President, VP get big pay boost

JAKARTA (JP): The government and the House of Representatives budget committee agreed on Wednesday to raise the basic salaries of President Abdurrahman Wahid and Vice President Megawati Soekarnoputri by 78 percent and 120 percent respectively.

This is part of the agreement reached by the two sides on major changes in the April-December 2000 state budget, which is expected to be approved at a plenary House session on Thursday.

According to a budget document leaked to the media, Abdurrahman's basic monthly salary will be increased to Rp 26.7 million (US$3,814) from Rp 15 million at present.

Megawati's basic salary will be raised to Rp 22 million from Rp 10 million, those of the Speakers of the House and People's Consultative Assembly to Rp 14.6 million and Cabinet ministers to Rp 12.6 million from Rp 2.5 million at present.

The basic salaries of legislators and other senior state officials will increase to Rp 8 million from around Rp 2.1 million.

The government and the House budget committee, however, failed to decide on the amounts of allowances and other perks for senior officials which will make up their gross take-home pay.

But based on the current pay structure, the President gets, on top of his monthly basic salary, a family allowance amounting to 14 percent of the basic salary, a senior official allowance amounting to 35 percent of the basic salary and additional perks amounting to a lumpsum of Rp 10 million.

Assuming that the present pay structure remains unchanged, raising Abdurrahman's basic salary to Rp 26.7 million would provide him with a gross take-home pay of Rp 49.77 million, compared to almost Rp 33 million now. Megawati will get almost Rp 40 million.

Based on the same pay system, the increase would give a Cabinet minister a monthly gross take-home pay of 20.5 million, compared to Rp 5.6 million at present.

The increase is, however, much less than the fourfold raise originally proposed in January for the President, the fivefold raise for the Vice President and the tenfold rise for Cabinet ministers, which were sharply criticized by legislators and analysts.

"The salary raises are aimed at helping to create a clean administration and prevent corruption," said deputy of the House budget committee Abdullah Zainie on Wednesday.

The government and the House had earlier agreed to raise the salaries of government employees, state police and the military by 30 percent, higher than the initial 20 percent hike proposed by the government in January.

The government has been determined to gradually raise the pay of bureaucrats in a concerted effort to fight rampant corruption in light of building up good governance.

Major changes in the 2000 state budget which have yet to be approved at a plenary House session on Thursday include:

Total state spending will increase to Rp 197.03 trillion from Rp 186.07 trillion proposed in the January-version budget draft, particularly to finance a greater amount of subsidies and a larger increase in the salaries of civil servants.

State revenues will rise to Rp 152.90 trillion from Rp 137.70 trillion on the back of higher oil and tax revenue targets.

The estimated deficit of the nine-month state budget will decline to Rp 44.13 trillion or 4.8 percent of gross domestic product (GDP), compared to 5 percent of GDP previously.

The deficit will be primarily financed by foreign loans, privatization proceeds and the sale of assets under the Indonesian Bank Restructuring Agency (IBRA).

The House is scheduled to approve the state budget on Thursday, although several political parties have hinted that they would oppose the planned 12 percent increase in fuel prices.

A number of legislators have opposed any increase in fuel prices amid the current economic hardship.

Unlike over the past 30 years, the House has critically assessed the draft budget over the past month. Fuel and electricity subsidies have been one of the most contentious issues during the debates.

The government earlier proposed an Rp 18.3 trillion fuel subsidy with an assumption that fuel prices would be raised by 20 percent. But after intense debate, the government and the budget committee finally agreed to a 12 percent increase in fuel prices that would result in a total subsidy of Rp 22.46 trillion.

The government also agreed to raise the oil export price assumption in the budget from $18 per barrel to $20 per barrel to allow for greater oil revenue to finance the larger amount of fuel subsidy.

Some legislators had earlier demanded a Rp 24 trillion fuel subsidy so that the fuel price increase would be limited to 10 percent. But others argued that a portion of the greater amount of oil revenue should also be allocated for subsidies on other sectors.

The state budget allocates Rp 8.37 trillion for the subsidy of electricity, food and credit for small-scale businesses. This figure was unchanged from the level proposed earlier.

Several economists have criticized the subsidy for fuel because that amount of large spending would not generate employment.

But legislators reasoned that a big increase in the fuel prices might cause massive unrest in the country.

The government and the budget committee also agreed to reduce the interest rate burden of the government bank recapitalization bonds in the 2000 state budget to Rp 38 trillion from Rp 42.36 trillion.

The budget committee demanded that the government delay a further issuance of the recapitalization bonds pending a complete review of the bank recapitalization policy.

The House also urged the government to take strong measures against bad bankers.

But finance minister Bambang Sudibyo said the government would not delay the bond issuance as it might affect the whole bank restructuring program.

"They're only asking us to make a complete review before issuing new bonds ... There's no delay, it's not a problem," Bambang told reporters.

The government has recapitalized several major private and state banks. The government plans to recapitalize other banks this year by issuing new bonds.

The interest cost of the bonds for this year alone was initially estimated at more than Rp 42 trillion.

The macroeconomic assumptions used for the state budget were unchanged.

Estimated economic growth (GDP) remains at 3.8 percent, inflation 4.8 percent and the exchange rate of the rupiah against the U.S. dollar at Rp 7,000. (rei)