(Bloomberg) — In northern Jakarta Bay, a region with the highest prevalence of stunting and malnutrition in Indonesia’s capital, about 160 first-graders excitedly pack their free school lunches on a warm September day.
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As they recited prayers, some peeked into the colorful boxes, while others hurriedly opened them to reveal rice, omelette, beef teriyaki, stir-fried chickpeas, carrots and melon. Looking on, 45-year-old Yani says she hopes the improved diet will improve her seven-year-old daughter’s grades and attendance.
The meals are part of a government-run pilot program after newly elected President Prabowo Subianto, who takes office on October 20, promised free school lunches as part of his successful campaign. The goal: to reduce stunting, improve educational outcomes in a country where almost a quarter of the population is under the age of 15, and boost economic growth to 8% per year.
The focus on soft infrastructure contrasts with predecessor Joko Widodo, who prioritized roads, railways and bridges and the mineral export industry, with GDP growth averaging 4.2% over his ten-year term. While economists and investors applaud the ambition, it is the price tag and the risks in delivering the program without waste and corruption that worry them.
Finance Minister Sri Mulyani Indrawati set aside 71 trillion rupiah ($4.6 billion) for the lunch program in the 2025 budget, with costs expected to rise as the rollout widens. The final expenditure of US$30 billion per year is equivalent to 14% of Indonesia’s entire 2024 budget and about 2.5 times more than annual healthcare expenditure.
Prabowo’s plan will cost five times the amount that India, which runs the world’s largest mid-day meal program, will spend in 2023. That program is rife with corruption scandals and accusations of poor hygiene – challenges that Indonesian authorities will have to avoid.
A recent expansion of the program to pregnant mothers suggests that spending could rise even further in coming years, “which could put upward pressure on the budget deficit if there is no reprioritization of spending programs,” said Martin Petch, who serves as vice president and senior credit officer at Moody’s Ratings makes him lead analyst for Indonesia’s sovereign rating.
Prabowo has sought to allay budget fears by funding the program within the 3% of GDP deficit limit in the 2025 budget, as the government seeks to cut waste and other non-essential spending. Details about subsequent financing plans have not yet been announced.
Kim Eng Tan, an S&P Global Ratings analyst in Singapore, said “continued commitment to prudent fiscal policy will be important” as the program expands.
Former General Prabowo says his free meal program aims to keep the country’s children healthy and competitive amid rapid technological advances and competition with other countries’ workforces. “This is not a matter of being liked, of becoming popular. This is a matter of strategy,” he said recently at a forum.
Nearly one in three children under the age of five in the vast archipelago of 275 million people are considered too small for their age. Poor diet and school attendance mean that Indonesian students score lower in math, reading and science than their peers, and their performance declines.
Improving education outcomes will be critical to helping Indonesia – which currently has an economic output of roughly $4,800 per person, making it an “upper middle-income country” according to the World Bank – to match its neighbors and move up the ranks the development ladder.
Economies that have “escaped the middle-income trap, such as Singapore, Korea and Taiwan, all have pretty good soft infrastructure,” said Rob Subbaraman, head of global macro research at Nomura Holdings. “So it is a good move by Indonesia, but they should not suddenly forget about the physical infrastructure.”
Prabowo has also pledged to renovate schools across the country, provide free medical checkups and expand various other social assistance programs. To pay for all this, he wants to double the country’s tax revenues – from around 10% currently – by reforming the tax system and increasing non-tax revenues. Investors and economists are waiting for more details on these plans once Prabowo is in power and finalizes his cabinet formation.
Thomas Rookmaaker, head of Asia-Pacific sovereigns at Fitch Ratings, said achieving developed nation status by 2045 – another of Prabowo’s targets – “appears to be a challenge without major productivity-enhancing reforms or significantly higher government spending and a build-up of the national debt.”
Of all Prabowo’s campaign pledges, it is the lunch program that has received the most attention, given its sheer size. And not everyone is sold on the idea.
Muhammad Rafi Bakri, an analyst at Indonesia’s Audit Commission, wrote in a report in April that the lunch plans “may not be a panacea” for Indonesia’s stunted growth problem, and expressed concerns about the sustainability of the program’s financing. India’s free lunch programme, Bakri pointed out, is also supported by non-profits – something that is unlikely to happen in Indonesia’s case.
For other analysts, the potential boost to both the short- and long-term prospects outweighs such concerns.
“In the near term, this initiative could boost economic activity and create growth opportunities for companies in the consumer goods sector,” said Mohit Mirpuri, fund manager at Singapore-based SGMC Capital Pte., who is “bullish” on the country. “A healthier, better-educated workforce is the foundation of productivity and innovation, making Indonesia an attractive market for long-term investors.”
Back in Jakarta Bay, Dahlia, 40, thinks the daily meal program will help her fussy seven-year-old daughter eat a more balanced diet, although she worries about the quality and hygiene of the food.
“We won’t be able to see directly how the kitchen works,” she said. “I really hope that the government and the school ensure that everything is clean. That is my biggest concern.”
–With help from Yuki Tanaka and Andy Lin (News).
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