Prabowo Subianto, the “cuddly TikTok grandpa” (formerly better known as a murderous general serving under the dictatorship of Suharto) who took office as Indonesia’s president in October of last year, announced a plan to provide free meals to the country’s 83 million schoolchildren (as well as pregnant women). Broker analysts as well as credit rating agencies complain about the costs involved, which are estimated at up to IDR 450 trillion (about USD 28 billion). For 2025, Prabowo’s government has allocated IDR 71 trillion to the program with the aim to reach just short of 20 million children. The idea is that better-fed youths eventually will spur economic growth from currently 5% per annum to a rather fanciful 8%.
Mr. Prabowo has a point. Malnutrition in the early years of a child’s development does have a negative impact on brain (IQ) and body development (often referred to as “stunted growth”). There seems to be a clear correlation between nutrition and educational outcomes. The country’s ministry of health estimates the prevalence of stunting at 21.6% (2022). The ambitious goal is to cut stunting to lower than 14% within the next couple of years. Note that stunting does not necessarily occur because of a lack of food but because of a lack of the right food. Eating a Big Mac every day does not address the problem of low IQ (just look at Donald Trump). That is why the ministry employs nutritionists to put together healthy meals. Provided meals are not sourced from Sodexo, school attendance should improve, which obviously is beneficial to gaining educational qualifications.
Today’s menu…
Given that stunting results in lower IQ, it should be no surprise that PISA scores of Indonesian students are much lower than the OECD average in mathematics, reading and science (the OECD produces a report every 3 years with the next one due this year). But Indonesia’s scores were also much lower than those of Brazil, Mexico, Malaysia and Thailand (which all have lower stunting rates). Of comparable countries, only Philippines did worse (indeed, its stunting rate is at around 30%).
Of course, nutrition is not the only factor that determines the quality of students. More could and should be done to improve educational standards in Indonesia. For example, Vietnam, which has about the same GDP per capita in dollars as Indonesia, achieves much better PISA scores than Indonesia. Vietnam’s quality of education has improved markedly over the last decades thanks to the quality of their teachers, who receive frequent training as well as having a certain freedom to design classes to the needs of pupils. Pay is performance-based and teachers are paid more if they are willing to go to more remote areas. And, not unimportant, the job of being a teacher in Vietnam brings prestige and respect (indeed, every year teachers are celebrated with a special day which falls on November 20th). It should be no surprise that Vietnam is a more popular manufacturing base for foreign companies than Indonesia because its employees are better trained.
We believe that Prabowo’s free meal policy makes a lot of sense (also confirmed by the Global Alliance against Hunger and Poverty ahead of the G20 meeting in Rio de Janeiro last year). Investing in human capital is as important (if not more so) than investing in physical infrastructure. The out-of-pocket costs are indeed rather high at 1.8% of GDP (if the government indeed spends IDR 450 trillion per year by 2029, as planned) and could increase due to Indonesia’s infamously corrupt bureaucracy. Still, we think it is a good investment, even if it will deteriorate the country’s financial metrics in the short term. Note that the program provides new jobs (cooks, cleaners, logistics, etc.) and saves money for many families that subsequently increases their propensity to consume, whereas food ingredients are sourced from local producers. This offsets some of the financial costs of the program. Maybe not exactly a “free lunch” but still one to devour…