New 2003 budget approved<\/p>\n
The state budget proposal for 2003 that was approved by the
\nHouse of Representatives on Wednesday was significantly different
\nfrom the original plan submitted in August because of major
\nchanges in several key economic assumptions brought about by the
\nOct. 12 bomb attack in Bali.<\/p>\n
The target of economic growth in terms of real gross domestic
\nproduct was revised downward from 5 percent to 4 percent and the
\naverage rupiah rate from Rp 8,700 to a range of between Rp 8,500
\nand 9,500 relative to the U.S. dollar. The inflation rate was
\nrevised upward from 8 percent to a range of 9 percent to 9.5
\npercent and the average international oil price from US$20.5 to
\n$22\/barrel. However, the target of benchmark short-term interest
\nrates was maintained at 13 percent.<\/p>\n
The budget deficit was revised upward from 1.3 percent of
\ngross domestic product to 1.78 percent to allow for the
\nallocation of an additional Rp 10.6 trillion ($1.17 billion) for
\npump priming to partly offset an anticipated downturn in private
\nsector spending. This will increase government investment
\nexpenditure next year to Rp 65.1 trillion.<\/p>\n
Most analysts have predicted that without an additional
\nstimulus the economy would only be able to expand by a mere 3.5
\npercent at the most next year, or about similar to the estimated
\ngrowth for this year.<\/p>\n
Simply juggling budget aggregate figures is one thing but
\ntranslating them into a set of appropriate action programs that
\nare credible to the market is quite something else and enormously
\nchallenging for that matter. If the market does not accept the
\nrevised budget figures as credible, the new key economic
\nassumptions would soon be rendered unrealistic.<\/p>\n
True, the government should come up with additional pump
\npriming measures to offset an anticipated slackening of the pace
\nof private investment and consumer spending, because the
\nincreased security risks and anticipated negative ramifications
\nof the bomb attack on domestic political conditions are
\nheightening business risks, adversely affecting business
\nconfidence and banking operations and decreasing tax revenues.<\/p>\n
Since the government reduced the target of its tax revenues by
\nRp 6.6 trillion from the original target due to an expected
\ndecline in taxable corporate incomes, the biggest question now is
\nwhere the additional pump priming cash will come from,
\nconsidering that printing more money is wholly out of the
\nquestion.<\/p>\n
New calculations of non-tax receipts, notably royalties from
\nnatural resources, dividends from state companies and fees from
\npublic services led the government and the House to the
\nconclusion that the target of these revenues could still be
\nincreased by Rp 15 trillion.<\/p>\n
Taking into account the Rp 6.6 trillion shortfall in tax
\nreceipts, non-tax revenues will thus contribute a net additional
\nreceipt of around Rp 8.4 trillion.<\/p>\n
On top of that, the government expects an additional Rp 2.5
\ntrillion from official loans and grants from its international
\ndonor community (Consultative Group on Indonesia) which will
\ndecide how much to commit in January.<\/p>\n
But these figures are simply estimates that have to be
\nrealized through action programs. Tax collection has to be
\nstepped up, otherwise the shortfall in tax receipts could be much
\nlarger than the estimated Rp 6.6 trillion. The tax directorate
\ngeneral needs to continue the vigorous campaign it launched last
\nmonth to collect at least a portion of the Rp 19.6 trillion in
\ncorporate tax arrears.<\/p>\n
Budget discipline has to be heightened to ensure that all fees
\nfrom public services are transferred to the state coffers. A
\ngood balancing act is necessary to ensure that dividend payouts
\nby state companies will not jeopardize their investment programs
\nto improve efficiency and competitive strength.<\/p>\n
No less important is to meet the reform agenda because quite a
\nportion of loan pledges from CGI creditors are contingent upon
\nthe government's policy performance.<\/p>\n
Yet more challenging is to ensure that the pump priming goes
\nprimarily to labor intensive programs (job creation), poverty
\nalleviation, the empowering of small and medium-scale enterprises
\nand improvement of export infrastructure.<\/p>\n
Trade-facilitation measures in regulations, licensing systems,
\ntransportation, port handling and customs services need to become
\nefficient and professional to offset the additional costs of
\nbusiness caused by the increased security and business risks.<\/p>\n
Job creation is particularly vital in view of the estimated
\n40 million fully unemployed and under-employed people.<\/p>\n
Certainly, a 4 percent economic expansion is far from adequate
\nto absorb the unemployed, let alone the 2.5 million new job
\nseekers that enter the labor market every year. Yet, well-
\ntargeted investment spending of Rp 65.1 trillion could go a long
\nway in preventing the already dangerously high unemployment level
\nfrom exploding into social unrest, as well as to minimize
\npoverty.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/new-2003-budget-approved-1447893297",
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"sponsor": "Okusi Associates",
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