Abstract Economic development in Indonesia produces at least two conditions. First, it caused the increasing of economic growth and the increasing of upper and middle class. Second, it caused the increase of gap between the rich and the poor, as there are many people who always left behind in the development process. Planning problem, budget constraint, political agenda, and many others can be mentioned as a caused but they have same effects, there are people who never touch by development. This condition generatesinequality in society when the rich become richerwhile the poor become poorer.

1. PNPM: Tackle Inequality Problem in Indonesian Development Oleh : Budiarjo Pusat Inovasi Kelembagaan dan Sumber Daya Aparatur Deputi Bidang Inovasi Administrasi Negara Lembaga Administrasi Negara Jl. Veteran 10, Jakarta 10110, Indonesia E-mail: budilan@yahoo.com

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PNPM: Tackle Inequality Problem in Indonesian Development Oleh : Budiarjo Pusat Inovasi Kelembagaan dan Sumber Daya Aparatur Deputi Bidang Inovasi Administrasi Negara Lembaga Administrasi Negara Abstract Economic development in Indonesia produces at least two conditions. First, it caused the increasing of economic growth and the increasing of upper and middle class. Second, it caused the increase of gap between the rich and the poor, as there are many people who always left behind in the development process. Planning problem, budget constraint, political agenda, and many others can be mentioned as a caused but they have same effects, there are people who never touch by development. This condition generatesinequality in society when the rich become richerwhile the poor become poorer. To avoid various problem of which possible arise because of inequality, government requested to overcome this condition with programs which is directly profiting the poor. Therefore, Indonesian government launched Program NasionalPemberdayaanMasyarakat (PNPM) or National Program for Community Empowerment.PNPM was designed as integration some various programs of society empowerment, job creation, and poverty reduction. In its implementation process, this program showed some positive impacts especially in poverty reduction. However, the program are also faced many problems that have to tackle. This paper triesto describe briefly what PNPM is, the problem, and some results that were achieved. Keywords: inequality, community empowerment, PNPM, poverty reduction.
A. Introduction
After Indonesian independence in 1945, Indonesia has conducted a series of development. In the economic development, along with political stability in the New Order Era, Indonesia enjoyed economic growth until finally shaken by the Asian economic crisis that resulted in the fall of the Suharto government in May 21, 1998. In politics, the economic crisis has resulted in

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the collapse of Suharto presidency, and in economic development, the crisis has had significant impact on economic growth, as shown in table 1. Table 1 Indonesia’s Economic growth 1996 - 2008
Year
Percentage
1996
7.8
1997
4.7
1998
-13.1
1999
0.8
2000
4.9
2001
3.6
2002
4.5
2003
4.8
2004
5.1
2005
5.7
2006
5.5
2007
6.3
2008
6.1
Source: BPS-Statistics Indonesia From the table, Indonesia's economic growth rate during the period 1996- 2008 showed a fluctuating condition. Economygrew 7.8 percent in 1996, and then in 1997 when economic crisis began, slowed to 4.7 percent, and finally in 1998 Indonesian economy fell to negative growth (minus 13.1 percent). From 1999 to 2008, although slowed in 2001, Indonesia's economy grew smoothly.
This economic growth has impact to the growth of the middle class. According to ADB’s data1, the number of Indonesian middle class2 increased
1Asian Development Bank, Key Indicators for Asia and the Pacific 2010, available online:http://www.adb.org/Documents/Books/Key_Indicators/2010/Part-I.asp

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rapidly during the last 10 years along with the continued growth of the economy of this country. In 1999, the percentage of upper middle class is about 25 percent or 45 million people. A decade later (2009) the number soared to 42.7 percent or 93 million people. Although there is an increase of economic and number of middle class, these developments were not fully enjoyed by all people of Indonesia. With various development programs that have been conducted, until now there are so many poverty and unemployed. The number of poor and unemployed in Indonesia since 1996-2008 can be seen in table 2. Table 2. Poverty and unemployment in Indonesia
Year
Unemployment (million)
Poverty (million)
Sum
Percentage
Sum
Percentage
1996
4.4
4.9
34.5
17.7
1997
4.2
4.7
-
-
1998
5
5.5
49.5
24.2
1999
6
6.4
47.9
23.4
2000
5.8
6.1
38.7
19.1
2001
8
8.1
37.9
18.4
2002
9.1
9.1
38.4
18.2
2003
9.9
9.7
37.3
17.4
2004
10.3
9.9
36.1
16.7
2005
11.9
11.2
35.1
16.0
2006
10.9
10.3
39.3
17.7
2007
10.5
9.8
37.2
16.6
2008
9.4
8.5
35.0
15.4
2ADB used spending measure to differentiate the poor and the rich/not poor. The poor spends below U.S. $ 2. Meanwhile, the middle-upper spends U.S. $ 2-20 per day.

