President unveils new budget...

President unveils new budget...

President Abdurrahman Wahid and Vice President Megawati
Soekarnoputri unveiled the 2000 draft state budget to the House
of Representatives' plenary session in Jakarta on Jan. 20.
Excerpts of the budget are as follows:

The year 2000 draft state budget is the draft for the first
year budget which has been drawn up pursuant to the 1999-2004
State Policy Guidelines.

In accordance with direction in the Guidelines, the draft
state budget is a draft for the state budget in the transitional
period of the April 1 to March 31 fiscal year (FY), which will
become the calendar year. In spite of the fact that the year 2000
draft state budget is meant as the transitional budget, in
drawing up the draft the government did not in the least abandon
the good mechanism of cooperating with the House.

This transitional provision is indeed highly important and
there is indeed an objective need for that. The government and
the House have to better prepare themselves in order for them to
be able to work in the new system of life as members of the
nation and state, as regulated by the various decrees of the
Assembly in the last General Session.

In this new system, the center of the gravity of the
legislative authority has been moved from the President to the
House. Not only do high state institutions have the obligations
to implement the State Policy Guidelines, they also are obliged
to report on the implementation of the Guidelines in the yearly
session of the People's Consultative Assembly.

Experience has shown that the Constitution which was designed
in the framework of setting up the Unitary State of the Republic
of Indonesia 55 years ago contains many positive points which
must be maintained well; however, there are also points which
need improving. As was agreed upon in the last General Session of
the Assembly, we must keep the preamble to the 1945 Constitution.

However, as regards the system of the government which
regulates the relationships between and among various state-
running institutions, it has been felt that it needs to be
restructured. We take this measure either to ward off the
concentration and centralization of power or to provide maximum
opportunities for the potentials of our nation.

All of those are happening when situations in various fields
are still critical and cannot be fully surmounted yet. We are
facing options which are not easy to choose and which need to be
well weighed before a binding decision is made. It is obvious
that all of the problems which have piled up for so long cannot
be solved at once. It is obvious that we have to take short-term
safety measures first, not only for the sake of overcoming a
chain of crises, but also for the sake of building a platform,
from which we move forward to the next stage.

The government is fully aware that sociopolitical and security
problems constitute national priorities which we must handle, the
reason being that the solution of those problems is a
prerequisite for restoring our economy. Various short-term basic
policies have been, are being, and will be taken to solve those
problems. The basic policies and concrete measures still need to
be developed further by forging close cooperation with the House.

As a point of departure in the drawing up of this year's state
budget, it can be noted that the world economy in 1999 grew, so
it is estimated, higher than it was in the preceding year.
Whereas in 1998 the world economy growth was 2.5 percent, it is
estimated that in 1999 it reached 3.0 percent.

It is estimated that in 2000 the world economy will even grow
higher, namely to 3.5 percent. Meanwhile, Asian countries which
were hit by the economic crisis most severely, such as South
Korea, Thailand, Indonesia, and Malaysia, have gradually been
recovered and began to sustain a positive growth in 1999.

The fairly good development in the national economy is shown
by the fact that there was an expansion of 3.1 percent in the
second quarter of 1999, which was followed with an increase of
0.54 percent in the third quarter. On the basis of this, in the
FY 1999/2000, the Indonesian economy experienced, it is
estimated, a growth of l to 2 percent. In the year 2000 state
budget it is expected that the economy will grow at a higher rate
of 3 to 4 percent.

As the outcomes of various government policies such as the
prudent monetary policy, basic commodities are adequately
available; the distribution of goods and services is smooth; and
the exchange rate of the rupiah is relatively stable; and the
growth of the consumers price index in 43 cities (except Dili)
was, in the first nine months of the 1999/2000 FY, adequately
under control. During that period, there is an inflation rate of
minus 2.61 percent, much lower than that in the same period in
the previous FY, which was 40.70 percent.

The prudent monetary policy strengthened the exchange rate of
the rupiah in the 1999/2000 FY (up to November 1999) compared to
the rate at the end of the preceding FY. In the 2000 FY (April-
December 2000) it is estimated to be Rp7,000.00 per US$ 1.00.

In line with the initial strengthening of the exchange rate of
the rupiah and with the decrease in the inflation rate, the bank
interest rates also began to slide. This caused negative spread
to slide gradually too.

In line with the monetary improvement, the growth of the
capital market in the FY 1999/2000 (up to December 1999) showed
an increasing trend. This was in line with the signs towards
improvements in the economic activities.

In addition, the more conducive sociopolitical situation
resulting from the running of the general elections and from the
convening of the sessions of the People's Consultative Assembly,
which went smoothly and safely, also motivated market actors to
be active in making investment in the capital market.

