Austere budget signaled

JAKARTA (JP): President Soeharto, signaling an austere 1995-96 state budget, instructed all ministers and senior officials yesterday to increase efficiency, generate more revenues and intensify supervision next year.

"The President said that the 1995-96 budget is going to be limited, but with hard work we can still make a lot of progress," Minister of Information Harmoko told reporters after an annual plenary cabinet meeting at the State Secretariat here.

The three-hour meeting was attended by Vice President Try Sutrisno, all of the cabinet members, first echelon officials, Chairman of the Supreme Advisory Board Sudomo, Chairman of the Supreme Audit Agency J.B. Sumarlin, Chief Justice Soerjono and Head of the National Intelligence Agency Soedibyo.

Soeharto is scheduled to deliver a proposal on the 1995-96 state budget plan to the House of Representatives on Jan. 5 for deliberations prior to its implementation on April 1.

The 1994-95 state budget is expected to increase by 11.9 percent to Rp 69.74 trillion (US$31.7 billion) over the previous fiscal year.

"The President also said that due to the limitation of the budget, the government is compelled to adopt strong budgetary disciplines and must be able to account for the utilization of funds," Harmoko said.

The minister also cited the President's warnings to all ministers not to use funds from state-owned firms to finance their programs next year.

Revenue

Soeharto also stated that the government will make "a maximum effort" to increase state revenues from taxes and other non-oil sources next fiscal year.

Under the 1994-95 budget plan, tax revenues are projected to increase by 18.4 percent to about Rp 40 trillion, which will constitute about 70 percent of the government's total revenues.

Harmoko said the President also ordered Minister of Finance Mar'ie Muhammad in the meeting to continue the privatization process for the state firms.

"The government wants to offer more shares of state-owned companies to foreign investors," the Minister added.

He also said that the President was impressed with the success of PT Indosat, a state telecommunication firm, which managed to list its shares on the New York Stock Exchange (NYSE) earlier this year.

Indosat, the provider of international telecommunication services, raised $799 million from the sales of 25 percent of its ordinary shares in October and around $297 million (Rp 650 billion) from the sales of another 10 percent of its shares on the local capital market.

All of the $799 million will be used to repay the government's loans from the World Bank and the Asian Development Bank.

Another state telecommunication firm, PT Telkom, is currently being prepared to follow Indosat's path to the international capital market.

"This is why state firms must continue to strive for excellence and efficiency," cited Harmoko.

The "go international" move of state firms, Harmoko said, is one way in lessening the country's dependence on oil and gas.

In the 1994-95 budget, the government calculates its revenues of Rp 12.85 trillion from oil and gas on the basis of an average oil price of $16 per barrel.

"The development of oil price on the international market is too volatile," the minister quoted the President as saying.

Harmoko also cited that the government will prioritize foreign aid without political ties in the 1995-96 fiscal year.

In the current budget, foreign aid is expected to reach Rp 10.01 trillion or about 4.8 percent of the budget.

The government's outstanding foreign debt fell by almost $3 billion to $56.6 billion as of the end of September from $59.46 billion at the end of June.

Soeharto also said that efforts to generate foreign exchange revenues must be stepped up to support the country's balance of payments and to finance development in general.

Efficiency

On government spending, Soeharto ordered that it must be conducted under the highest efficiency and most prudent principles and should be dedicated to the best public service, Harmoko said.

The President also reminded government offices to tighten their belts. "This is why workshops and seminars should be carried out within the premises of the offices," Harmoko quoted the President as saying.

Overseas trips and ceremonial expenditures should also be minimized, he added.

On development spending, the President already outruled the construction of new buildings for all government offices, both for those in the capital or in the provinces.

Soeharto has ordered the Head of the National Development Planning Board, the Minister/State Secretary and the Minister of Finance to coordinate their efforts to control "everything that involves government buildings."

He explained that the main priorities for development expenditures are to continue the construction of projects already started from previous periods and to extend maintenance funds for the existing projects.

The President also promised an increase in spending for rural development programs, including the Inpres Desa Tertinggal (IDT) scheme especially designed for least developed villages.

Official data show that the IDT scheme currently provides a subsidy of Rp 20 million for each of 20,000 least developed villages.

According to Harmoko, the President regarded this year's development supervision as having been generally carried out well.

Soeharto, however, has specifically instructed the Minister of Finance and the Governor of Bank Indonesia, the central bank, to step up supervision to "scrutinize state bank credits used by the private sector" and on the uses of export-credit facilities.

Indonesia was rocked by bad debt scandals in state-owned banks and bogus export scams this year.

The President, while stressing the importance of competitive bidding procedures, also appealed to the private sector not to mark up their projects because it will hamper the country's competitiveness and its efforts to distribute its wealth more equitably. (hdj)