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Source: BPS-Statistics Indonesia From table, unemployment had a tendency to increase from year to year. In 2005 unemployment reached the top level (11.2 percent)and then decreased to 10.3 percent in 2006, 9.8 percent in 2007, and 8.5 in 2008. Meanwhile, the level of poverty showed the trend continues to decline. For a moment raised in the event of an economic crisis in 1998, from 17.7 percent in 1996 and increased to 24.2 percent in 1998, the poverty rate tends to decline until 2008. In case of increasing economic growth and number of middle class and high unemployment and poverty, inequality issue became so sensitive to the public, especially for the poor, academics, and NGO. Therefore, criticism, protest and discussion on this inequality issue were easily spread to the public along with the democratization process and press freedom in Indonesia.Toaddressed this issue, the government of Indonesia immediately developed policies to overcome poverty and unemployment, and finally the government introduced PNPM or “the National Program for Community Empowerment”, a national program for community empowerment aimed at accelerating poverty reduction in 2007. After some years executed, there are some problem faced and also successful story of PNPM program. This paper will describe briefly what PNPM is, the goals, success stories, problems faced and some policy needed to sustain this program.
B. PNPM (National Program for Community Empowerment)3
PNPM is not an entirely new program. Poverty reduction programs had been initiated since the New Order regime. Thegovernment launched various programs of poverty reductionand community empowerment that is run by various ministries and agencies. One of the most famous was Presidential Instruction Program for Disadvantaged Villages (IDT), which aimed to
3 Descriptions about PNPM are based on PNPM Operations Manual: Tim Pengendali PNPM Mandiri, PanduanUmum Program NasionalPemberdayaanMasyarakat (PNPM) Mandiri, (MenkoKesra, 2008).

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improve the quality of the welfare of the poor through the development of human resources, capital, and productive business and institutional development in disadvantaged villages. Others poverty reduction programs and other community empowerment are: KDP (Kecamatan/district Development Program) carried out the Ministry of Home Affairs, P2KP (Urban Poverty Program) carried out the Department of Public Works, P4K (Income Improvement Project for Small Farmers and Fishermen) held by Department of Agriculture, PEMP (Coastal Community Economic Empowerment) held the Ministry of Maritime Affairs and Fisheries, KUBE (Joint Business Group) carried out the Ministry of Social Affairs, and others. Such programs ran on their own according to the policy of the department, not integrated, and partial. Moreover, 'target' and 'top down' approach were more emphasis, therefore poverty alleviation programs are often set goals without involving the poor themselves.
Starting in 2006, the government already has the concept of integrated poverty alleviation with a base of community empowerment. The program that was inaugurated by President SusiloBambangYudhoyono on 1 May 2007, called the National Program for Community Empowerment (PNPM)4 with the aim of increasing the empowerment and independence of the community.PNPM program is one of instrument for achieving the Millennium Development Goals or MDGs. Therefore, PNPM will be implemented at least until 2015 as it targets the achievement of MDGs. Related to the variety of other sectoral programs, PNPM provides an umbrella framework for all community-driven development programs in Indonesia. By consolidating these programs under a single framework, PNPM will avoid overlapping and duplication of programs and activities, better national targeting for the poorestand the direct transfer of funds to villages for better utilization of poverty reduction efforts.
4 The official name of this program is PNPM Mandiri. Mandiri means independent.

