Indonesian government to speed up spending for growth

Indonesian government to speed up spending for growth

Indonesian government plans to amend several regulations that have been widely blamed for slowing attempts to expedite state-budget spending, particularly for infrastructure development.

During a Cabinet meeting on Wednesday, President Joko “Jokowi” Widodo instructed related ministers to reform the current system, which had created bottlenecks for both central and local governments when trying to spend their budgets.

Coordinating Economic Minister Sofyan Djalil said that the current state budget procurement system was deemed too complicated and had caused many officials to end up in prison for violating procurement regulations.

“We will study the procurement procedures and will review the overall presidential decree and regulations to produce a perfect revision of the procurement mechanism,” he said.

“We want spending procedures to be swift but accountable.”

Weak budget disbursement over the last decade has been partly blamed for holding back the country from garnering economic growth of over 6 per cent annually.

The central government, for example, had only spent 37 per cent of the allocated 161 trillion rupiah (US$13.1 billion) capital expenditure as of October, according to the Finance Ministry. The allocated amount is supposed to be spent on infrastructure projects that have a multiplier effect on economic growth.

On account of the new centralised procurement system, the Jakarta administration recently predicted that budgetary spending this year would be extremely sluggish.

In the third quarter, the Jakarta administration’s budgetary spending had only reached 30 per cent of the total 72 trillion rupiah ($6 billion), according to the Jakarta Financial Management Board (BPKD).

Unspent funds at the local level was due to the local administration’s lack of courage in determining what sectors funds should be spent on as it depended too much on technical guidance from the central government.

The government has been prioritising the construction of infrastructure, particularly after accumulating around $10 billion in extra funds next year from the recent fuel-subsidy cut.

As more funds will be available for productive use, the administration would not want to see any bottlenecks in the disbursement of funds.

During the Cabinet meeting, the government also agreed on a plan for state companies to keep their dividends for capital expenditure in infrastructure development and to provide loans to small enterprises.

“For the 2015 budget revision, we will propose a plan in which state companies will no longer be required to give their dividends to the state coffers,” said Sofyan.

“It is best that the companies keep their dividends for future expansion or for infrastructure projects,” he said.

The 2015 state budget requires the companies to pay 43.73 trillion rupiah in dividends to the state.

In relation to infrastructure development, Agrarian and Spatial Planning Minister Ferry Mursyidan Baldan told The Jakarta Post after the Cabinet meeting that new policies on land acquisition would be formulated by the ministry.

“To help speed up land acquisition, the ministry will demand that all state companies or related agencies report their development plans so that we can secure the needed land and prevent price speculations,” said Ferry.

“The proposed land will be locked so that brokers won’t be able to get their hands on the land.”

Aside from infrastructure issues, the meeting also discussed a plan to halt any new construction of government offices and buildings in the years to come, to allow the funds to be allocated for more productive purposes.

“Only buildings that directly support public services will be constructed. Anything else will be shelved,” said Sofyan.

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