The state of development and nature of poverty in developing countries is quite different to that in developed countries. In developed countries, the rural and urban economies are now largely integrated, and poverty has become primarily a question of macroeconomic growth and the provision of a social-safety net to the elderly, infirm and disadvantaged (Timmer, 2005).

In developing countries, poverty can be divided into two categories, chronic and transient poverty, each requiring a different interventions. Social safety net programmes should be totally devoted to the chronically poor, while a sustainable community development approach is more appropriate for the transient poor, aimed at empowering them within a finite time frame. In Indonesia, about 50 per cent of the poor live in transient poverty, sensitive to external shocks but with the capacity to lift themselves out of poverty.

There are two paths out of poverty and two transition phases that should be considered (World Bank, 2006). The two paths are a shift in farming systems from subsistence to commercial farming, and a shift in non-farm informal enterprises to more productive and profitable formal businesses. The two transition phases are a shift out of subsistence agriculture to petty trading and manufacturing, and rural-urban migration of household members.

In Indonesia, the poverty rate increased 11.25 per cent (or by 3.95 million persons) from February 2005 to March 2006, leaving a total of 39.05 million in poverty. This poverty incidence, although lower than that between 1998 and 2002, was the highest since 2003. The source factors are: the fuel price hike, inflationary pressures in many sectors, stagnant or low performance of investment and economic growth as well as inappropriate implementation of poverty alleviation programmes (Jakarta Post, 4 September 2006).

In addition to the social-safety net and partial sectoral programmes, the Indonesian government has handed out unconditional cash transfers to more than 19 million poor and low-income households (76 million people) during the past ten-months. However, it appears the cash transfers were inadequate to significantly improve the lives of the poor. It is not just a matter of the effectiveness of individual programmes but also of the entire approach guiding poverty reduction in Indonesia.

This paper proposes holistic community empowerment and development as an alternative approach to poverty alleviation. This can be done in the following ways: (i) changing individual- or partial-sector programmes to multi-sector community development; (ii) mainstreaming informal employment and promoting gender equality; (iii) legally empowering poor people; and (iv) providing support to minimize the negative impacts of trade liberalization on the income and employment of the poor.

The philosophy of the multi-sector community development approach is: (i) to acknowledge the capacity and social capital of the poor; (ii) to make the poverty reduction agenda relevant, contextual and sustainable by involving the poor in decision-making processes; (iii) to encourage and support transparent and accountable poverty reduction activities at the community level; and (iv) to reposition the role of poverty reduction-related parties from development agents to community empowerment facilitators (Mubyarto, 2002; Adiyoga and Herawati, 2003).

Korea and China have implemented notable and successful programmes in this area. The Korean Seamaul-Undong, is considered to be best practice by UNESCAP and there are plans to implement it in other regions. The Government of China established the Leading Group Office for Poverty Reduction (LGOPR) and its executing agency (Poor Area Development Office/PADO) to co-ordinate the nation's funding and act as the principal advocate of the rural poor (UNESCAP, 2005).

The Government of Indonesia has implemented two national community development programmes since 1998/99, namely the Kecamatan (Sub-district) Development Project (KDP) and the Urban Poverty Alleviation Project (UPAP). Both projects promote the empowerment and involvement of poor people through participatory programme design. They also teach transparent budgeting and procedures, good governance and increased accountability (Jakarta Post, 4 September 2006). The two projects are the most democratic, bottom-up development programmes for poverty alleviation in Indonesia and in these projects a low rate of corruption was found.

In order to mainstream informal employment and promote gender equality, we must: (i) promote opportunities for both the self-employed and informal wage workers through integrated micro-finance service provision, skill training, improved technologies and other business development services; (ii) secure rights for the self employed, especially access to credit and other resources, as well as to create equitable policies for formal and informal enterprises; (iii) protect informal workers through extending the existing insurance schemes (and/or developing new ones); (iv) raise the ‘voice’ of informal workers through strengthening their organizations and representation in relevant policy-making institutions; and (v) be sensitive to gender issues and considering women workers who tend to earn less, have weak social protection, and need more policy support (Chen et al. , 2004).

Singh (2006) highlighted the importance of four key areas to be addressed to legally empower the poor and help them out of poverty. The areas include: (i) improved access to formal justice system and rule of law; (ii) a system of rights to protect their assets, to build trust, encourage access to credit and markets and raise productivity; (iii) labour rights to encourage the poor to move to the formal labour system; and (iv) an acknowledgment and encouragement of the entrepreneurial skills of the poor.

Trade liberalization will generate negative impacts for poor farmers living in remote areas and those cultivating protected commodities with low comparative advantage. Five policies are suggested to ensure that trade reform benefits the poor: (i) generating complementary measures to motivate a fair, open, rules-based trade system; (ii) increasing Indonesia's global export share to produce a transfer of resources as a result of gains from trade; (iii) stabilizing the price of exported commodities; (iv) developing human resources generally; and (iv) making trade a part of the overall agenda for economic growth and poverty reduction (Wilson Center, 2006).

The final stage in the rural-urban structural transformation can only be achieved gradually. Once rural-urban integration is achieved, the government will be able to focus on macroeconomic growth and social-safety net programmes devoted to the elderly, infirm and the chronically poor.

Written by I Wayan Rusastra, R&D Programme Leader, UNESCAP- CAPSA and Senior Researcher of ICASEPS, Bogor, Indonesia.

(References available upon request)