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The PNPM program consists of PNPM Inti (PNPM-Core) and PNPM Penguatan (PNPM-Support). The PNPM core consists of 4 major empowerment programs i.e. Kecamatan Development Program (KDP) as the basis for community empowerment in rural development and supporting programs such as PNPM Generation; Program on Poverty Reduction Urban (P2KP) as the basis for the development of community empowerment in urban areas; Acceleration of Disadvantaged Areas Development (P2DTK) for development of underdeveloped regions, post-disaster and conflict; and Social and Economic Infrastructure Development Program Area (PISEW) to integrate economic growth centers with others regional surroundings. Meanwhile, the PNPM-supports consist of the existing ministries’ technical program activities that also provide support to the poor areas/communities.
PNPM is trying to nurture the solidarity and corporation spirit in the Indonesian culture, and fully owned and managed by the Government of Indonesia. It is recognized however that international development cooperation has an important and constructive role in supporting Indonesia to meet its goal in reducing poverty. Both bilateral and multilateral assistances supporting poverty reduction are useful in bringing fresh ideas and lessons from international practices.
Objective
There are some objectivesof PNPM, i.e.:
1. Increased participation of all communities, including the poor, women groups, indigenous communities, and other community groups who are vulnerableand often marginalized in decision-making process and development.
2. Increased capacity of community institutions.
3. Increased government capacity in providing services tocommunities especially the poor through policies, programs and pro-poor budgeting.
4. Increased synergy between communities, local governments, private sector, associations, universities, non-governmental organizations,

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community organizations, and interest groups, to make effective efforts to reduce poverty.
5. Increased empowerment and self-reliance, as well as local government capacityand local stakeholders in tackling poverty.
6. Increasing community’s social capitals in accordance with the potentialand cultural as well as to preserve local wisdom.
7. Increased innovation and the use of appropriate technology, information andcommunication in community empowerment.
In an effort to achieve the objectives of PNPM, there were strategy, basic principles,and approach that need to be a reference in the implementation of programs. Strategy PNPM strategy consists of:
1. Basic Strategy
a. Intensify efforts to improve the ability of empowermentand independence of the community.
b. Establish a broad partnership with various stakeholders to togetherachieve empowerment and self-reliance.
c. Applying the integration and synergy of sectoral development approach,territorial development, and participatory development.
2. Operational Strategy
a. Optimizing the full potential and resources of society,central government, local governments, private sector, associations, universities, governmental organizations, civil society and other concerned groupssynergistic.

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b. Strengthening the role of local governments to manage programsin its territory;
c. Developing a trusted, rooted, andaccountablecommunity institution.
d. Optimizing role in the service sector, and development activitiesare integrated at the community level.
e. Improving the ability of learning in the community, in understandingthe needs, potential, and solve the various problems it faces.
f. Applying the concept of participatory development in consistent, dynamic, andsustainable approaches.
Basic Principles
PNPM is emphasizing the following basic principles:
1. Relieson human development. The implementation of the PNPM alwaysrelies on improving the whole human dignity.
2. Autonomy. In the implementation of the PNPM, the public has the authorityindependently to participate in determining and managing activities.
3. Decentralization. Management authority and sectoral development activitiescould be delegated to the local governments or the public in according to their capacity.
4. Oriented to the poor. All activities conductedprioritized to the interests and needs of poor communities and groupsof disadvantaged community.
5. Participation. Communities are actively involved in every decision processof development and mutual help to run the facilities.
6. Equalityand gender. Men and women have equalityin their role at every stage of development and in enjoying fairlybenefits of development activities.
7. Democratic. Every development decision-making was toke through discussion and consensus, with main orientation to the interest of poor.

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8. Transparency and Accountable. Communities must have adequate accessto all of information and decision making process; therefore management activities should be carried out openly and held moral, technical, legal, or administrativeresponsibility.
9. Priority. Government and society should prioritize the fulfillment ofthe need for poverty alleviation by utilizing limited resources optimally.
10. Collaboration. All interested parties in poverty reductionencouraged to create cooperation and synergy among othersin poverty reduction.
11. Sustainability. Every decision must take into accountinterests of improving the welfare of society, not only today but alsoin the future while maintaining environmental sustainability.
12. Simplicity. All rules, mechanisms and procedures in the implementation of the PNPMshould be simple, flexible, easily understood, and easily managed, andcan be accounted for by the public.
Approach Approach or rational efforts in achieving the program's objectivespay attention to the principles:
1. Using districts as the locus of a program to harmonizeplanning, implementation, and control.
2. Positioning the community as a determinant / decision makers and key actorsdevelopment at the local level.
3. Giving priority to universal values and local culture in the development processparticipatory.
4. Using a community development approach in accordance withsocial characteristics, cultural and geographical.
5. Through a process of empowerment that consists of learning, independence, andsustainability.