The number of listed companies in the capital market grew to
include 15 more companies, of which nine were share emittents and
six were bond emittents. In addition, the composite share price
index positively reflected the capital market activities. The
market capitalization value, also rose from Rp 167.3 trillion to
Rp 451.8 trillion, rising 170.05 percent.

In the FY 1999/2000, the value of export comprising oil and
gas export and non-oil and non-gas export is estimated to amount
to US$ 54,151 million, an increase of 12.0 percent compared to
the value of export in the preceding FY, which was only US$
48.354 million. In the FY 2000, which is only nine months long,
the export value is estimated to reach US$41,552 million,
comprising the export value of oil and gas, at US$8,003 million,
and that of non-oil and non-gas, at US$33,$49 million.

In the mean time, the import value in the FY 1999/2000,
comprising the oil and gas import and the non-oil and non-gas
import is estimated to reach US$ 32,934 million. This figure
shows an increase of 7.3 percent from the import value in the FY
1999/2000, which was US$ 30,707 million. In the FY 2000 the
import value is estimated to reach US$27,284 million, comprising
the oil and gas import at US$ 3,233 million and the nonoil and
non-gas import at US$ 24,051 million.

With the improving export and import, the balance of trade in
the FY 1999/2000 is estimated to have a surplus of US$ 21,217
million or 20.2 percent higher than the surplus in the preceding
FY, which was only US$17,674 million. In the FY 2000 the balance
of trade is estimated to have a surplus of US$ 14,268 million.

In spite of the fact that there are indications of
improvement, grave problems still pose before us. In the FY
1999/2000, the capital flow, which encompasses the government's
capital flow and private sector's capital flow, is expected to
undergo a deficit of US$ 3,476 million. In that FY, the
government's capital flow underwent a surplus of US$ 5,446
million, while the private sector's capital flow underwent a
deficit of US$ 8,922 million. In FY 2000, the capital flow is
estimated to have a surplus of US$ 214 million.

Various improvements in the overseas trade can also be seen in
the decline of the national debt service ratio (DSR), which in
the FY 1999/2000 is estimated to be 54.0 percent, compared to
that in the FY 1998/1999, which was 57.4 percent. In the FY 2000,
the national DSR is estimated to be 47.2 percent, comprising the
government's DSR of 12.8 percent and the private sector's DSR of
34.4 percent.

However, in presenting the state budget 2000, please allow the
government to concentrate on the economy and to forward the
vision on the medium-term economic framework which is needed to
adopt policies and take subsequent measures. As-the underlying
attitude and point of departure, we find it necessary to develop
the people's economic power as the backbone of the national
economic development.

It is imperative in this regard to bring into being more just
and equitable opportunities for all of the people to seize and at
the same time to create more efficient and shockproof economy. In
this respect, the active roles of the people at large should be
enhanced, especially as regards the roles of the members of the
society, the majority-of whom are still left behind, by means of
creating opportunities to progress and to empower themselves.

As regards the labor policy, there are three main items of the
agenda which need to be paid attention to.

First, unemployment should be curtailed and business
activities restored. The endeavor towards pushing business
activities should be directed primarily to ones which have
potential for economic recovery such as the enhancement of export
and trade. Especially for the small-scale and medium-scale
enterprises, which absorb a great deal of labor, an endeavor will
be taken by mainly eradicating all impediments that still exist
and by providing direct support if it is really needed and if it
can be done in an effective manner. Subsequently, improvements
will be made in the execution of the labor-intensive social
safety net and poverty alleviation programs designed to absorb
local labor, including those who have been laid off as a result
of the crisis.

Second, an impetus should be provided for cross-labor economic
activity mobility, by providing systematic and directed training.
On the basis of the results achieved by vocational schools and
training centers up to now, training programs should be designed
and implemented by the private sector. In this regard, the
government should only play the catalytic role for the sake of
achieving the reallocation of human resources.

Third, the labor market is expected to be more flexible; in
order to sustain it, various labor regulations need to be
rectified.

The improvement of the human resource quality will be done
through, among other things, health and education development.
The priority of the health development needs to be set higher in
order that its target, namely the impoverished members of the
community, get the adequate share of the funds. In the medium
term, the role of the community health funds should be raised. In
line with the process of decentralization, the authority to use
the available funds should rest with regency or municipality.

As such, the activities developed will better reflect the
needs of the region concerned. At a later date, in line with the
enhancement of development and the availability of adequate funds
for community health development programs, the charge rate to
members of the community who are really needy should be lowered.
Hospitals should be provided with an impetus to finance their
activities. The private sector's role in health development needs
to be extended too, among other things by developing national
insurance and phamarceutical industry.