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Implementing Universal Basic Income In Indonesia
Article in Basic Income Studies · May 2019
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IMPLEMENTING
UNIVERSAL BASIC INCOME
IN INDONESIA
April 2019 Bayu Rizkyadi Sasranagara
I. What is UBI?
Universal Basic Income (abbreviated to UBI) is a periodic cash payment
unconditionally delivered to all on an individual basis, without means-test or work
requirement. It has 5 characteristics, which is:
1. Periodic : it is paid at regular interval (for example every month).
2. Cash Payment : It is paid in an appropriate medium of exchange, allowing those
who receive it to decide what the spend it on. It is not, therefore, paid either in kind
(such as food or services) or in vouchers dedicated to specific use.
3. Individual : it is paid on to an individual, not to a household. (for example,
1 income for 1 person, not 1 income for 1 household).
4. Universal : it is paid to every citizen without means test.
5. Unconditional : it is paid without a requirement to work or to demonstrate
willingness-to-work.1
From the 5 characteristics regarding UBI, it can be summarized that in Universal
Basic Income, the main point is the income is paid to anyone regardless of age, social
classes, status. It is paid on a regular schedule (every month or every week) and is given
without any requirement to give back in any form, which can be range from labour
work or interest. The most important point is the income is in cash or any other payment
method with can be used to buy anything the receiver want, unlike foods stamp which
can only be used to buy foods.
It has shown positive results on pilots conducted in various countries, from
Finland first conducting in 2017, with result showing the group receiving UBI
experienced significantly fewer problems related to health, stress and ability to
concentrate, and much more confidence in their own future2, to a pilot conducted in
Kenya by GiveDirectly, a charities group that gave 404 USD, twice the monthly
household consumption in an area to randomly chosen poor households in Kenya
between 2011 and 2013. The result, published on Princeton Press, shown an increase
in consumption and savings, food expenditure, health and education. Alcohol
consumption and tobacco use does not increase3, which defy public expectation
1
"About Basic Income," BIEN, , accessed March 20, 2019, [Link]
2
Olli Kangas et al., "The Basic Income Experiment 2017–2018 in Finland. Preliminary Results,".
3
Johannes, and Jeremy Shapir. "Household Response to Income Changes: Evidence from An Unconditional Cash
Transfer Program in Kenya." November 15, 2013, 35.
Page | 1
regarding UBI. All in all, Universal Basic Income has shown positive result for the
recipients in all of it pilot programs, and a proven effective way to combat poverty,
wealth inequality and health risk.
However, like many other social or welfare programs, there’s various problems
and challenges that need to be address regarding Universal Basic Income. Some
problem is regard to the cost of UBI, and what a strain it can cause on the economy
with giving free money to everyone. Other is problem is the possibility that people will
work part time instead of full time, since they won’t need to work as much because the
government will give them money.
According to BIEN (Basic Income Earth Network), a network/link that was
established in 1986 between all individuals and groups that is interested in basic
income4 the concept of Basic Income was first thought of by a humanist, Johannes
Ludovicus Vives (1492-1540). In a memoir addressed to the Mayor of Bruges in 1526
under the title De Subventione Pauperum (On the Assistance to the Poor), he proposed
that the municipal government should be given the responsibility of securing a
subsistence minimum to all its residents, not on grounds of justice but for the sake of a
more effective exercise of morally required charity. The assistance scheme would be
closely targeted to the poor. Indeed, it is because of their ability to target them more
efficiently that public officials should be put in charge of poor relief. To be entitled to
the latter, a poor person’s poverty must not be undeserved, but he must deserve the help
he gets by proving his willingness to work5. Though not a pure universal basic income,
as it required the receiver to prove his willingness to work (which mean it’s not
unconditional, which is a key characteristic of UBI), and it targeted the poor, it’s
considered the first recorded concept of a basic income that is practice in society (not a
theory). In the modern age, as early as 1960s and 1970s some welfare debates in the
United States and Canada included discussions of Basic Income. Six pilot projects were
also conducted with negative income tax. US president Richard Nixon once even
proposed a negative income tax in a bill to the US Congress—but Congress eventually
only approved a guaranteed minimum income for the elderly and the disabled, not for
all citizens.