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Program Component
The series of community empowerment process is done through a program componentas follows:
1. Community development
Community development component includes a series of events to develop critical awareness and independence of the community that consists of mappingpotential, problems and needs of communities, participatory planning, organizing,resource utilization, monitoring, and maintenance of the results which have been achieved.
2. Direct Aid
Direct Aid (BLM) is a stimulant self-supporting fund thatgiven to community groups to fund some activitiesplanned by the community in order to improve welfare, especiallythe poor.
3. Strengthening Local Governance and Local Actors
Governanceand capacity building of local actors is a series ofactivities to increase the capacity of local governments and local actors/groups. Activitiesin this component include seminars, training, workshops, and field visits.
4. Management and Development Assistance Programs
Managementand development assistance programs include the activitiesto support governments and other stakeholders in the managementactivities such as providing management consulting, quality control, evaluation, andprogram development.
Scope of Activities
The scope of activitiesbasically open to all activities, include:
1. The provision and improvement of infrastructure/facilities housing environment, social andlabor-intensive economy;

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2. Provision of financial resources through revolving funds and micro credit fordevelop economic activities of poor communities. Greater attentionshould be given to women in making use of this revolving fund;
3. Activities related to improving the quality of human resources, particularly thoseaims to accelerate the achievement of the MDGs;
4. Increased capacity of communities and local governance through awarenesscritical, business skills training, organizational management and finance, as well asimplementation of good governance.
Program Harmonization In order to improve the effectiveness and efficiency, implementation of various programscommunity empowerment in PNPM were harmonized on those aspectsas follows:
1. Target
Harmonization of goals intended to integrate aspects of regions and groupsbeneficiary community.PNPM focused on districts that have the following criteria: a) havelarge enough number of poor people, b) low level of basic services, c) levellow fiscal capacity, and d) a village behind.
2. Community institutions
Harmonization of community institutions intended to:
a. Achieve a trusted community leadership, values-based, androoted.
b. Efficiency of governance.
c. The effectiveness of poverty reduction programs.
d. Encourage government that responds to the problem of poverty andefforts to overcome.
Harmonization of institutional done through:
a. Developing and strengthening institutional capacities that already exist withhow to improve management capacity, improve

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performance and ethics agencies,and increase the level of representation of the various institutions.
b. Increased cooperation among the village.

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Organization How PNPM was organized from national to village level can be seen in picture 1.
Picture 1.PNPM organization
National consultant
Ministry’s unit
PNPM Team Controller
Ministry/Agency
National level
PNPM Coordination Team
Province consultant
Province level
Regency/City consultant
Organ’s Unit
PNPM Coordination Team
Regency/City’s organs
Regency/city level
Facilitator
Villages communication forum
Operational officer
District level
Community organization
Village level
Public/Benefit receiver

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From the picture, there are four main parts of PNPM’s organization i.e. PNPM team controller (steering committee), ministry/agency (organizing committee), consultant/facilitator, and the community. Team controller consists of Minister, Head of agency, and was led by vice president. This teamhas responsibility to gives guidance to the organizing committee. In the local level, coordination team was led by governor in province and Bupati/Mayor in regency/city level.
Management of Program
Program management of PNPM consists ofpreparation, participatory planning, implementation/activity execution, control, evaluation,and reporting.
1. Preparation
Preparationof PNPM in central government was coordinated by PNPM Team Controller which cover for example public policy and program development, stipulatinglocation, communications strategy, information system development, and also evaluation and monitoring.
Preparationof PNPM in local level was coordinated by Team Coordination of province and regency/city, covering for example providing fund contribution, forming Secretariat of Team Coordination and also formed Program Execution Team.
2. Participatory Planning
Participatory planning is development decision-making processinvolving public, private, and government according to their respective functions.Participatory planning mechanism consists of planning at village, inter-village (district), and coordinative planning districts.
Participatory planning aims to provide a space as wide as possible to the citizenssociety both men and women, especially poor households to engageactively in digging the idea or the identification of needs and decisiondevelopment planning decisions.

