Soeharto unveils nation's draft budget for recovery

President Soeharto unveiled on Tuesday the draft state budget for fiscal year 1998/1999 before a plenary session of the House of Representatives (DPR). The following is a condensed version of the provisional translation of the budget speech provided by the State Secretariat.

The year 1997 we have just passed has been a year full of concern for our nation.

We have been repeatedly subjected to major disasters on land, at sea and in the air. Many lives were lost and the economic lifeline was somehow interrupted.

We suffered from a long drought. Very extensive areas of our bushes and forests caught fire. As a result, the productivity of estates has declined, particularly food crops and plantations. It was predicted in 1997 just past that the production decline of rice, maize, soybeans, cassava, sweet potato, peanut and mug bean would be between 1.3 to 5.6 percent. The natural disasters have disrupted transportation and food provision in a number of areas. Some areas were suffering from food-scarcity. In Irian Jaya, the draught has claimed more than 500 lives and thousands more are threatened by famine. The government has been exerting its utmost efforts to overcome this suffering.

At the same time -- as a consequence of the draught -- other areas have experienced difficulties to absorb manpower.

But an even heavier blow was the onslaught of the monetary turmoil since the second half of last year.

The monetary crisis that has plagued this region is apparently more serious and long-lasting than first thought. Relative to our economic fundamentals and the depreciation of other currencies of neighboring countries, our rupiah has suffered an unreasonable depreciation. Now, the East Asian region has also been shaken. Furthermore, the indirect impact of the crisis has been felt in a number of countries outside Asia. The international community has become increasingly aware that unless it is handled properly, this financial crisis may assume a global dimension.

Both regional and international actions must continue to be intensified. However, the solution will, in the final analysis, depend on each individual country.

Our determination to address this issue is firm. We will fight with all our strength to extricate ourselves from this crisis.

We have accepted assistance from international institutions and friendly countries with gratitude and appreciation. Obviously, such support has helped our own efforts.

However, the key to resolving the crisis lies in our own hands. Success will depend on our own actions to overcome the crisis.

We are aware that these measures are certainly difficult. They may even be very painful, but we have to believe in our own ability. We must be able to mobilize our resources to find a solution to the problem confronting us. We must be willing to share the burden equally amongst ourselves. We must do whatever is needed to free our nation from this crisis. We must all place national and common interest above our own.

With such a strong resolve, we will definitely be able to overcome all problems before us.

In order to weather current crisis, we have developed a wide- ranging program of economic and financial reform and restructuring covering the monetary sector, banking, fiscal issues, domestic and foreign trade, investment and the privatization of state-owned enterprises.

The economic and financial reform and restructuring program we have devised, and some we have implemented, has the support of the International Monetary Fund (IMF). This international institution stands ready to provide funds and technical assistance to support the implementation of our program. Similar support is also provided by the World Bank and the Asian Development Bank. A host of other countries have also committed funds as a supplement to the assistance extended by the above international institutions.

We have already carried out some parts of the program during these last few months.

We are fully committed to implement the whole program in the months to come.

The primary goal of this economic and financial reform and restructuring program is to restore confidence in our currency, in our financial institutions and in our economic prospects. It is extremely important to restore such confidence. It is precisely the lack of such confidence that has been the main reason for the myriad problems that have recently emerged.

The principal target of the fundamental measures that we have adopted, and will adopt, in the various fields is to restore as soon as possible the confidence of economic players, both at home and abroad. We must certainly not lose the momentum.

Permit me to explain the main features of our economic and financial program.

The first element of this program is the readjustment of macro-economic balances that were disturbed by the monetary crisis. This is an essential step aimed at laying a solid foundation for the adjustments we have to make at the sectoral and micro levels.

The crux of the matter is that at present capital inflows from abroad have declined significantly. In the past, such capital was easy to obtain. This is the reason why we must all adjust our business and investment plans, so as not to exceed the available funds. These adjustment apply to both the government and the private sector.

Without a willingness to adjust our plans in line with this new reality, we cannot achieve macro-economic balance. The reason is very obvious: our total expenditures will exceed our financial means. As a consequence, our rupiah will continue to come under pressure and will weaken further. We must be fully aware of the relation between the effort to strengthen the value of the rupiah and the importance for us, as a nation, of exercising self- control so as to limit our spending to our own financial resources. Let us never spend more than we earn.

This is the reason that in drafting the current 1998-1999 State Budget, we base ourselves on the existing reality.

The implementation of all government projects which entail substantial funding, especially those which have not yet started, must be postponed or rescheduled. Stricter criteria must be applied to the implementation of projects, so that only extremely urgent projects and those with sufficient resources can be carried out. Similarly, all projects of the state-owned enterprises must be reviewed, especially those that have a substantial import-content.

