Managing city finances

Jakarta Governor Surjadi Soedirdja submitted to the City Council on Wednesday his proposal for a 5.18 percent increase in the administration's spending for the year starting April 1. Later on, he said the overall budget is only a fifth of what is ideally needed to manage a city as big and as complex Jakarta, currently home to over nine million people. Of course, given the city's limited financial resources, the governor cannot be expected to have his way.

But his point makes it difficult for the City Council, which has to approve the administration's spending plans, to deny him the modest increase he is seeking. Considering that the Central Government is gunning for an 11 percent increase in the current fiscal year, Surjadi's request looks moderate and realistic.

In his proposal, the governor is proposing total spending of Rp 3.37 trillion ($1.46 billion), including Rp 1.39 trillion in public sector investment, in the 1997-98 fiscal year. This would be financed by Rp 2.03 trillion to be raised locally, and the rest would come from Central Government contribution.

In his budget speech, Surjadi laid out his priorities. Sectors that will receive the highest budget allocations include the administration's personnel (mainly for skill upgrading), housing and settlement, regional development and transportation.

What is significant about the administration's finances is its drive to become financially more self-reliant, in spite of pressures to continue raising spending. In 1997-98, locally generated revenues are envisaged to account for 60 percent of the administration's total finances. This is not only easing the burden on Central Government, but it also means greater autonomy on how the City administration runs its affairs. We have often heard how the governor has too many bosses in the central government, whose interests need not necessarily be the same as those of residents. By relying less on Central Government funding, let's hope the governor can once in a while turn down any special request or order from officials that go against the common interest of his residents.

Greater financial self-reliance also means that more and more of the city's spending plans will have to be funded by residents, chiefly in the form of local taxes. The House of Representatives is currently deliberating a government-sponsored bill that will simplify local taxes and allow local administrations to impose new taxes. These include a maximum of 5 percent gasoline tax and a maximum 20 percent tax on land-water exploitation. Other taxes permitted under the proposed law are 10 percent for street lighting tax, hotel tax and restaurant tax; 25 percent for billboard tax; and 35 percent for entertainment tax. All these new taxes offer tremendous potentials for the city administration to bolster its revenues in the future. As long as the administration can convince that every rupiah collected is spent effectively, residents have no reason to refuse.

With more and more of the city's spending now being underwritten by residents, this calls for greater accountability on how the administration spends every rupiah it collected from the public. The administration must also work harder to meet and to respond to the needs of residents and address their complaints. In short, the administration must be prepared for a more critical and demanding public.

While we see no reason for the City Council not to endorse Surjadi's request for the 5.18 percent budgetary increase, we hope council members will give the proposal a thorough reading, making sure that the every rupiah collected is spent effectively and efficiently, and that at the end of each year, every single rupiah is accounted for.