Considering the aforementioned, the choice only highlights the

Considering the aforementioned, the choice only highlights the
need to raise domestic prices. Obviously, it is a heavy, yet
unavoidable decision to maintain the sustainability of the state
budget as a prerequisite for economic recovery. The balance
obtained from a subsidy reduction would increase development
funds available to fulfill the basic needs of people.

In a bid to lessen the burden of the low-income people as a
result of the price hikes, compensatory programs will be carried
out. In order not to repeat past experiences, such programs would
be carefully prepared from the very beginning, as part of the
process of formulating and deliberating the Draft State Budget
for 2002, to ensure smooth running of the programs when the price
increases are effected. Besides this, the government continues to
make appropriation for supporting special rice market operations
aimed at ensuring the availability of rice at a price affordable
to the poor people.

Allow me now to submit the main development budget for 2002.
As a result of the strong commitment to fiscal sustainability by
reducing the amount of debts, funds for development become more
limited. Although the nominal amount of the budget is increasing,
its ratio against the GDP will decrease from 3.1 percent in 2001
to 2.8 percent in 2002. This limited budget urges the regions to
take up bigger responsibilities in accordance with the larger
amounts of funds that will be transferred to them. Nominally, the
budget for development for 2002 is Rp 47.1 trillion, of which Rp
22.7 trillion will be locally financed and Rp 24.4 trillion will
be funded by foreign loans.

The development budget fully managed by the central government
will be directed more for improving the people's welfare,
especially through the provision of basic needs in a more just
and evenly distributed manner, the improvement of income, and the
creation of jobs and the maintenance of the physical
infrastructure. Some of the budget will also be spent for
supporting the endeavors to create good governance and to restore
order and security.

On this occasion I am not going to dwell upon the allocation
of the budget in every single sector. The more detailed
allocation has been distributed to the distinguished members of
the House. As a general picture, however, I would touch on some
of the proposed budget allocation for some sectors.

In an attempt to fulfill the basic needs of the people, the
government has earmarked for the education, and health and social
welfare sectors a budget of Rp 11.6 trillion and Rp 4.3 trillion,
respectively. The budget allotted for the latter two uses up one
third of the total development budget, while the education sector
takes 24.7 percent.

The educational budget will be used for improving enrollment
at elementary schools, especially the intensification of the
nine-year compulsory education program, improving the quality of
education, providing scholarships for children of poor families,
procuring textbooks and improving the quality of teachers and
other educational officials through a series of trainings.

The funds allocated for the sector of health and social
welfare are intended to broaden the coverage of basic health
services for the poor, homeless children, elderly citizens, the
handicapped, socially disadvantaged persons, as well as for the
victims of natural disasters and social unrest.

Hence, the budget allocation also serves as an effort to
improve the people's income through job creation. Such an effort
will be decided mostly by the people themselves, while the
government will facilitate the program through the improvement of
infrastructure.

The funds allocated for the agriculture, fishery and
irrigation sectors are intended to strengthen food sufficiency
through the improvement of food and fishery production, the
enhancement of production and consumption diversification, the
empowerment of farmers and rural people through the distribution
of farm inputs such as seeds, fertilizers, medicines, and the
expansion of market network and the improvement of supervision
and information services. For the irrigation subsector, the funds
are mainly directed for the maintenance and rehabilitation of
irrigation networks.

The funds for the transportation and communication sectors are
aimed at maintaining and rehabilitating the facilities and
infrastructure for transportation services to ensure safe
transportation and facilitate services to remote areas.

Accordingly, these four sectors I earlier expounded on, namely
education, health and social welfare, agriculture, fishery,
irrigation, transportation and communication sectors, together
take up 61.3 percent of the total budget.

Besides aiming at improving the people's welfare, the central
government budget is also directed at creating good governance,
public order and security. To this end, the law and defense and
security sectors also deserve a significant increase of budget of
48.4 percent and 40.9 percent, respectively.

The budget in the legal sector will be utilized to improve law
enforcement by cracking down on KKN and human rights abuses,
enforcing discipline in law enforcers, creating a clean judiciary
and respect for human rights, and continuing the process of
legislation within the framework of economic recovery.

While the budget for the defense and security sector will be
spent for anticipating disturbances of security and public order
by providing adequate equipment to enforce law and order as well
as preventing crimes.

State expenditures on various sectors I previously dwelled
upon form only some parts of the government undertakings as
various other development activities will be implemented by
regional governments. To support these programs, the government
sets aside an amount of Rp 90.3 trillion for balanced funds.
Despite the fact that it is the regions which have the full
authority to utilize the funds, I hope that the budget will be
spent in accordance with their scope of responsibility based on
the principles of regional autonomy.

In total, government expenditures, including the balanced
funds for the regions, total Rp 332.4 trillion. Accordingly, the
budget deficit for 2002 is expected to reach Rp 43 trillion or
2.5 percent of GDP. This figure is less than the 3.7 percent
estimated for the current fiscal year. The smaller deficit allows
the government to decrease new foreign borrowings in line with
the commitment to fiscal sustainability.

The financing of the deficit will be derived from both
domestic and foreign resources. Domestic resources for financing
are the proceeds from the privatization of state-owned companies
and sales of the assets managed by IBRA. The privatization of
state-owned enterprises will be executed in a more selective
fashion and is estimated to contribute Rp 4.0 trillion to the
state budget, while asset sales by IBRA are targeted to reach Rp
21.5 trillion.

These are the main programs of the government, including the
proposed budget. We have a huge amount of homework and a tough
task ahead, while difficult choices have to be made. However,
only with the spirit of togetherness, mutual help and high
discipline in implementing our common commitment will, we hope,
all these problems, God willing, be solved, to lead us to a
better future.

With the same spirit, we will fully cooperate with the House
to deliberate the draft budget for the 2002 fiscal year. I hope
the deliberation can be concluded according to the schedule so
that regional governments will have ample time to formulate their
respective budgets, ready for implementation early next year.