During the ‘new order’ period up to mid-1997, the Indonesian economy had been performing very well. The annual growth rate of GDP and external investor confidence were high, overall inflation was low, and foreign direct investment was robust. However, by the end of 1997 and in 1998 Indonesia was in a deep financial crisis. In 1998, the country experienced a contraction of 13.6% in GDP and only a very small positive growth of 0.12% in 1999. In 2000, the growth rate of real GDP was 4.8% and 3.4% by the last quarter of 2001. By mid-1997, the incidence of poverty was about 10.1% of the population, and in 1998, as a consequence of output decline, the incidence of poverty was estimated to have increased to 14.1% in 1999, or about 29 million people (World Bank, 1998). However, based on the National Social Economic Survey (SUSENAS) in 2000 from the Central Bureau of Statistics in Indonesia (BPS) and using different measurement methods, the poverty rate in 1998 was about 23.6% (BPS, 2000b). Historically, the social security system in Indonesia was started in 1977 with the introduction of a social security program for workers known as ASTEK (Employees’ Social Insurance / Asuransi Sosial Tenaga Kerja). In 1992, the government issued a Social Security Act for private employees, including state companies, and ASTEK was changed to JAMSOSTEK (Social Security for Private Employees / Jaminan Sosial Tenaga Kerja). JAMSOSTEK is a compulsory social protection scheme for employees against social hazards, such as employment injury, death, sickness, and old age. The existing social security system in the country has several shortcomings. One of these is the JAMSOSTEK scheme’s coverage of only employees in the formal sector. Also, not all JAMSOSTEK schemes comply fully with the law and government regulations on employee’s social security or with international standards (as defined by the International Labor Organization, ILO). In comparison with other Asian countries such as Singapore, Thailand and the Philippines, government spending on social security in Indonesia is relatively small. For instance, in 1996, spending on employment injuries, survivors, sickness and health, and old age on average was not higher than 5% of GDP. Recently, several ministries in Indonesia, i.e. the Ministry of Health (DEPKES), the Ministry of Social Welfare (DEPSOS), the Ministry of Manpower and Transmigration (DEPNAKERTRANS), and the Ministry of Finance (MENKEU) have been working on the reform of the social security system, including the JAMSOSTEK scheme. For this purpose, the government has proposed a new law that will support the reform. Under that new law PT2 JAMSOSTEK will become a Trust Fund. The proposed law is currently being processed.