Planning state investments<\/p>\n
Government investment, which is itemized under the development
\nbudget in the treasury accounts, will put up only Rp 30.7
\ntrillion (US$14 billion), or 26.4 percent, of the Rp 113.5
\ntrillion total investment required in the next 1995-1996 fiscal
\nyear to generate an economic growth of at least six percent. The
\nremaining Rp 82.8 trillion investments are expected from the
\nprivate sector, including state companies. All these target
\nfigures are by and large in line with the targets set in the six-
\nvolume Sixth Five Year Plan (Repelita VI) Book.<\/p>\n
The mere 2.5 percent increase in government investment
\nbudgeted for next fiscal year -- the second year of the sixth
\nplan -- should not, however, be seen as detrimental to overall
\neconomic development. We should not view state investment from
\nthe absolute amount because as the government steadily decreases
\nits direct involvement in economic activities and retreats from
\nthe economic sectors that can more efficiently be conducted by
\nthe private sector, the role of its investments in fueling
\neconomic growth will diminish as well.<\/p>\n
We note, for example, that since 1985 -- when the first
\npackage of massive economic reform measures, notably deregulation
\nand bureaucratic reform, was launched -- the operating (routine)
\nbudget of the government has always been larger than its
\ninvestment budget.<\/p>\n
Critics may argue that the trend has not been designed
\ndeliberately but has instead been forced by the limited financing
\ncapability of the government. We don't, however, share that
\nnotion. We think the government should be commended for having
\nbeen consistent with the spirit of its economic reform. In the
\n1990-1991 fiscal year, for example, when the government got an
\noil windfall as a result of the skyrocketing oil prices in the
\nwake of the Gulf war, the government firmly held to its tight
\nbudget and kept the surplus funds as reserves for development. In
\nfact, the government now still holds Rp 1.7 trillion in such
\nreserves.<\/p>\n
The way the development (investment) budget is allocated, as
\noutlined in the 1995-1996 draft state budget, further reassures
\nus of the government's determination to hold firmly to its policy
\nof steadily decreasing direct involvement in economic activities.
\nThe largest portion of the investment budget will be used for the
\ndevelopment of the provinces, human resources and basic
\ninfrastructure. The emphasis on those three major areas will
\nsupport the government's basic tasks in economic development --
\ndirecting, guiding and facilitating the economic activities of
\nthe people. The privatization of state companies should also be
\nseen in this light. Direct involvement of the state in the few
\neconomic sectors is designed to be a catalyst to encourage or
\nsupport private-sector activities.<\/p>\n
President Soeharto himself reiterated in his budget address on
\nThursday that in so far as economic development activities are
\nconcerned, the government will limit its role to giving
\ndirection, support and endorsement.<\/p>\n
The President also reaffirmed -- apparently as a reminder to
\nhis cabinet ministers -- that every development project proposed
\nby the ministries to the National Development Planning Agency
\nshould be tied to the annual programs stipulated in the Sixth
\nFive Year Development Plan. Otherwise their proposals will be
\nrejected outright. That, we think, is quite encouraging because
\nsuch a policy will help ensure that the public funds will be used
\nin line with the guidelines set by the taxpayers through their
\nlegislators who have approved the development plan.<\/p>",
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"sponsor": "Okusi Associates",
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