Business leaders praise draft of state budget

JAKARTA (JP): Business leaders say the 1997/1998 draft state budget unveiled yesterday reflects the government's intention to increase the role of provinces in national development.

Chairman of the Bukaka Group Fadel Muhammad said yesterday the draft budget was "very people-oriented," as was President Soeharto's speech at the House of Representatives yesterday which promised several presidential decrees supporting bottom-up development planning.

"These presidential decrees will have a very big multiplier effect because in the end people will be required to rely more on local products and services," Fadel told reporters.

Programs conducted under presidential decrees -- known as Inpres programs using specially-allocated funds -- include health programs, food supplement programs for school children, elementary school programs and least-developed village programs.

Fadel, who is also a chairman of the Indonesian Chamber of Commerce and Industry, said government decrees which directly aimed to boost regional growth would create new growth areas.

He said the naming of several "leading provinces" in eastern Indonesia to get special facilities for business would bolster their growth.

Fadel said local administrations and officials, rather than the central government, would play an important role in the economy.

"They will face bigger challenges in their jobs. If they fail, I am afraid the government will not achieve its target," he said.

PT Bakrie Brothers president Tanri Abeng said the 11.6 percent expansion of the draft budget, which was proposed to balance at Rp 101.09 trillion (US$43.95 billion), was "quite normal".

He warned that high imports of consumer goods should be controlled by encouraging the production of cheap but high- quality domestic goods.

"But this can only be achieved by creating efficiency at all levels," he added.

Businessman A.A. Baramuli, also a chairman of the chamber's supervisory council, suggested the government offer soft loans to Indonesia's small-scale exporters to boost non-oil and gas exports.

"Small-scale businesses will never be competitive if they depend on commercial loans which have lending rates of up to 23 percent," he said.

Baramuli said that if the government did not have such funds, it could use foreign loans.

Fadel was confident the government could achieve its Rp 64 trillion tax revenue target for the next fiscal year.

This is 16 percent higher than this fiscal year's target.

Most of the increase was expected to come from income tax revenue which was targeted to reach Rp 29.11 trillion, or 23 percent higher than this fiscal year's target.

"Many companies have proven that they can grow through business expansion. All of this will bear fruit in the next two to three years, so there will be no problem (with tax revenue)," he said.

Businessman Sukamdani Sahid Gitosardjono said he was "pleased" with the government's new tax revenue target because it was an important move to distribute wealth more fairly across the country.

Fuad Bawazier, the Ministry of Finance's director general of taxes, said the government, in its bid to achieve the higher tax revenue target, would not resort to any "surprise moves" which would burden taxpayers.

"We have predicted that major investment ventures will help us achieve the 23 percent increase in income tax revenue," he said.

"This target is higher than the inflation and economic growth rates for 1997/1998 which are estimated at 6 percent and 7 percent, respectively. The 23 percent increase in tax revenue will generate, in real terms (adjusted for inflation), a 10 percent net increase in receipts," he said.

Economist I Nyoman Moena described the 1997/1998 draft budget as contractive because, even though it was 11.6 percent higher than the current one, the large targeted increase in tax receipts would raise a lot of funds from taxpayers, thereby reducing disposable incomes.

He predicted this would lead to tighter monetary and banking policies.

"This condition will encourage banks to raise more deposits by increasing their deposit (interest) rates -- which in turn would increase lending rates -- rather than expanding their lending," he said. (rid/pwn)

Table: Indonesian balance of payments (US$ million) ----------------------------------------------------------------

1995-96 1996-97 1997-98 Description (actual) (estimate) (projection) ---------------------------------------------------------------- 1. Exports (FOB) 47,754 51,726 56,153

a. Oil 6,529 5,931 4,798

b. Liquefied natural gas 4,087 4,307 4,059

c. Non-oil and non-gas 37,138 41,488 47,296 2. Imports (FOB) -41,502 -46,572 -50,742

a. Oil -3,635 -3,227 -1,584

b. Liquefied natural gas -270 -270 -267

c. Non-oil and non-gas -37,597 -43,075 -48,891 3. Services -13,239 -13,977 -15,209

a. Oil -1,719 -1,776 -2,088

b. Liquefied natural gas -1,519 -1,523 -1,474

c. Non-oil and non-gas -10,001 -10,678 -11,647 4. Current account -6,987 -8,823 -9,798

a. Oil 1,175 928 -1,126

b. Liquefied natural gas 2,298 2,514 2,318

c. Non-oil and non-gas -10,460 -12,265 -13,242 5. Special drawing rights 0 0 0 6. Official capital 5,730 5,844 5,608

a. Program aid 0 0 0

b. Project aid and others 5,730 5,844 5,608 7. Debt repayments (principal) -5,939 -5,536 -4,939 8. Other capital 11,672 10,489 10,578 9. Total (4 to 8) 4,476 1,974 1,449 10. Errors and omissions -1,825 -632 0 11. Monetary movements -2,651 -2,606 -1,449

Note: Current account against GDP (%) -3.4 -4.0 -4.0 Debt Service Ratio (%)

- Government 16.4 14.1 11.8

- National 32.6 31.7 31.2

Source: The Ministry of Finance