Working Paper: 1998

Social Impacts of the Indonesian Crisis:
New Data and Policy Implications ^*)

Prepared by Jessica Poppele (EACIQ), Sudarno Sumarto (SMERU) and Lant Pritchett (EACIF)

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Summary

The social impacts of Indonesia’s crisis, while serious, have fortunately been less dramatic than early reports suggested. Rather than the universal devastation in poverty, employment, education and health so widely predicted and repeated in the media, new data reporting on conditions as of the fall of 1998 reveal a more complex and heterogeneous picture. Not surprisingly, given the genesis of the financial and economic crisis in the formal sector, people in urban areas hurting more than rural areas. People on Java appear to have been more effected and are bearing the brunt of the crisis, both in comparison to more isolated islands with less linkage to the formal, modern economy (Maluku) or islands with export commodities (large parts of Sulawesi, Sumatra). The new data also show that pre-crisis economic status or poverty rates are not good indicators of how much any given region or household has been affected by the crisis. While some of the poor are doing worse, others appear to be better off and many of the newly emergent urban middle classes are hit the worst of all. There are however hard hit areas in Kalimantan and the Eastern Islands which were both poor pre-crisis and which have been hit very hard by the crisis. These new data have important implications for policy makers in designing and adjusting programs aimed at minimizing the affects of the crisis on the poor and vulnerable.

^*) This is not a World Bank report and has not received World Bank review nor approval. Circulation in this preliminary form is intended to disseminate the findings of work in progress to encourage the exchange of ideas, even if the work is less than fully polished. The paper carries the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the view of the World Bank, its Executive Directors, or the countries they represent. Similarly, these views do no necessarily represent the views of those governments or organizations which provide support to SMERU.