Lawmakers criticize lack of stimulus in 2005 budget

Dadan Wijaksana, The Jakarta Post, Jakarta

The 2005 state budget proposed by the government has been seen as lacking in stimulus measures, badly needed to help stimulate the economy, some lawmakers said on Tuesday.

Speaking at a House of Representatives Budget Commission hearing, lawmakers were unanimous in saying that the budget's ability to provide stimulus was crippled by the huge public debt servicing, which has eaten up to some 50 percent of central government expenditure.

"It means we have to seek resources other than the budget to provide stimulus such as investment. We can provide investors with other forms of stimulus, for instance; better treatment in tax issues, which is crucial for them. But the problem is, we are also lacking in that area.

"So, while we cannot expect much stimulus from the budget itself, we also do not have clear-cut measures to lure investment, which could otherwise provide stimulus for the economy," senior lawmaker Benny Pasaribu.

Under the proposed 2005 state budget, the government earmarks Rp 63.9 trillion for interest payment of both domestic and foreign debts. For the payment of principal of foreign and domestic debts, some Rp 46.8 trillion and Rp 23 trillion have been allocated, respectively.

The interest and principal debt payments total Rp 132.4 trillion, or close to half of Rp 264.9 trillion of the central government planned budget next year, or almost twice the amount set aside for development spending which stands at Rp 69.8 trillion.

Benny added that with the budget being heavily burdened by debt servicing, the government should have thought of a clearer way to lure investors, such as in terms of reform in crucial issues like tax, customs and labor, and also consistency in policy.

"All will work well to instill confidence in investors. Once they come and invest here, that could serve as stimulus for our economy."

Benny also told the forum he was among a small team of House members who recently paid a visit to Japan, where a seminar on Indonesia's economy was held.

"Many Japanese businessmen investing here complained about tax issues, not just their complexity -- they said they even had problems in filling out the self-assessed tax forms, but also the lengthy bureaucratic channels," Benny said.

Another legislator, Simon P. Maurin, deplored the lack of stimulus provided by the 2005 budget, but also urged the government to be more serious in combating illegal practices -- be it in forestry, mining, maritime or other sectors -- so as to minimize the potential losses of state funds, which could in turn be used to strengthen the badly depleted state coffers.

"From illegal logging alone, we lose hundreds of trillions of rupiah each year, and we've done virtually nothing about it. We could have used the money to increase the budget's allocation for development spending and social welfare," he said.

He was referring to the rampant illegal logging, with reports showing that the country is losing a forest the size of Jakarta within a week.