This Draft State Budget is aimed at overcoming the monetary crisis. Expenditures truly must be restricted to the most essentials, while efforts are made to increase revenues. Continued improvement in our tax auditing system, registration and administration will help us raise non-oil/gas revenues.

There is no other choice for the business community but to also carry out consolidation and restructuring, motivated by the same spirit. The goal should be to support the efforts to overcome the monetary crisis currently confronting our nation.

The business community seems to be "over enthusiastic" in taking part in development. Therefore, as the case with the government, it must also carry out introspection and correction. Both the business community and the government should carefully select those projects and undertakings to be given priority and those to be postponed. Let us draw a lesson from the present experience and not repeat the same mistake. Let us not rely too much on loans to support business activities. If necessary, companies must sell some of their assets to reduce outstanding loans.

The spirit of solidarity and willingness to share the burden for the sake of national interest is an essential element for our success in surmounting the crisis.

In the monetary field, we should continue to exercise prudent control over the quantity of money in circulation. The goal is to sustain the strength of the rupiah exchange rate. To safely achieve this objective, the expansion of credit and economic liquidity must be limited and carried very carefully. From this limited amount, we must give priority to small and medium enterprises, exports and other productive activities.

We must adopt a relatively tight fiscal and monetary policy stance. We have to apply an austerity plan to state finances and carry out consolidation in the private national business community. Both measures are part of the stabilization stage that we must go through before the public's confidence in the rupiah is restored.

We must stop the ongoing erosion of confidence in the rupiah. In fact, we must reverse it. Because, if this erosion goes unchecked, our national economic foundations will crumble. Obviously, with very serious consequences.

All of us -- without exception -- must do our utmost to see to it that the transitional period does not last too long. The effort to restore confidence in the rupiah is a task for all of us, it is our common task. The sooner we put this task above our respective interests, the sooner will we be able to accomplish our goal.

In this connection, let me reaffirm that the Indonesian government has not the slightest intention of changing our free foreign exchange system. Indonesia was the first among the developing countries to introduce a free foreign exchange system 25 years ago, in the early seventies. In fact, the free foreign exchange system has enabled Indonesia to rapidly achieve prosperity. Therefore, the free foreign exchange system will not be changed.

The second important element of our economic and financial reform and restructuring program is to restructure the banking sector and restore its health.

The measures in this field are aimed at restoring public confidence in the national banking system. Two years ago, on the 4th of January 1996, when presenting the 1996-1997 Draft State Budget to the House of the Representatives, I emphasized: "It must be realized that when the people's confidence in a certain bank declines, all the consequences become the full responsibility of the owner and board members concerned."

After the revocation of the 16 bank licenses, the main target of the policy in this field is to consolidate the remaining banks with a view to creating a more solid, efficient and competitive banking sector capable of gaining the public's full trust. The government will encourage bank mergers, the injection of additional capital and seek improvement in managerial skills in order to reach this goal. To reinforce the banks' capital and enhance their competitiveness, the government will encourage technical cooperation and facilitate the capital participation by foreign banks.

The government has announced the plan to merge state owned banks in the framework of an overall restructuring that will be carried out this year. The goal is to consolidate and then privatize these banks. Foreign banks of international repute will be able to take part in the privatization plan. Before entering the globalization era in the 21st century, Indonesia must have sound banks that can be relied upon to provide efficient banking services to the Indonesian public and business community. The next step will be to prepare performance contracts with the respective boards of directors of state-owned banks that set clear quantitative performance targets and supervisory mechanisms.

The managerial capabilities and capitalization of Regional Development Banks will also be enhanced following a clear plan. The assessments and assistance of the World Bank, the Asian Development Bank and the International Monetary Fund will be used fully in reforming our banking sector.

To enhance the public's confidence in our national banks, a system of protection for small depositors will be introduced by providing the principal role to the banking sector itself.

To strengthen further the basis for a sound and efficient financial system, we shall move to consolidate the institutional, legal and supervisory aspects. The rules and procedures related to the operation of commercial banks, collateral, bankruptcy and liquidation will be improved and adjusted further to meet internationally-accepted practices.

Furthermore, the implementation of banking supervision will be strengthened and systems and mechanism of supervision will be improved. The criteria for classifying earning assets quality and the provision of reserves will be improved and adjusted to meet international practices. In order to strengthen the financial position of the commercial banks, a tax exemption facility will be granted for loan-loss reserves after non-performing loans have been audited by the tax office.

