Wed, 10 Aug 1994

Domestic resources are expected contribute 93% of investment

JAKARTA (JP): Domestic resources are expected to contribute 93 percent of the Rp 102.1 trillion (US$47.05 billion) in investments needed for economic development this fiscal year, Bank Indonesia Governor J. Soedradjad Djiwandono said here yesterday.

"Foreign resources will likely contribute about seven percent or Rp 6.7 trillion to this fiscal year's investments for economic development," he said, during a seminar organized by the Association of Alumnae of the Faculty of Economics of the University of Indonesia, held at the Jakarta Hilton Convention Center.

He explained that domestic resources are projected to provide total investments of Rp 95.3 trillion this fiscal year, of which Rp 67.4 trillion will come from the private sector and the remaining Rp 27.9 trillion from the government's savings.

For comparison, the government, under its current budget, expects to see savings of Rp 17.38 trillion this fiscal year.

The government's savings are the difference between its revenues from domestic resources and its routine spending. The government expects to obtain domestic revenues of Rp 59.73 trillion this fiscal year, besides its projected revenues of Rp 10.01 trillion from foreign aid, while it plans to spend Rp 42.39 trillion for routine programs, including spending for goods and salaries and foreign debt repayment.

According to the National Development Planning Board (Bappenas), this fiscal year's investments of Rp 102.1 trillion will be part of the Rp 660.01 trillion expected during the sixth Five Year Development Plan (Repelita VI) period, of which Rp 622.8 trillion will likely come from domestic resources and Rp 37.3 trillion from foreign resources.


Soedradjad said that in order to achieve the investment target from the private sector, the government will take various measures to improve protection of public funds, to promote the development of alternative instruments for savings, to encourage the increase in fund generation through capital markets, the insurance industry and pension funds as well as to promoting the development of the securities market.

Meanwhile, an official at the World Bank's Jakarta office, James A. Hanson, said the government should tighten spending, improve tax collection and encourage state-companies to finance their own projects if it wants to increase its spending.

He said the government failed to achieve its targets in savings collection in the last two fiscal years because its expenditures, particularly those for personnel salaries, exceeded its budgeted levels, while revenues from oil and gas were less than expected.

"Domestic non-oil revenues, although larger than programmed, did not make up the difference," he said. As a result, the government's savings was about 20 percent to 25 percent below the budgeted levels.

Soedradjad acknowledged that the government, in its effort to increase savings, should improve tax collection, increase revenues from state-owned companies, sharpen priorities in state expenditures and gradually reduce subsidies.

He also said Indonesia's economy is expected to continue enjoying high growth this year, thanks to increasing domestic demand for goods and services and rising investments.

According to Repelita V, Indonesia's economy will likely grow by six percent this year, as compared to 6.1 percent last year.

State Minister of Investment Sanyoto Sastrowardoyo said recently that foreign investments, which last year declined to $8 billion from $10 billion in 1992, are expected to more than double to $20 billion this fiscal year.

Domestic investments approved by the government during the first seven months of this year reached Rp 33.2 trillion, as compared to Rp 39.4 trillion in the whole year of 1993. (02) Editorial -- Page 4