Analysts reject proposed bigger education budget

Analysts reject proposed bigger education budget

Urip Hudiono, The Jakarta Post/Jakarta

While welcoming the Constitutional Court's ruling that mandates
an increase in the education budget, economists are saying that
full implementation would not be fiscally viable at present due
to the state budget's many limitations.

Economist Faisal Basri said a 20 percent allocation for the
education sector -- as stipulated in the Constitution and
recently upheld by the Court -- would mean the government would
have to provide up to Rp 110 trillion (some US$11 billion) in
funds, assuming next year's expenditures at some Rp 550 trillion
-- an amount that would be difficult to work into the current
budget structure.

"Of course the government can reallocate its spending for
this, but what use would it be if more goes to education, but we
take away from infrastructure and health, for example," the
economist from the University of Indonesia (UI) said.

"Reducing fuel subsidies and debt payments, meanwhile, also
have their own economic and political complications."

Sri Adiningsih from Gadjah Mada University mentioned how
swapping fuel subsidies for more education funds -- by allowing
another fuel price hike -- could hurt the economy, referring to
how the recent rise in inflation and interest rates from the
latest hike would likely stifle growth and push up the jobless
numbers.

Meanwhile, concerning the option of meeting the requirement
simply by raising expenditures for education at the expense of a
wider budget deficit, both Faisal and Sri Adiningsih said that it
too had its fiscal risks.

"With allocations for education now standing at some Rp 40
trillion, an additional Rp 70 trillion would translate into a
deficit of some 3 percent of the gross domestic product (GDP),
which is not good in terms of fiscal sustainability, particularly
if the government fails to finance it," he said.

The best that the government could do, Faisal said, is to
gradually increase the allocation as it had planned to do --
citing a 50 percent budget increase next year to Rp 60 trillion
with a tolerable 1.5-percent deficit.

The government had said it would only be able to increase the
education budget by an average of 3 percent each year until it
reaches 20.1 percent in 2009.

While the options are limited on the spending side, Chatib
Basri, who is also from UI and an advisor at the Office of the
Coordinating Minister for the Economy, said the government had at
present few options to increase revenue, other than boosting tax
collection and proceeding with the privatization of state-owned
enterprises.

"Taxing too much could, however, hurt businesses and the whole
economy, while I don't think proceeds from the selling of state
assets would amount to that much, apart from likely objections
the public," he said, adding that the government's planned
allocation of between 12 and 14 percent for next year would still
be feasible.

Nevertheless, Faisal, Chatib and Sri Adiningsih, were all of
the opinion that the education budget must indeed be increased
further if this country wants to improve its human resources.

"The Court's ruling should be seen as a wake-up call for the
government to change its paradigm and priorities in drafting the
state budget and providing more for human-resource development,"
Sri said.

Faisal, meanwhile, suggested a more output-oriented paradigm
-- rather than an input-oriented one -- for the educational
sector, linking its financial support to what is actually needed.

"Why provide so much money in advance, if we are actually not
prepared in the way we will spend it wisely for the betterment of
our nation's education system?" he said.