4
"About BIEN," BIEN, , accessed March 22, 2019, [Link]
5
"History of Basic Income," BIEN, , accessed March 22, 2019, [Link]
Page | 2
Indonesia first implements a basic income system called Bantuan Langsung
Tunai, which translate to Cash Transfer in English. It was implemented in 2005, using
the rising price of oil to slash subsidies, causing fuel price to rise 50%, and using the
fund for the subsidy to fund the program. it continues to 2009 and 2013, which it then
changes the name to Bantuan Langsung Sementara Masyarakat. It has a goal to help
the lower class and below poverty citizens to buy goods for their daily needs. It was
deem a success, by the World Bank and Ministry of Social Bachtiar Hamzah. However,
praises for the program was not without critics and controversy surrounding it.
Some of the critics and opponent against BLT (or BLSM) is it’s used to attract
voters, as it was held during elections season. Some other controversy is the fund
regarding it, as Anwar Nasution, then head of the Badan Pemeriksa Keuangan, found
out and gave proof that it originated from debt, not subsidies cut, which was denied by
the Minister of Finance, Sri Mulyani. Other opponents have argued that Cash Transfer
program educates the mental community to become beggars. Nevertheless, the Cash
Transfer program was scrap and replace with Bantuan Langsung Non Tunai which is
the same thing except it in a card, not cash. And it was limited in what it can afford,
which mean people can’t buy what they want, limiting their freedom of purchase6.
The purpose of this research paper is to analyse and propose a possible solution
for problem regarding UBI, and how it should be fund whiles also not being overbudget.
Since the author is base in Indonesia, it will use data from the Central Bureau of
Statistics (BPS) as its main source of evidences for statistic, either to determine the
amount of people living within or under the poverty line or finding the minimum wage.
The author will also gather data from journals and papers from past researches
regarding UBI. The author will also use data gathered from UBI pilots from around the
world, as well as before and after result of the pilots.
6
Marta, Fajar. "Dulu BLT, Kini Bantuan Uang Non-tunai." [Link]. April 07, 2017. Accessed April 02,
2019. [Link]
Page | 3
II. Problem Regarding UBI, And It Solution
Universal Basic Income have various problems surrounding it, from the fund it
needs to the target demographic. Of course, using Indonesia as an example, it is best to
target the poor and lower class as the recipient of UBI, therefore making it a basic
income system, rather than universal basic income, as they need the cash much more
than the middle or upper class. According to the Central Bureau of Statistics, there’s
26,000,000 citizens who is considered below the poverty line, which mean they cannot
fulfil their basic need. In this view, poverty is determined by the economic situation of
a family, and whether they can put foods on the table.
A report by Oxfam from February 2017 show that the gap between the richest
and poorest in Indonesia has widen faster than any other South East Asia countries. 4
of the richest has much more wealth than the poorest 100 million people 7. Furthermore,
Indonesia have the sixth worst inequality of wealth in the world. In 2016, the wealthiest
1 percent of the population owned nearly half (49 percent) of total wealth. The
collective wealth of the richest four billionaires was 25 billion USD, more than the total
wealth of the bottom 40 percent of the population –about 100 million people. In just
one day, the richest man can earn from interest on his wealth over one thousand times
more than what the poorest spend on average on their basic needs for an entire year.
Another problem in implementing UBI is the failure of Indonesia taxation
system. Compared to it GDP with the rest of South East Asia, it has the second lowest
in region. The IMF has calculated that has a potential tax take of 21.5 % of GDP, which
can increase the nation health budget 9 times over. And even with the second lowest
tax, there’s still tax dodger and corruption are rampant (although the amnesty program
that was recently implement has help collected 147 trillion Rupiah, it was still small
compared to the target of 1,000 trillion Rupiah).
According to the World Bank, a ‘moderate’ poverty line is $3.10. With that in
mind, the number of Indonesians living on poverty shoots up to 93 million, or roughly
36% of the population. However, on the extreme poverty scale, it has drop from 40%
to 8%, a sharp drop. However, that is the case if the we use the ‘extreme’ scale, which
7
Toward a More Equal Indonesia: How The government Can take Action to Close The gap between the Richest
and the Rest, February 2017.
Page | 4
is $1.90 per day, or roughly 27,128 Rupiah8. Which translate to 813.840 Rupiah a
month. If we use the ‘moderate’ scale of $3.10, or 44,261 Rupiah a day, twice the
amount from extreme poverty which mean an income of 1.327,830 Rupiah a month,
it’s still a far cry from Rp.3,940,973, which is the minimum wage according to
Governor Regulation No. 114 of 2018. And the fact that a mere 36% of the population
lives below the minimum wage, it’s not surprising that so many lives in poverty.