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3. Implementation
Activitiesconducted by the PNPM are self-managed communitybased on the principle of autonomy and facilitated by government-assisted deviceby a facilitator or consultant.Stage of implementation of activities carried out after the planning process is complete.
4. Control
Control is a series of monitoring activities, and follow-upundertaken to ensure appropriate implementation of the planned developmentand ensure that funds are usedin accordance with the objectives of the program. Monitoring activities in PNPM consists:
a. Participative monitoring by society start from planning to the implementation process.
b. Monitoring and inspection by Government
c. Monitoringby consultant and facilitator, from national to local level. This activityconducted routinely through management information system and field visit. Monitoring is also conducted by facilitator in every step of program management so that repair and adjustment of program execution can be conductedimmediately.
d. Independent monitoring by various other parties(NGO, university, journalist).
e. Budgetaryaudit by supervisory body.
5. Public Complaints
Complaint issues and questions from the public, program participants, government,and others submittedeither directly or indirectly. Managementof public complaintsstarted at the level which closest tolocation of the complaint, and treatment done as soon and as close as possible from the location.

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6. Evaluation
Program evaluation aims to assess the performance of the implementation, benefits, impacts, andsustainability of activities. The evaluation carried out routinely and regularly, both by program managers andindependent parties such as NGOs, universities, and research institutions. This evaluation activities need to be arranged in a systematic, objective, and transparent.
7. Reporting
Reporting in PNPM was performed periodically and gradually through the structural path(the government) and functional lines (consultants and facilitators) to ensureflow of information quickly, precisely and accurately to all stakeholders.
C. Success Story
Was introduced in 2007, PNPM has showed its outcome by give manybenefits for poor societies in the form of fulfillment infrastructure and productive economic empowerment. Especially for economically productive activities listed there are 750 productive business groups, including 22 thousand women's groups managed, and all 6, 408 districtsin Indonesia already covered PNPM5. Moreover, the various poverty reduction programs that run by the government proved capable of reducing poverty in Indonesia. This can be seen from the existing population indicators. In March 2009 the number of poor people was about 32, 5 million, or 14.1 percent. This number has decreased from previous years.Although the government recognize the aggregate number of poor people is still too big, poverty reduction programs from the government remains consistent.
5 PNPM terbuktimanfaatnya, www.tnp2k.org, last modified Thursday, 25 February 2010, http://tnp2k.org/index.php?option=com_content&view=section&layout=blog&id=5&Itemid=19

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Moreover, PNPM could give positive impression to the public6. These programs simply treat public disappointment so far because of the improvement of community service, and easy bureaucracy process. Once proposal submitted, meet the full feasibility study, then the road or the bridge built as soon as possible.
In Central Java province7, PNPM significantly had positive impact for economic development of society. PNPM has been successful in reducing poverty rates by 7.49%. This was disclosed by head of DinasCiptaKarya of Central Java. He admitted that with the activities of conducted in the central Java region during 2008 to 2009, has been able to reduce the poor population. In addition, these programs also provide benefits for the development of small business community so as to absorb the existing labor force. Another benefit that is not less important is the growth of critical consciousness and community participation indicated by the large fund- governmental organizations, the amount of community involvement in the form of volunteers.
The success story of PNPM was also admitted by neighbor country which caused the Mongolians to become very interested in learning more about the program in Indonesia8. According to Antara, the Mongolian delegation came to the office of the Welfare Coordinating Minister to expressed their wish to learn more about the PNPM program in Indonesia for application in their country.
6Masalahdalam PNPM Mandiri, www.waspadamedan.com, http://waspadamedan.com/index.php?option=com_search&areas[]=content&searchphrase=all&searchword=PNPM+Mandiri
7Berkat PNPM Mandiri, AngkaKemiskinanTurun 7,49 Persen, www.tnp2k.org, last modifiedTuesday, 16 February 2010 10:38, http://tnp2k.org/index.php?option=com_content&view=section&layout=blog&id=5&Itemid 8Mongolia wishes to study Indonesia`s PNPM program, Antaranews.com, last modified Mon, March 8 2010 22:15, http://www.antaranews.com/en/international

