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.