The following table provides poverty figures - both relative and absolute - for Indonesia's population:

Indonesian Poverty and Inequality Statistics:

   2006  2007  2008  2009  2010  2011  2012  2013  2014
Relative Poverty
(% of population)
 17.8  16.6  15.4  14.2  13.3  12.5  11.7  11.5  11.0
Absolute Poverty
(in millions)
   39    37    35    33    31    30    29    29    28
Gini Coefficient/
Gini Ratio
    -  0.35  0.35  0.37  0.38  0.41  0.41  0.41     -

Sources: World Bank and Statistics Indonesia

The table above shows a steady decline in national poverty. However, the Indonesian government applies rather easy terms and conditions regarding the definition of the poverty line, resulting in a more positive picture than reality. In 2014 the Indonesian government defined the poverty line at a monthly per capita income of 312,328 rupiah. This amount equals approximately USD $25 and, thus, indicates a very low standard of living, even for Indonesian standards. But if we apply the poverty threshold as is used by the World Bank, which classifies the percentage of the Indonesian population living on less than USD $1.25 a day as poor, the percentages in the table above will rise by a couple of percentage points. Moreover, according to the World Bank, when taking into account the percentage of the Indonesian population that lives on less than USD $2 a day, the figure for 2009 rises to 50.6 percent of the population. This shows that a large proportion of the Indonesian population is in fact near poor. More recent reports in Indonesian media assert that around a quarter of Indonesians (which translates to around 60 million people) are currently near poor.

In recent years, Indonesian poverty numbers have shown a steady downward trend. It is assumed, however, that in the future this downward trend will continue at a slower pace. Most of the Indonesians that rose out of poverty in recent years, were those that lived just below the poverty line. This means it took less effort to push them out of poverty. But as this group is slowly narrowing in number, it is now the bottom base of Indonesia's poverty that needs to be alleviated. This will be more complicated and thus results in slowing rates of poverty reduction.

Indonesian Poverty and Geographical Distribution

One remarkable characteristic of Indonesian poverty is that there is a major difference in terms of relative and absolute poverty in relation to geographical location. While in absolute terms over half of the total Indonesian poor population lives on the island of Java (located in the more populous western half of Indonesia), in relative terms the provinces of eastern Indonesia show far higher numbers of poverty. The table below shows the top five of Indonesian provinces regarding highest incidences of relative poverty. All these provinces are located outside the more developed western-located islands of Java, Sumatra and Bali.

Indonesian Provinces with Highest Relative Poverty

Papua           27.8%
West Papua           26.3%
East Nusa Tenggara           19.6%
Moluccas/Maluku           18.4%
Gorontalo           17.4%

¹as percentage of total population per province in September 2014
Source: Statistics Indonesia

These eastern provinces, where farmers lead a largely subsistence existence, contain very high rates of rural poverty. In these regions, indigenous communities have been living on the margins of development processes and programs. Migration to urban areas is often the only way to find employment and - thus - escape poverty.

Contrary to relative poverty in eastern Indonesia, the table below shows that absolute poverty in Indonesia is clustered on the islands of Java and Sumatra.

Indonesian Provinces with Highest Absolute Poverty

East Java
Central Java
West Java
North Sumatra
Lampung        1.1

¹ in millions in September 2014
Source: Statistics Indonesia

Poverty in Indonesia - Indonesia's Poorest Provinces - Relative and Absolute Poverty in Indonesian Society - Indonesia Investments Delft Jakarta

Food price stability (rice in particular) is a vital matter for Indonesia as the country contains a population that spends a large proportion of their disposable incomes on rice. Therefore, inflationary pressures on the price of rice (for example due to bad harvests) can have serious consequences for those that are poor or near poor and significantly raise the percentage of poverty in the country.

Rural and Urban Poverty in Indonesia

Indonesia has experienced a process of rapid and continued increased urbanization. Since the mid-1990s the absolute number of Indonesia's rural population began to decline and today more than half of Indonesia's total population lives in urban environments (20 years ago approximately one-third of Indonesia's population lived in urban societies).

With the exception of a few provinces, the rural populations of Indonesia are relatively poorer than the urban ones. Indonesia's rural poverty rate (percentage of the rural population living below the national rural poverty line) dropped to around 20 percent in the mid-1990s but suffered at the hands of the Asian Financial Crisis that ravaged the country between 1997 and 1998, causing this number to rise again to 26 percent. After 2006, a significant decline in rural poverty in Indonesia emerged as is visible in the table below:

   2005  2006  2007  2008  2009  2010  2011  2012  2013  2014
Rural Poverty
(% living below
rural poverty line)
 20.0  21.8  20.4  18.9  17.4  16.6  15.7  14.3  14.4  13.8

Sources: World Bank and Statistics Indonesia

The urban poverty rate is the percentage of the urban population living below the national urban poverty line. The table below, that indicates urban poverty in Indonesia, shows a similar pattern as Indonesia's rural poverty rate: a continued decrease since 2006.

   2005  2006  2007  2008  2009  2010  2011
 2012  2013  2014
Urban Poverty
(% living below
urban poverty line)
 11.7  13.5  12.5  11.6  10.7   9.9   9.2   8.4   8.5   8.2

Sources: World Bank and Statistics Indonesia

In the two tables above, a significant increase in poverty is visible between 2005 and 2006. This development is mainly due to massive cuts in fuel subsidies by the Yudhoyono government in late 2005. Rising international oil prices had made the government decide to reduce fuel subsidies in order to relieve the government's budget deficit. This consequently led to a double-digit inflation rate of between 14 and 19 percent (yoy) until October 2006.

Widening Inequality in Indonesia?

The GINI coefficient, which measures income distribution inequality, shows a decreasing trend in Indonesia in recent years. A coefficient of 0 indicates perfect equality, while a coefficient of 1 indicates perfect inequality. However, the methodology of this GINI coefficient can be questioned as it divides the population in five baskets, each containing 20 percent of the population: from the 20 percent richest to the 20 percent poorest. Subsequently, it measures the (in)equality between those baskets. The problem when using this coefficient for Indonesia, however, is that the country is characterized by extreme inequality within each basket, making the outcome of the GINI coefficient less in tune with reality. Hence, Indonesian media often reports that the gap between poor and rich in Indonesia is actually widening.