Bantuan Langsung Tunai (Unconditional Cash Handouts) as a Compensation for Fuel Subsidy Reduction Policy

The Government of Indonesia has a plan to implement Bantuan Langsung Tunai called BLT (Unconditional Cash Handouts) in order to compensate the reduction of fuel subsidies. The plan is to distribute Rp150,000 to each poor household since the reduction is implemented until nine months after that (The Jakarta Post, March 2012). It is debatable whether this policy is effective and efficient. Some people believe that BLT is an effective way to help the poor in coping with the increase of fuel price. However, it is arguable that BLT might bring more drawbacks than benefits. Based on different perspectives and experiences, it is plausible that government should not implement this ineffective and costly policy.

From the previous implementation in 2008, BLT has several weakness points. One of them is that the possibility of wrongly targeted recipients is quite high. Banerjee et al. (2009) mentions that it is difficult to decide who is eligible for this kind of aid programs in Indonesia, including BLT. The Government lacks reliable data about people incomes. Therefore, before employing BLT program, the data should be credible.

BLT disbursement might lead to social clashes between residences who are aided and who are not. According to Cameron (2011), the miss-targeted of a cash handouts program in Indonesia has a possibility to affect crime’s growth and social capital reduction within communities. There are some examples of riots because of its disbursement. In Ujung Pandang at the late of 2008, where crowd of people who are BLT recipients come at a time then makes a chaos in the city’s main post office. Some people are injured in this disbursement accident (The Jakarta Post, September 2008).

Cash handouts may create a bad habit for society, such as beggar mentality and consumptive behavior. Instead of giving facilities in a long-term effect policy, BLT only gives short-term effect. This condition led people being used to be given instead of getting proper jobs. Because of that reason, some governors in Indonesia rejected to give BLT to their people. Solo and Bantul regency have mentioned about their rejection (The Jakarta Post, March 2012). The usage of BLT also not-well monitored. People who get the aid cannot be controlled to use the money for useful allocation, because there is no obligation to control their consumption.  Some households are more likely to use the money for unintended allocation, such as buy a new cell phone or to buy cigarettes.

Patunru (2012) and The World Bank (2012) state that in economic shock; BLT is helpful because it provides just-in-time cash assistance to households. This liquidity is an advantage of BLT. The BLT disbursement also covers a wide range of people. However, it is wasting resources when the government spends trillions rupiahs for a miss-targeted program. In addition, even though BLT reaches all of regions, it cannot be long last programmed. It means BLT is an expensive policy and has very temporary impact.

In conclusion, the Government of Indonesia should review this policy because its ineffectiveness, social-clashes issues and the possibility to bring a bad habit for society. Therefore, budget should be allocated for education, health, and infrastructure in order to get a wider impact on poverty alleviation. The poverty alleviation program should not be instant solution, but also consider its sustainability and its wider impact on social life.[]

References:

Banerjee, Abhijit et al.  2009. How to Target the Poor: Evidence from a Field Experiment in Indonesia. Web. 2 August 2012. <http://www.cepr.org/meets/wkcn/7/778/papers/ banerjee-hanna-olken.pdf>.
Cameron , Lisa and Shah, Manisha. 2011. Mistargeting of Cash Transfers, Social Capital Destruction, and Crime in Indonesia. Web. 2 August 2012.  <http://users.monash.edu.au /~clisa/papers/BLT_JPubE.pdf>.
Patunru, Arianto A. 2012. Subsidi BBM dan Kompensasi BLT. 24 March 2012. Web. 2 August 2012. <http://regional.kompas.com/read/2012/03/24/04361836 Subsidi.BBM.dan.Kompensasi.BLT>.
The Jakarta Post. 2008. Makassar BLT Rush as Poor Overrun Post Offices. 16 September 2008. Web. 2 August 2012. <http://www.thejakartapost.com/news/2008/09/16/makassar-blt-rush-poor-overrun-post-offices.html&gt;.
The Jakarta Post. 2012. Regions Say no to Direct Cash Assistance for Poor Families. 24 March 2012. Web. 2 August 2012. <http://www.thejakartapost.com/news/2012/03/24/ regions-say-no-direct-cash-assistance-poor-families.html>.
The World Bank.2012. BLT Temporary Unconditional Cash Transfer: Social Assistance Program and Public Expenditure Review 2. Web. 2 August 2012.  <http://documents.worldbank.org/curated/en/2012/02/ 15893823/bantuan-langsung-tunai-blt-temporary-unconditional-cash-transfer>.

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