The purpose of this report is to identify the nature and key constraints to poverty reduction in today's Indonesia and to provide concrete recommendations on how Indonesia can move forward to achieve its poverty reduction objectives. It aims to contribute to the policy debate and decision-making process in Indonesia by putting forth: (i) new and more comprehensive analysis of empirical poverty diagnostics; and (ii) suggestions on concrete policies and programs for a strategic action-plan to achieve Indonesia s stated poverty-reduction objectives. Chapter 2 lays out the history of growth and poverty reduction, and analyzes where Indonesia stands today and how past experiences have influenced the present. Chapter 3 presents new analysis that enhances our understanding of the nature and causes of poverty in Indonesia, as well as some of the forces driving the changes in poverty. Chapter 4 analyzes how growth processes have aided people in finding pathways out of poverty, and lays out strategies to address the constraints that hinder the poor from linking into and contributing towards growth. Chapter 5 analyzes the benefit incidence of spending in key sectors that matter most for the poor and proposes policies and actions to make budget allocations and sector spending programs more pro-poor. Chapter 6 provides original analysis of the actual risks and vulnerabilities faced by the poor and the mechanisms they use to cope with shocks. Chapter 7, regarding making government work for the poor, argues that improved governance is a critical factor in ensuring that growth, spending, and social protection work for the poor. Finally, Chapter 8 gives a summary of recommendations.
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