Wed, 21 May 2003

Govt budgets Rp 1.7 trillion for Aceh war

Fitri Wulandari and Dadan Wijaksana, The Jakarta Post, Jakarta

The government has prepared a total of Rp 1.7 trillion (about US$200 million) from the 2003 state budget to finance the military operation in the war-torn province of Aceh.

Minister of Finance Boediono said on Tuesday that the money had been taken from the budget's reserve account for emergency financing.

"The fund has been prepared. It will be drawn from the reserve account. The government will have to report it to the House of Representatives but the fund is ready," Boediono told reporters on Tuesday.

According to Boediono, out of the total figure, Rp 1.2 trillion is allocated for the Indonesian Military (TNI) and Rp 500 billion for the National Police.

Boediono, however, did not give details about the length of time that the funds would be able to finance the war. However, if the military needs additional funding, the government might use more money from the reserve account.

"We will ask the House if we can take more from the reserve account. But financing for the military operation must be secured," he remarked.

Abdullah Zainie, the chairman of the House's budget committee confirmed Boediono's statement, saying that the House had agreed to allocate a total of Rp 8.2 trillion for the 2003 budget's reserve account.

The reserve account, according Abdullah, is established to cover emergency financing needs such as special programs in conflict areas as well as in areas struck by natural disasters.

"Aceh can be classified as a troubled area," Abdullah explained.

In order to get the funds, the Ministry of Finance should send a request to the House of Representatives. Based on the request, the House would ask the Budget Committee to decide on it.

"The final decision lays in the hands of the Budget Committee," Abdullah explained.

However, in an urgent situation, like in the case of a military operation in Aceh, the related ministry -- in this case the defense ministry -- could directly request the money from the finance ministry.

"But, they have to report to the Budget Committee about the use of the funds afterward," Abdullah stressed.

He brushed aside concerns that the cost of the war in Aceh would further strain the state budget.

Analysts have voiced concerns over the expense of the military operation as they believe it would further strain the state budget ahead the government's plan to end its contract with the International Monetary Fund (IMF) at the end of this year.

Some analysts say the cost of the offensive, the biggest since Indonesia's 1975 invasion of East Timor, could run into several hundred millions of dollars, as reported by Reuters.

The well-respected International Crisis Group (ICG) think-tank recently quoted a source who suggested the overall cost of the operation could be between $118 million and $800 million.

Despite those concerns, an adviser to Indonesia's chief economics minister said on Monday the conflict would not have a significant impact on this year's budget and he was "quite confident" it would not hurt foreign investment.