the previous year. Apindo attributes this to decreased domestic demand and challenges in the global market, highlighting the importance of expanding the domestic market and enhancing industrial competitiveness. The association calls for increased investment in labor-intensive sectors and policy reforms to create a more flexible job market and improve education alignment with job readiness.
Reference: “PHK Sepanjang 2023 Tembus 358.809 Tenaga Kerja, Industri Loyo,” Bisnis.com, 05/02/2024.