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Reducing poverty in south-east Asia is the key to reducing extremism

By James Ensor - posted Tuesday, 26 November 2002

The abhorrent act of terrorism in Bali has challenged Australians' most commonly held views on peace and security. While locating and prosecuting those responsible for the Bali outrage is rightly of paramount importance, it is clear that there can be no sustainable long-term security in our neighborhood without concerted action from governments, the private sector and aid agencies to redress the social and economic imbalances that fuel violence and extremism.

There is no question that productive private-sector investment is a vital driver for economic growth and poverty reduction in developing countries in our neighbourhood. So too, however, is the delivery of aid that focuses on the building blocks for human and economic development – education, health care, good governance and sustainable use of natural resources. The reality is that limited immediate financial return on investment is unlikely to attract private sector investment in these important sectors.

Some world leaders have rightly drawn connections between the recent acts of terrorism, the rise in violent extremism, and the global crisis of poverty, inequality and persistent humanitarian need. While there clearly is not a direct link between entrenched poverty, gross inequality and terrorism, the events of the past year have shown the world that widespread poverty and suffering can create an environment conducive to breeding social instability and violent extremism. Achieving human security – focused on the achievement of the basic rights of people – is one critical element to achieving global security.


Nowhere is such action more important than in the so-called arc of instability to Australia's immediate north where many countries – including Indonesia – are undergoing rapid change characterised by increasing social and economic inequality, communal violence, ethnic tension, environmental degradation, the decline of foreign direct investment and reducing health and living standards.

The social and economic challenges confronting Indonesia are staggering. Prior to the 1997 economic crisis, 11 per cent of Indonesian's lived below the poverty line. Now, just five years later, about 50 per cent of the Indonesian population, or more than100 million people, live below the poverty line. The World Bank estimates that the real wages of Indonesian urban and rural workers have fallen by 40 per cent and 34 per cent respectively. The Asian Development Bank estimates that 39 million Indonesians have lost their jobs.

Indonesian debt now stands at more than $300 billion. As a consequence, the Indonesian budget allocated 52 per cent of State spending on debt service in 2001. Just seven per cent of spending was allocated to health and education services for ordinary Indonesians – some of the most important building blocks for long-term economic development. The human consequences of these budgetary distortions are devastating. Indonesian school enrolments have fallen by 5 per cent in recent years, translating to more than 1.3 million children without access to basic education. A deficiency in Vitamin A has re-emerged among Indonesian children as has the incidence of Iron Deficiency Anemia – which affects the immune system and slows intellectual development.

It is these and other challenges that Australian aid agencies are supporting Indonesia to address. During 2000-01, Australian aid agencies supported 54 projects throughout Indonesia assisting 1.5 million Indonesians. These projects focus on community development activities designed to improve health and nutrition, agricultural productivity, women’s rights, education standards and the environment. Training programs are being conducted in managing natural disasters, judicial issues and micro credit. Some projects – particularly those focused on relief and peace building – are specifically in response to political or ethnic instability in Aceh, Papua and the Mulukas.

Most Australian aid agencies – including Oxfam Community Aid Abroad - work in close collaboration with Indonesian partner organisations in implementing these projects. These partner organisations include Government agencies, churches, education institutions, village councils and local non government organisations.

A number of aid agencies broaden the impact of their project work by advocating for changes in policies and practices to reduce poverty and conflict and secure the basic rights of Indonesian people. These include advocacy for reducing Indonesia’s debt burden, for reducing the impact of the financial crisis on Indonesian children and support for democracy and human rights in Indonesia.


In today's globalised world, our lives are more inextricably linked than ever before, and so is our prosperity. Like the economic forces that drive globalisation, the anger and social tensions that accompany entrenched poverty and growing inequality will not respect national borders. The instability that this generates threatens us all.

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About the Author

James Ensor is Director of Public Policy at Oxfam Australia.

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