Lessons from Indonesia’s digitised social safety net

Countries aiming to improve the delivery of social welfare and poverty reduction initiatives should look to Indonesia’s blueprint for a digitised social safety net, a new Lowy Institute Analysis argues.

The report by Dr Hilman Palaon, entitled Digitising the social safety net: Lessons from Indonesia, examines how Indonesia has digitised its social assistance programs, including subsidised energy and food initiatives.

The digitisation of Indonesia’s social safety net has coincided with a significant reduction in poverty, with less than ten per cent of the country’s 279 million residents living below the international poverty line by 2023.

“Advancements in digital technology and access have enhanced the potential of social assistance programs to play a decisive role in promoting more inclusive and resilient social and economic development,” writes Dr Palaon.

“Indonesia learnt from the successes of other countries in pursuing its social safety net digitisation agenda.

“International development partners, most notably Australia and the World Bank, have also played important roles, allowing Indonesia to access financial resources, technical expertise, information on best practices, and global perspective on its own digitisation efforts.

“The key observation from Indonesia’s experience is that there is no one-size-fits-all approach. However, with the requisite policy focus and careful design, leapfrogging past the analogue delivery of social benefits is possible.”

Lowy Institute Research Director Hervé Lemahieu said: “Countries looking to supercharge their poverty reduction efforts and make their societies more resilient to economic shocks, should look to Indonesia. Digitising the provision of social welfare offers huge spill-over gains, which could help overcome development and geographic challenges in the Pacific Islands region and the rest of Southeast Asia,” he said.

Dr Hilman Palaon is a Research Fellow at the Lowy Institute in the Indo-Pacific Development Centre. His work focuses on digital economy issues in the Indo-Pacific region.

KEY FINDINGS

• The digitisation of social safety nets can help drive inclusion and reduce poverty while fostering more resilient social and economic development. Indonesia’s experience offers important lessons for other countries in how to do so.
• There is no one-size-fits-all approach. Indonesia learned from international examples while developing specific solutions tailored to its needs. Experimentation, sustained political will, and keeping pace with fast-changing technology have been key to its success.
• A well-executed digitised social safety net offers direct operational gains, including by combatting inefficiency, fraud, and corruption in the provision of social welfare, many spin-off benefits such as expanding digital and financial literacy in society, and contributes to macro-level stability by managing economic shocks and enhancing public trust in government.
• The next steps in Indonesia’s journey should focus on incorporating digital ID and data analytics to improve the performance and integrity of an expanded social safety net system. Strengthening cybersecurity and data protection will also be critical. A key political test will be the recertification and eligibility agenda, to graduate citizens from social assistance programs once they are no longer in need of them.  
   

The Analysis Digitising the social safety net: Lessons from Indonesia is available to read and download at the Lowy Institute website.

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