III. Implementing UBI in Indonesia
Using data from the 2018 state budget report from the Ministry of Finance,
Indonesia total income is 1.894,7 trillion Rupiah, a bit higher than the income from
2017, which is 1.736,1 trillion Rupiah, a 158,7 million difference. Of 1.894,7 trillion
Rupiah, 1.618,1 trillion come from taxation, whiles 275,4 trillion come from other
source beside taxation. However, despite the high amount of income, it still overbudget
as the state expenditures is 2.220,7 trillion Rupiah, an 121,7 million Rupiah increase
from the 2.098,9 trillion Rupiah expenditures in 2017. Of that amount, the central
government is accounted for 1.454,5 trillion Rupiah, whiles 766,2 million is transferred
to regionals and villages around the country.
Figure 1. Income and expenditure of Indonesia on 20189
8
Currency exchange rate as of 2019-05-03 06:16 UTC. Data from [Link]
9
Informasi APBN 2018, Kementerian Keuangan
Page | 5
As seen from figure 1, Indonesia main income come in the form of taxation,
with 1.894,7 trillion Rupiah collected from it alone, and it’s projected to rise, following
previous trend. For examples in 2016, the income from taxation is 1.285.0 trillion
Rupiah. And in the last report, 2018 the taxation rises to 1.618,1 trillion Rupiah.
On July of 2016, the Ministry of Finance enact a Tax Amnesty Program, a
program where as of March 2017 has collect 115,0 trillion Rupiah. This program was
deeming to be successful, as it offers tax dodger an option of collecting a fine or paying
the tax they had been avoiding.
So far, the income received from taxation, non-taxation, and amnesty program
total 1.894,7 trillion, which is later given to ministries and agencies, used to pay interest
and debt, as well as subsidies on energy like electricity, petroleum, and liquefied
petroleum gas (LPG). As of 2018, the government has spent 46,9 trillion Rupiah on
petrol and LPG subsidies and spent 47,7 trillion Rupiah on electricity subsidies. Since
2017, there’s an increase of 5,1% on electricity, petroleum and LPG. Another subsidy
is non-energy type, which account for 61,7 trillion Rupiah from the national budget.
The 61,7 trillion is divided into 4 policies, which is:
- Subsidy fertilizer (28,5 trillion Rupiah)
- Program Credit Interest Subsidy (18,0 trillion Rupiah)
- Tax Subsidy (10,8 trillion Rupiah)
- PSO (Public Service Obligation) Subsidy (4,4 trillion Rupiah)
To implement UBI, it’s necessary to determine:
- The amount of cash the government is requires to gives.
- The amount of people living below poverty line (individual and families).
- How will the government transfer the fund.
- How will it be fund.
With 26 million citizens below the poverty class, and a minimum liveable wage
of 1.456,700 Rupiah for individual and 2.954,800 Rupiah for family10, it important the
fund given is siphon from already available/implemented source of income, because
10
"Indonesia Living Wage Individual." Indonesia Living Wage Individual | 2019 | Data | Chart | Calendar |
Forecast. Accessed May 07, 2019. [Link]
Page | 6
creating a new taxation incentive is not efficient, and create additional expenditure to
the already overbudget state. From a report done by OECD (Organisation for Economic
Co-operation and Development) on basic income, they purpose a solution which is to
eliminate all social/cash benefit programs and replace it with basic income. In Indonesia
case, this mean eliminating cash benefit program like BPJS, Jaminan Kesehatan
Nasional, Kartu Keluarga Sejahtera, Kartu Pelindung Sosial, Program Indonesia
Pintar, Program Indonesia Sehat, and other social related welfare. Because these
welfare programs are implemented to combat poverty by providing poor people access
to healthcare, education, ect, it’s has unequal coverage/doesn’t cover every citizen.
Beside that, a form of conditional cash transfer has been enacted, however it has
various requirements. For example, recipients must be married/pregnant. They must
have a child between 0 and 6 years old, or the recipient must be 60 years old or older11.
These are not ideal requirements, as most Indonesia citizen who lives in poverty is
under 60 years old, and most people are living individually/doesn’t have a family. Using
the OECD suggestion, this type of welfare programs will be scrap, in exchange for a
true basic income, with no condition or criteria whatsoever.
From the 26 million citizens, the amount of money the government must give
is critical to determine if it enough to help people climb out of poverty or not. To little
and it won’t create a dent in the difference. Too much and it can cause wealth instability.
