The Villages, Disadvantaged Regions and Transmigration Ministry sees the need to optimize the rural cash-for-work project in order to help strengthen the rural economy by increasing local productivity to support national economic growth.

The cash-for-work project is part of the government’s village fund program, which aims to empower rural communities by prioritizing the use of local resources, labor and technology to provide additional income, increase purchasing power and reduce poverty.

In the context of the ongoing global situation, the project is expected to help mitigate the adverse impact on the national economy.

Since the outbreak of the coronavirus disease, known as COVID-19, in China in December 2019, more than 110,000 people worldwide had been infected as of March 9 according to a John Hopkins CSEE report, and 103 countries had been affected.

The World Health Organization (WHO) reported that the total number of confirmed cases outside China was 28,673 with more than 680 deaths, bringing the total number of deaths to 3,809 globally.

With China being the world’s second-largest economy and a leading trading nation according to the World Economic Forum (WEF), the coronavirus outbreak is likely to be a nightmare for the global economy.

Although the International Monetary Fund (IMF) assumes that the impact will be relatively minor and short-term, the continued spread of the virus could have terrible consequences.

The Organization for Economic Cooperation and Development (OECD) has asserted that the COVID-19 outbreak is contributing significantly to global economic disruption, as mentioned in its report Coronavirus: The World Economy at Risk.

Based on the OECD’s economic assessment, the COVID-19 outbreak is believed to be reducing global growth by around 0.5 percent this year and the annual global GDP growth is projected to expand just 2.4 percent in 2020, which would be the weakest since 2009.

As China plays a great role in global supply chains as a producer of intermediate goods, travel, and commodity markets, the adverse consequences of the impacted economy in China are sorely felt by other countries.

It is directly disrupting the global economic supply chain, weakening the demand for imported goods and services, and extensively affecting international tourism and business travel given that Chinese tourists account for one-tenth of all cross-border visitors worldwide.

The Bloomberg report gives a perspective on how the global economy is suffering as a result of the supply chain disruption.

While in China, Starbucks has shut thousands of outlets and McDonald’s Corp has closed hundreds of restaurants, across the world, many companies that rely on import manufacturing from China are in crisis.

For instance, consumers in New Zealand complain about being unable to get bath equipment because the German factory that produces that equipment no longer has access to its raw materials from Shanghai, China.

The worsening situation will adversely affect the G20 economies in 2020, especially for countries that are closely interconnected to China, such as Japan, South Korea, Australia and Indonesia.

Indonesian economic shakeup

With China being the biggest trading partner of Indonesia, the global coronavirus outbreak may deeply affect the country’s economic growth, particularly in tourism and export-import activities, since China contributes 13 percent of total international visitors to Indonesia.

This is shown by the significant drop of Chinese tourists by some 500 visitors at the end of January.

Finance Minister Sri Mulyani Indrawati was quoted on the ministry’s website as saying that a 1 percent drop in China’s economic growth (6 percent) would bring about a drop of 0.3 to 0.6 percent in the Indonesian economy.

The OECD has projected the GDP of Indonesia will drop by 0.2 percent, from 5 percent in 2019 to 4.8 percent in 2020.

According to Statistics Indonesia (BPS) 2018 reports, the declining global economy has both direct and indirect impact on the national economy, both in urban and rural areas.

As almost 50 percent of Indonesian people live in villages, the rural economy weighs on the national level.

The global economic situation has been affecting almost 2,500 villages (3 percent of the total number of villages) that face difficulties in exporting their products, such as food products (1,183 villages), non-food products (517 villages) and both food and non-food products (773 villages).

Indirect impacts also remain in 16,747 villages (22 percent of the total number of villages).

To minimize the economic impact and to ease economic dependence, an approach to establish a national production and consumption chain is essential.

Shield for villages

In response to the COVID-19 outbreak, the ministry issued a circular letter on Feb. 10, seeking to accelerate the use of the village fund phase 1 by prioritizing the implementation of the cash-for-work project.

The project accommodates various choices and opportunities from society, and utilizes local wisdom to reduce poverty and to increase income.

The approach has so far had positive outcomes, including infrastructure development and a reduction in unemployment and poverty.

Around 8.06 million village laborers were absorbed, the cash wages paid back to villagers reached Rp 8.7 trillion and the unemployment level was reduced from 6.53 percent in 2016 to 6.3 percent in 2019.

The income received by the workers increased the purchasing power of the community, augmented the cumulative household consumption and reduced income inequality in society.

The approach also reduced the unemployment rate and scaled down the poverty rate in the villages.

BPS reported that the monthly village per-capita income significantly increased from Rp 572,586 (2014) to Rp 877,074 (2019), resulting in a significant drop in poverty in villages from 14.9 percent in 2015 to 12.60 percent in 2019.

To ensure the system worked properly, the ministry deployed 37,088 skilled volunteers in the villages, sub-districts and districts.

The best example of a successful cash-for-work project is in Pangerharjo village in Kulonprogo district, Yogyakarta.

Before 2012, Pagerharjo village had a high percentage of poor families, a lack of health facilities and little supported infrastructure.

In 2012, Pagerharjo was selected as a village to run the Food Self-Reliance Village program, also supported with the village fund in 2014.

 The village managed the fund to develop itself as a tourist village with local contents.

The village developed, managed, maintained and empowered local society involving youths and household members.

Another area having been developed is the agricultural sector to boost food production.

After running the program for years, the poverty level significantly decreased from 934 poor families in 2014 to 694 families in 2015.

The annual rice production slightly increased by 618 kg/ hectare with an average total production of 6,719 kg/ hectare.

That village has enjoyed a positive impact from the cash-for-work project in supporting local economic growth.

We can imagine what the potential impact will be if all 74,953 villages in Indonesia can optimize the project.

Shaking up the economy to tackle the impacts of COVID-19 must be seriously considered.

A prudent strategy to face the challenge is urgently needed, and the cash-for-work project to optimize the use of village funds is expected to strengthen the local economy, increase the purchasing power, and reduce poverty, all expected to boost Indonesian national economic growth.

However, the success of the project is mainly dependent on the commitment of the village society and their strong will to live a better life.

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