Govt rejects 100% hike in salaries

Govt rejects 100% hike in salaries

JAKARTA (JP): Minister of Finance Bambang Sudibyo said on
Monday it was impossible for the government to fulfill the demand
from the House of Representatives to raise the salaries of
government employees by 100 percent this year.

Bambang said raising the salaries of government employees by
100 percent would translate into an additional funding necessity
of about Rp 27 trillion (US$3.57 billion) in the new 2000 state
budget, and would affect the government's routine expenditure,
particularly the spending on rehabilitating the country's ailing
banking sector.

"Looking at the current capacity of the state finances, the
increase (proposal) is difficult to realize," he told the House
during a plenary session on the April-December 2000 state budget
draft.

The government initially proposed a 20 percent increase in
salaries.

The National Awakening Party (PKB) faction led the call for
the 100 percent increase in the salaries of government employees
on grounds that the current salaries were too low, and a 20
percent increase was small compared to the massive government
spending on the restructuring and the recapitalization of ailing
banks.

The faction also reasoned that a significant rise in the
salaries would help to fight corruption and create a clean and
effective bureaucratic system.

The faction also said the government should trim down its
budget allocation for the bank restructuring and recapitalization
program.

But Bambang said although the salaries of government employees
were not high, but they were still higher than the country's
minimum regional wage.

He added that raising the salaries was only one way to clean
up corruption in the state bureaucracy.

Elsewhere, Bambang said the government would try hard not to
revise its budget assumptions despite concerns over domestic
social and political development.

He said that revision in the budget assumptions would also
affect other elements of the budget, including the revenue and
spending sides.

"We have consulted on the budget assumptions with Bank
Indonesia," he said.

"We will try not to revise the budget assumptions," he said.

He particularly pointed out that the exchange rate assumption
of Rp 7,000 per U.S. dollar in the state budget was made based on
various factors including the expected domestic inflation level
and inflation in the country's trading partners.

He said at Rp 7,000 per dollar, Indonesia's export products
were still competitive in the international market.

"But we also realize the exchange rate is also affected by
noneconomic factors," he added.

He said the government would make strong efforts to stabilize
the domestic political situation and maintain security conditions
as well as expedite the bank recapitalization and corporate
restructuring process in order to achieve the budget targets.

The state budget assumes an exchange rate of Rp 7,000 per
dollar, an economic growth of 3.8 percent, inflation rate of 3.8
percent and an oil price of US$18 per barrel.

But several House factions, particularly the Indonesian
Democratic Party of Struggle (PDI Perjuangan), the largest
political party, warned the government that the assumptions were
too optimistic amid separatist movements and sectarian clashes in
several parts of the country as well as the standoff between
President Abdurrahman Wahid and former Indonesian Military (TNI)
commander Gen. Wiranto, who is now the coordinating minister for
political affairs and security.

The political infighting between Abdurrahman and Wiranto, and
rumors of a planned coup by the military has put pressure on the
rupiah, which hovered at about Rp 7,600 per dollar last week.
(rei)