Published online by Cambridge University Press: 16 May 2019
Joko “Jokowi” Widodo was sworn in as the new president of Indonesia in October 2014, replacing Susilo Bambang Yudhoyono (SBY) who had governed Indonesia for ten years from 2004 to 2014. At the time of the transition, the picture of the Indonesian economy was not too positive. Economic growth had steadily declined since its peak in 2011 and poverty reduction had stagnated since 2012. Meanwhile, inequality, as measured by the Gini Ratio, had steadily increased and reached its highest point ever of 0.41 in 2011 and remained at this level thereafter. An underlying fundamental beneath these trends was the continuously declining commodity prices since 2011. During the previous decade, Indonesia had been riding a commodity boom — a steady increase in the prices of primary commodities.
Figure 12.1 depicts the trends of economic growth, poverty rate, and Gini Ratio during the 2002–17 period. It shows that Indonesia's economic growth rate has steadily increased from 4.5 per cent in 2002 to 6.35 per cent in 2007, but the Global Financial Crisis (GFC) brought it down to 4.58 per cent in 2009. The recovery was relatively quick, reaching 6.49 per cent in 2011. However, it has steadily declined since then, bottoming out at 4.88 per cent in 2015. It has progressively increased in the following two years, reaching 5.17 per cent in 2017.
During this period of positive economic growth, the poverty rate has generally declined, falling from 18.2 per cent in 2002 to 10.64 per cent in 2017. The exception was in 2006 when the poverty rate increased to 17.75 per cent from 15.97 per cent in the previous year due to increases in fuel and rice prices. Meanwhile, the Gini Ratio has steadily increased from 0.32 in 2004 to 0.41 in 2011, remaining at this level until 2015. It then slightly decreased to 0.393 by 2017.
The stagnating poverty reduction and high inequality level posed a double challenge in social welfare for Jokowi when he took over the presidency at the end of 2014. He immediately launched a couple of initiatives in this area, which he had flagged during his presidential campaign. First, he introduced the KIP (Kartu Indonesia Pintar, Smart Indonesia Card) and KIS (Kartu Indonesia Sehat, Indonesia Health Card), two major social assistance programmes in the areas of education and health, respectively.