Habibie's budget<\/p>\n
President B.J. Habibie's speech outlining the government's
\nspending plans in the House of Representatives on Tuesday was
\nexceptionally long for a bare-bone budget that essentially offers
\nlittle to stimulate Indonesia's depressed economy. The speech,
\nwhich lasted for two hours and 15 minutes, was not only tortuous
\nfor House members to sit through, it was disproportionate in
\nlength given that only 11 months remain before his administration
\nhas promised to make way for a new, democratically elected
\ngovernment.<\/p>\n
With little to discuss by way of the budget, Habibie took the
\nopportunity to indulge in an elaboration of his vision and to
\ndefend some of his more controversial policies. The speech also
\nprovided an insight into where his priorities lie, and more
\nimportantly, what can be expected by way in terms of new
\npolicies. His warning about the \"untoward\" behavior of the press,
\nfor example, could signal the imminent return of closer
\ngovernment control of the media. By instructing the Armed Forces
\nto take firm measures to restore security and order, while at the
\nsame time arguing that mobilization of the masses has been the
\nsource of social unrest, Habibie hinted at a tough clampdown on
\nstudent protests, if and when they resume after Ramadhan.<\/p>\n
When the President did eventually get round to explaining the
\ngovernment's spending plans, he gave little reason for cheer. The
\nsole exception was when he announced a plan to raise civil
\nservice and Armed Forces salaries and pensions. The government
\nhas rarely used fiscal policy to invigorate the economy, and the
\n1999\/2000 budget looks to be no exception, even with the nation
\ndesperately searching for the first green shoots of recovery.<\/p>\n
In all fairness, the budget includes massive provisions for
\nvarious social safety net programs. These programs are needed to
\nprovide relief to those worst affected by the economic crisis.
\nThe government is also forging ahead with its attempt to promote
\nits concept of a people's economy by providing massive subsidies
\nto interest rates on over a dozen loan schemes devised to help
\nsmall and medium-sized enterprises and cooperatives. Funds
\nallocated to recapitalize commercial banks make up another major
\npart of the budget. Using Rp 18 trillion to bail out mismanaged
\nbanks may seem rather excessive, but a healthy banking system is
\ncentral to economic recovery.<\/p>\n
Given the limited funds available to the government, there
\nwill be precious few new public investment projects initiated in
\nthe coming year, and what modest spending plans the government
\nhas hinge on its ability to raise revenues. Here, the government
\nhas very few options. With weak global oil prices dragging oil
\nand gas revenues down and the all pervading recession squeezing
\nits ability to increase taxes and levies in other sectors of the
\neconomy, the government plans to resort to greater foreign
\nborrowing to cover the expected budget deficit.<\/p>\n
In drafting the budget, the government has assumed a zero
\ngrowth rate in the 1999\/2000 financial year, an inflation rate of
\n17 percent, world oil prices averaging at US$10.5 a barrel, and
\nan exchange rate of Rp 7,500 to the American dollar. These
\nassumptions appear somewhat conservative given that in 1998,
\nIndonesia's economy contracted by 13 percent and inflation rose
\nto nearly 77 percent. The current budget, after numerous
\nrevisions, was recalculated assuming $13 per barrel of oil and an
\nexchange rate of Rp 10,000 to one dollar.<\/p>\n
Despite the tenuous nature of the assumptions used to draft
\nnext year's budget, there is a larger and more telling \"if\" upon
\nwhich the accuracy of the government's financial planning hinges.
\nThe budget assumes that the markets and the public will have
\nstrong confidence in the government, which in turn hinges on
\npolitical and social stability, neither of which can be
\nguaranteed.<\/p>\n
In spite of his lengthy budgetary speech, Habibie failed to
\naddress the question of political stability convincingly. His
\napparent desire to restrict student protests, when the student
\nmovement is just about the only effective means of checking
\ngovernment power, is likely to stir the students into further
\naction. Furthermore, establishing a civilian militia in the face
\nof widespread objections will only serve to antagonize the
\npublic, giving rise to the prospect of yet more clashes and
\nconfrontations and even less stability in our already turbulent
\ncountry. If either of these misdirected ventures were to take
\nplace, even the most conservative budgetary assumptions would
\ncome to appear wildly optimistic.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/habibies-budget-1447893297",
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"sponsor": "Okusi Associates",
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