Govt told strict monitoring of budget funds required

JAKARTA (JP): Businessmen, analysts and legislators hailed the government's 1999/2000 draft budget which puts a priority on the sectors and people that have been hit the hardest by the current economic turmoil, while also calling for tight monitoring of budget spending in order to avoid leakage.

Legislator Lili Asdjudiredja said on Tuesday that the government must improve the supervision of the flow of funds to ensure that the money ends up in the right hands.

"The priorities are all correct. In order to take off we need to overhaul the banks, create jobs and help small-scale businesses," he told reporters after President B.J. Habibie unveiled the draft budget.

"The biggest question is will the government be able to exercise tight supervision," he said.

Economist Didik J. Rachbini said he was heartened by the government's efforts to provide jobs through infrastructure projects concentrated in villages.

"The effect of projects like village irrigation works, upgrading markets and roads will be to create a large number of job opportunities," he said.

He was, however, worried that the money used to finance the projects could be easily siphoned off.

"On a more pessimistic note, (the funds) will probably leak away like in the past," he said.

In the draft budget for the 1999/2000 fiscal year which begins in April, the government allocates a sizable amount of funds for social safety net programs and development in remote areas.

This follows a series of measures in the draft budget to move power away from the central government to the provincial administrations.

Consistent with its recent moves to promote small businesses, the government also plans to allocate a significant portion of the development budget to foster small-sized and medium-sized enterprises and cooperatives.

This includes Rp 629.21 billion (US$84 million) for small- scale industries, Rp 4.39 trillion for the agricultural sector, Rp 224.03 billion for forestry, Rp 175.45 billion for small traders and Rp 1.33 trillion in capital and technical assistance for cooperatives and small businesses.

Businessmen also embraced the populist movement, but urged the government to maintain a favorable business climate by providing the support the private sector needs to weather the crisis.

The chairman of the Indonesian Chamber of Commerce and Industry Aburizal Bakrie said the impetus for development was the private sector.

However, Aburizal warned that high credit interest rates would make it difficult for the business sector to survive.

"If the motor of development is the private sector than credit interest rates should be lower than 30 percent, not the present 42 percent," he said.

The president of the Batara Group, Fadel Muhammad, commended the government's move to increase the allocation of funds for the development of the eastern region of Indonesia.

However, he criticized the government for neglecting the industrial sector, an area he says needs major restructuring.

"It will be useless to restructure the banks if it is not followed by industrial restructuring," he said.

Fadel and other experts expressed pessimism that the government could meet its target for domestic revenues, particularly from taxes.

Legislator Daryatmo said that the government's targets for income and value added taxes were unrealistic considering that economic activities had practically halted.

He suggested that the government boost income through excise taxes.

Didik also questioned the government's assumption that the price of crude oil, a major earner for the state, would reach US$10.50 per barrel during the 1999/2000 fiscal year.

Didik pointed to the fact that neither the government nor the Organization of Petroleum Exporting Countries, in which Indonesia is a member, had made any attempts to halt the plunge of oil prices, which currently stand at around $8.00 per barrel.

Because the government will still be short of funds, economist Rizal Ramli of the Econit Advisory Group suggested that the government increase revenues from the mining and forestry sectors.

Rizal also called on the government to renegotiate its foreign debt in order to reduce the debt servicing burden in the budget. (das/aly)