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D. The Problem9
Although was recognized by the public as a powerful program to reduce poverty, PNPM often face obstacles in its implementation. The problem briefly could be mention as follows:
1. PNPM always be confronted with various complexity, dynamics and diversity of socio-economic issues, and politics that is contradictory therefore require attention and treatment from the government and local governments, as well as among the society in various regions.
2. Mindset that is formed as a result of experience with the system of centralized governance and development has led to a weakened capacity of local governments and communities in the process of social change to improve welfare in various regions.
3. Financial sharing between central and local government that still feels heavy for most local government.
4. Disbursementof funds which sometimes does not fit between the central and local government.
5. Indications of fraud and irregularities
Based on the results of the Provincial Management Consultant supervision during FY 2010 and strengthened by the results of World Bank supervision there are strong indications of fraud and irregularities in Southeast Sulawesi Province10. Of the 22 districts visited, found indications of fraud and serious irregularities in 15 districts in the form of facilitators often absent, an indication of misuse of funds, grants and revolving funds, an indication of an auction setting, the indication mark- up price and volume, an indication of incorrect reporting and others.
6. Consultant and facilitator performance11
9 Identified from various sources, mainly from http://www.pnpm-mandiri.org/,
10PermasalahanSeriusPelaksanaan PNPM MandiriPerdesaan di Provinsi Sulawesi Tenggara, www.pnpm-mandiri.org, accessed june 1st, http://www.pnpm- mandiri.org/index.php?option=com_content&view=category&layout=blog&id=59&Itemid=81&lang=in 11 Ibid.

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Supervision by the Consultant and Facilitator are questionable, because they do not take action to prevent the selection of facilitators who do not fit the rules and procedures. At least 30 district facilitators in all districts and 49 sub-district facilitators in 8 districts have been identified as problematic.
E. Conclusion
PNPM is a national program for community empowerment aimed at accelerating poverty reduction. This program is part of government response to the inequality issues in Indonesia and also government effort to integrate various community development programs into one framework. In the implementation level, the program facing various problems, ranging from complexity, dynamics and diversity of socio-economic and politic issues; old mindset; financial; fraud and irregularities; and facilitator performance. Although there are many problems, this program is recognized by the people and government of Indonesia as a strong program to reduce poverty. Therefore, government commitment and implementation of this program until 2015 should be supported.
F. References
Asian Development Bank, INO: Rural Infrastructure Support to the PNPM Mandiri II Project, (ADB, 2009), Jakarta Asian Development Bank, Key Indicators for Asia and the Pacific 2010, available online: http://www.adb.org/Documents/Books/Key_Indicators/2010/Part- I.asp
Berkat PNPM Mandiri, AngkaKemiskinanTurun 7,49Persen, www.tnp2k.org, last modified Tuesday, 16 February 2010 10:38,

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http://tnp2k.org/index.php?option=com_content&view=section&layout=blog&id=5&Itemid
DaftarLokasiBermasalah Di PNPM MandiriPerdesaan, available online: http://arsip.pnpmmandiri.org/images/stories/lokasi_bermasalah.htm
Masalahdalam PNPM Mandiri, www.waspadamedan.com, http://waspadamedan.com/index.php?option=com_search&areas[]=content&searchphrase=all&searchword=PNPM+Mandiri
Mongolia wishes to study Indonesia`s PNPM program, Antaranews.com, last modified Mon, March 8 2010 22:15, http://www.antaranews.com/en/international
PermasalahanSeriusPelaksanaan PNPM MandiriPerdesaan di Provinsi Sulawesi Tenggara, www.pnpm-mandiri.org, accessed june 1st, http://www.pnpm- mandiri.org/index.php?option=com_content&view=category&layout=blog&id=59&Itemid=81&lang=in
PNPM terbuktimanfaatnya, www.tnp2k.org, last modified Thursday, 25 February 2010, http://tnp2k.org/index.php?option=com_content&view=section&layout=blog&id=5&Itemid=19
SulikahAsmorowati (2010), Bureaucratic Culture Or Citizen Oriented Culture? Bureaucracy, Community and Reform In The National Program For Community Empowerment (PNPM) In Surabaya, Indonesia, Paper was presented to the 18th Biennial Conference of the Asian Studies Association of Australia in Adelaide, 5-8 July 2010
Tim pengendali PNPM Mandiri, Tanya Jawabseputar PNPM Mandiri, (MenkoKesra, 2010), Jakarta
Tim Pengendali PNPM Mandiri, PanduanUmum Program NasionalPemberdayaanMasyarakat (PNPM) Mandiri, (MenkoKesra, 2008).