Indonesia’s Poverty Reduction Plan Sees Surprising Side Effects


SEATTLE, Washington — Indonesia is an emerging middle-income country that has seen enormous growth in its economy since the 1990s. Since then, the government has cut its poverty rate by nearly half, but about 9% of Indonesians still live under the poverty line, and over 20% of the population is at risk for falling under the poverty line. A significant driver of the economic development in the country has been its 20-year poverty reduction and development plan, which was established in 2005.

The Development Plan and CCTs

In the first phase of the long-term plan, the Indonesian government provided conditional cash transfers, or CCTs, to the most impoverished residents. The CCT program supplies individuals living in poverty with a steady income as long as they get regular medical care and keep their children in school. The initiative called Program Keluarga Harapan, otherwise known as the Family Hope program, was designed to break the poverty cycle by allowing people living in poverty have more economic freedom.

Unexpected Environmental Benefits

Yet, while the Family Hope program was meant to be one of the most considerable poverty reduction efforts, it also became Indonesia’s most influential environmental program. The plan was not designed to benefit the environment. Still, since the Indonesian government began providing cash transfers to impoverished households in 2007, the country has seen a significant drop in deforestation. Substantial changes in deforestation patterns were especially prevalent in villages where cash assistance was provided.

Economic growth and environmental protection are often perceived to be differing goals. In other countries that have also implemented CCTs, such as Mexico, poverty reduction efforts have increased deforestation rates. However, in Indonesia, deforestation has dropped by 30%, despite the CCT program having environmental stipulations. In a country with one of the world’s highest deforestation rates, this reduction in the amount of land being cleared is a huge step forward.

Decreasing Deforestation Rates Explained

The CCT program has helped rural Indonesians scale back on deforestation because those living in these villages often rely on farming for their income and sustenance. If farmers fear poor weather conditions, they may cut down trees to clear land and plant more crops. The cash transfers, which promise families quarterly payments for six years, act as a sort of insurance policy against a low crop yield. As a result of the CCT program, farmers are less worried about losing crops and income insecurity when they know they have this additional source of income, and are, therefore, clearing less land.

Paul Ferraro, the author of an Indonesia deforestation study at Johns Hopkins University, said that the value of sustaining Indonesian forests is worth the cost of the program, even if environment protection was not the program’s intention. Additionally, environmental economist Jonah Busch called the program in Indonesia a “great win-win.”

Establishing Similar Projects Worldwide

Because several other Asian countries have similar economies that rely heavily on rice farming, researchers are hopeful that similar poverty reduction programs can have similarly positive environmental impacts.

In addition to the positive environmental impacts of the Family Hope, the program has also helped children obtain access to the food and medicine needed to reduce their chances of severe growth problems drastically. These problems, resulting from malnutrition or lack of medical care, can stunt both physical and mental development in children and perpetuate the poverty cycle.

Looking Ahead

While historically, environmental protection and economic growth have been at odds with one another, the surprising side effects of Indonesia’s poverty reduction plan are giving both economists and environmentalists hope for a greener and more prosperous future.

Jessie Cohen
Photo: Flickr


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