To find how much the government is require, the author found 3 variables to determine
it, which is the minimum liveable wage (1.456,700 Rupiah), the amount of people under
poverty (26 million), and the state income with subsidies and social benefit cut
(subsidies + national income = [Link].000.000 Rupiah). To calculate the
expenditure for basic income, the author used the following formula:
11
"KEPUTUSAN DIREKTUR JENDERAL PERLINDUNGAN DAN JAMINAN SOSIAL NOMOR: 04/LJS
/08/2018 TENTANG PERUBAHAN PERTAMA ATAS KEPUTUSAN DIREKTUR JENDERAL
PERLINDUNGAN DAN JAMINAN SOSIAL NOMOR :01/LJS/02/2018 TENTANG PETUNJUK TEKNIS
PENYALURAN BANTUAN SOSIAL NON TUNAI." Kementerian Sosial RI. Accessed May 9, 2019.
[Link]
Page | 7
[𝑝𝑜𝑝𝑢𝑙𝑎𝑡𝑖𝑜𝑛 𝑙𝑖𝑣𝑖𝑛𝑔 𝑢𝑛𝑑𝑒𝑟 𝑝𝑜𝑣𝑒𝑟𝑡𝑦] × [𝑚𝑖𝑛𝑖𝑚𝑢𝑚 𝑙𝑖𝑣𝑒𝑎𝑏𝑙𝑒 𝑤𝑎𝑔𝑒]
= [𝑡𝑜𝑡𝑎𝑙 𝑒𝑥𝑝𝑒𝑛𝑑𝑖𝑡𝑢𝑟𝑒 𝑜𝑓 𝑏𝑎𝑠𝑖𝑐 𝑖𝑛𝑐𝑜𝑚𝑒 ]
With this formula, we can calculate the total expenditure to be
[Link].000 Rupiah (37 trillion Rupiah), the total fund needs to provide 26
million citizens with the minimum liveable wage per month. In a year, it cost
[Link].000 Rupiah (454 trillion Rupiah)12. Using the latest income, along
with a cut in subsidies and social benefit, the author calculated the total national income
decrease from 1.894,7 trillion Rupiah to 1.440,7 trillion Rupiah 13. This may seem a
huge waste of money, however it can help fuel economic growth, as much more people
are available in the workforces, and buying power increases among citizens. And by
boosting the economy and buying power, it can increase the taxation income as there’s
now an additional 26 million people who can purchase commodities, and possibly paid
back some of the cost of implementing basic income.
Some of the way the government can transfer the basic income is through
monthly payment in cash through each sub-district offices. However, the drawback is
there’s a possibility the cash will be corrupted. The other option which is hassle free is
to transfer the fund directly to a bank account which is own by the receiver of said fund.
This require the government to issue bank account card which they will withdraw from.
To cut cost, it recommended to use already existing facilities, for example an already
established bank which already have it ATM sprawling in Indonesia. It’s much better
than setting up a new bank, which will cost much more money and take time to set up
on every province, basically starting from zero. With that in mind, it is efficient if the
fund is distributed via already established banking system.
The other option to distribute the basic income is through the local
government14. The central government only need to transfer the fund to the local
government, and the local governments will then distribute the wealth to their own
citizen. This will certainly lessen the strain for the central government, as the bulk of
the work (allocating, managing the fund, ect) will be handle by the local government.
12
Calculated by multiplying the basic income expenditure per month (37 trillion Rupiah) by 12
13
Calculated by subtracting the basic income expenditure per year by the yearly national income
14
Recommended by a sociologist from UNPAD
Page | 8
Beside that, the workload will be greatly reduces, as instead of 1 entity catering to 26
million people, various entities will cater to a couple million people in each village/sub-
districts. For example, the Jakarta Local Government will only send fund to their
respective poverty citizen, the West Java Local Government will send fund to their
respective poverty citizen, ect. With this option the cycle goes like this:
Central government => sub-district => village/lurah
The only drawback with this system is every levels of government, from the
central to the village must be clean, and the money does not fall into anyone other than
the poverty class. To prevent this, every time the local government is given the fund
from the central government, they (local government) must give back a proposal with
a budget plan, or RAB (Rencana Anggaran Biaya). Another option beside RAB is
creating an LPJ (Laporan Pertanggung Jawaban), or accountability report.
IV. UBI Pilot Programs Result
There’re various pilot programs that is successful around the world, from
Mincome on Dauphin, Manitoba, Canada; BIG (Basic Income Grant on Omitara,
Namibia; and Madhya Pradesh Unconditional Cash Transfers Project (MPUCT) on
Madhya Pradesh, India. With Mincome, data show high school completion increased,
whiles hospitalization rates fell 8.5%15. In BIG, poverty and child malnutrition decrease
significantly, and Madhya Pradesh Unconditional Cash Transfers Project show an
increase in basic living condition, food sufficiency and economic activities.
