Fri, 22 Aug 2003

House factions criticize, want revision of budget draft

The Jakarta Post, Jakarta

A number of factions in the House of Representatives have criticized the draft 2004 state budget, saying it is will not stimulate the economy or improve the quality of life for civil servants in Indonesia.

"Golkar demands the government help improve the welfare of the civil servants in the 2004 budget," Golkar spokesperson Ahmadi Noor Supit told a plenary session on Thursday.

Golkar is the second largest faction in the House. The former political vehicle of former dictator Soeharto has been a strong supporter of the bureaucrats.

The Nation Awakening Faction (PKB), the third largest party, backed the call.

PKB spokesman Muhyiddin Suwondo said civil servants deserved to have their salaries increased by around 50 percent as inflation could soar next year due to the general elections. Inflation can reduce the people's purchasing power.

"Who can guarantee that inflation will not soar next year because of the elections. By that time, their salaries would no longer be sufficient to even meet their basic needs," he said.

The government recently released the draft budget.

President Megawati Soekarnoputri said that despite a 13.2 percent increase in routine spending, there would be no increase in the salaries of civil servants, Indonesian Military personnel or National Police officers due to limited funds.

Almost all of the nine factions in the House disagreed with that argument, including the President's own party, the Indonesian Democratic Party of Struggle (PDI-P), which unanimously claimed the government could rake in more revenue from taxes by enforcing tax compliance.

The 2004 tax revenue target accounts for 13.5 percent of the country's gross domestic product (GDP).

"We have enough potential for the tax ratio to be raised to around 16 percent, as suggested by Propenas (five-yearly economic development programs), which could boost tax revenues by Rp 49 trillion," PDI-P spokesman Soakardjo Hardjosuwirjo said.

Lawmakers also criticized the draft budget as being too conservative, saying it would not stimulate the economy to help solve the country's problems.

"Growth of 5 percent will not help much. In fact, there will be an increase in unemployment in 2004," Golkar's Ahmadi said.

Ahmadi said the calculation was based on assumptions that 5 percent growth could only absorb between 1 million to 1.5 million new workers, compared to around 2.5 million new workers entering the domestic job market each year.

In the draft budget, the economic growth target was set at 4.5 percent (although Megawati in her state of the nation speech gave a 5 percent figure), a slight increase on this year's projected 4 percent growth.

Critics have said the modest target should be attributed to the government's reluctance to allocate a greater portion for development spending, crucial to bolstering productive activities and thus economic growth.

For 2004, spending on development programs has been earmarked at Rp 68.1 trillion, only about Rp 3 trillion more than this year's budget.

"It's sad to learn that allocation for debt payments accounts for almost half of our total tax revenues, and is, by far, more than that for development spending," Reform Faction spokesman Ambya Bustam said.

Routine Expenditures

(in trillion Rp) -----------------------------------------------------

2002 2003 2004 (draft) ----------------------------------------------------- Personnel Exp. 39.8 50.2 56.9 Material Exp. 12.7 15.4 17.8 Interest Payment 89.9 81.9 68.5 Subsidies 40.0 25.5 23.3 Others 7.2 15.5 19.4 ----------------------------------------------------- Total 189.5 188.6 185.8 ----------------------------------------------------- Source: Ministry of Finance