One of the longest programs on UBI is the GiveDirectly Pilot Program, where
6,000 Kenyans get income for 12 years. With the duration of the project, the result and
data gather is much higher than other pilots. The author has decided to use the
GiveDirectly Pilot Program as a benchmark and proof of concept for UBI in Indonesia.
According to a research by GiveDirectly, THE SHORT-TERM IMPACT OF
UNCONDITIONAL CASH TRANSFERS TO THE POOR: EXPERIMENTAL
EVIDENCE FROM KENYA*, written by Johannes Haushofer and Jeremy Shapiro on
April 25, 2016, the finding was that treatment households increased both consumption
and savings (in the form of durablegood purchases and investment in their self-
15
Forget, Evelyn L. "The MINCOME Projectand Ontario’s BIG Experiment." The MINCOME Projectand
Ontario’s BIG Experiment. Accessed May 16, 2019.
Page | 9
employment activities)16. There’s also an increase in food expenditures and food
security, but not spending on temptation goods. Households invest in livestock and
durable assets (notably metal roofs), and it show that these investments lead to increases
in revenue from agricultural and business activities. The researchers also observe no
evidence of conflict resulting from the transfers; on the contrary, they report large
increases in psychological wellbeing, and an increase in female empowerment with a
large spill over effect on non-recipient households in treatment villages 17.
However, the research pose a few questions, notably the long-term effect of
giving unconditional funds. Since the GiveDirectly pilot is run by a non-government
organization, which mean it does not influence the country economy. Does the
emergence of unconditional cash transfer lead to changes in prices, wages, and crime
at the local level? Does the calories consumptions increase or decrease among
recipients? And lastly, the large spill over effect on female empowerment still deserve
a further investigation. But in conclusion, from a policy point of view, the study is only
a small step in that adds to the growing body of evidence showing that UCT have
broadly “positive” welfare impacts, with little evidence for “negative” effects such as
increases in conflict or temptation good consumption18.
V. Conclusion
Universal Basic Income is a simple albeit costly way of combating poverty.
Various nations and NGO have run pilots and experiments, giving money without any
condition attach and the results has been nothing but positive. Indonesia with an always
growing economy is feasible with implementing basic income. The way to implement
it is either by transferring the fund to a bank card which is distributed to each 26 million
people, or the central government send the fund to the local governments, which they
then will delivered it to each people. However it is considered much more efficient if
Indonesia implement the latter, as the distance between the capital city and 26 million
people is too large, an example being the distance between Jakarta and Sabang, the tip
of Sumatra being 1,855 km, and the distance between Jakarta and Merauke, the tip of
16
Haushofer, Johannes, and Jeremy Shapiro. "THE SHORT-TERM IMPACT OF UNCONDITIONAL CASH
TRANSFERS TO THE POOR: EXPERIMENTAL EVIDENCE FROM KENYA." THE SHORT-TERM IMPACT
OF UNCONDITIONAL CASH TRANSFERS TO THE POOR: EXPERIMENTAL EVIDENCE FROM KENYA,
April 25, 2016. Accessed May 16, 2019.
17
Ibid pg. 36
18
Ibid pg. 37
Page | 10
Papua being 5,520.6 km. With these number it seems outright impossible for the central
government to be consistent in handing the fund. It is however much more efficient if
the fund is given to each local government, as there’s only 83,447 sub-districts, a
miniscule amount compare to giving it directly to 26 million people. And these sub-
districts only have to cater to the amount of poverty citizen in their respective district,
which again will reduce to workload in allocating the basic income to each individual.
Indonesia government have eliminated and drop the poverty level each year.
However, it cannot be denied that there’s still a high amount of people in poverty, above
10 million, and the government need to ramp up its effort to combat it. A proven,
feasible and economically sustainable option that has been tested since 1975 on various
nations globally that can greatly reduce various problems including poverty, child
malnutrition, and a drop in education is basic income. By the act of giving a liveable
wage, one that every man, woman and child deserve, it may help their live become a
little brighter. By given them a minimum wage, they shall no longer lives whiles
pondering everyday if they will have to skip a meal to lives tomorrow. They shall no
longer lives whiles thinking if the rice they have is the last they can eat. Because the
author believes that every man deserves to lives without facing discrimination from
society because of his economic background. Every woman deserves to lives without
wondering if the foods on the table is enough for her family of 4 to eat. And every child
deserves to live and go to school to get an education without having to work because
her parent doesn’t earn enough for them. Because by giving the minimum liveable
wage, a basic income to every 26 million people, is an excellent way to finally bring an
end to Indonesia poverty.
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