Under the current floating foreign exchange system, exchange rate risk has a major impact on the performance of banks. For this reason, the reporting system of commercial banks will be improved to ensure that the exchange rate risk is more accurately reflected.

We are aware that every effort to restore the health of the economy and to overcome a crisis, will always have undesirable side-effects, including the possibility of sluggish economic growth. We certainly want to minimize this negative impact as little as possible and make the adjustment period as short as possible.

To this end, it is extremely urgent that during the monetary stabilization period, we should continue and, more importantly, intensify the structural reform and deregulation of the real sector. The goal is to remove all kinds of constraint to the smooth flow of goods, to facilitate unhindered production and distribution process, and to establish healthy business practices. Thus, the negative impact of monetary stabilization on the economy can be minimized by improving efficiency and facilitating unhindered production and distribution.

The improvement of efficiency and unhindered production and distribution through the structural reform is also very important for the following reasons:

First, it helps to restore the public's confidence in our economic prospects in general; and

Second, it helps to dampen the impact of monetary stabilization on the inflation rate.

In this regard, the program to lower the import duties will be expanded and accelerated. Deregulation of investment and the domestic trade system will also be intensified.

To improve the efficiency of state-owned enterprises, we shall speed up their restructuring and privatization. As the first step, a review will be undertaken on expenditures and investment of the government and all state-owned enterprises. This review, to be carried out in cooperation with the World Bank, will develop a program to improve fiscal efficiency, to restructure state-owned enterprises and to be the basis for expediting privatization.

In connection with these measures, the supervision of state- owned enterprises will be consolidated under the Ministry of Finance. Furthermore, to encourage further the participation of the private sector in the development and management of government infrastructure, guidelines are being prepared so that the cooperation will be more efficient.

The program of economic and financial reform and restructuring that I have just set forth will serve as the map for us to find a way out of the present turmoil.

The government is determined to carry it out in all seriousness.

It is precisely based on such background, policies and measures to be taken that the 1998-1999 Draft State Budget is being prepared.

During the year 1997, our inflation rate was quite high, i.e. 11,05 percent. Whereas from April to December of fiscal year 1997, our inflation rate has already reached 9.09 percent. The main cause was the rise in foodstuffs of 6.28 percent. This means that around 57 percent of last year's inflation was caused by the increased prices of the food category.

The impact of high inflation rate and monetary crisis, with all its consequences, will continue to persist in the current 1998.

As a whole, our economic growth will be slower. It is predicted that during 1998-1999, our economy will grow by 4 percent. This is a very low figure, compared to our annual economic growth during the last 30 years, that reached an average of around 7 percent.

Another important element in drafting our state budget is the prediction of the exchange rate of the U.S. dollar against the rupiah. We do not want to see our rupiah to become too strong, thus weakening the competitive edge of our export commodities. Nor should we let the value of our rupiah to be too low, as it will put an excessive burden on our economy. We have taken into consideration the developments of the currencies of other countries in our region and in several other countries. On this basis, an exchange rate of Rp 4000 ton to US$ 1 is used in drafting the current state budget.

Another essential element is the price and production of our crude oil. It is expected that the price of our crude oil is US$ 17 per barrel. In compliance with the new OPEC quota, our crude oil production -- in addition to concentrates -- is set at 1.5 million barrels per day.

The 1998-1999 Draft State Budget is envisaged to be balanced to the tune of Rp 133.5 trillion or an increase by 32.1 percent compared to the current State Budget.

The relatively large increase is mainly caused by the substantial depreciation of the rupiah. The components of state revenues which are primarily affected by the exchange rate are oil/gas and development revenues. In terms of expenditures, the exchange rate primarily affects the size of external debt servicing, fuel-oils subsidies and development expenditures financed by foreign aid.

The domestic revenues reach Rp 107.7 trillion, which means a 22.3 percent increase or constitutes 80.7 percent of the total revenues. Meanwhile, development revenues are earmarked to be Rp 25.8 trillion, i.e. an increase by 98.1 percent. As to domestic revenues, the oil and gas contribute Rp 27.3 trillion or an increase by 83.5 percent, whereas non-oil and gas revenues are Rp 80.4 trillion, an increase by 9.9 percent.

The tax revenues increase slightly, namely by 2.1 percent. However, they continue to play an important role in domestic revenues. The tax revenues are expected to reach Rp 66.1 trillion, which constitute 61.3 percent of the total domestic revenues.

The majority of these tax revenues are from income tax and value-added tax, which are 82 percent of the total tax revenues.

The income tax is estimated to decrease by 10 percent. This is for the first time to date that we suffer such a decline. This estimate is based on the economic slowdown resulting from the impact of the monetary crisis on the taxable corporate profits.

In terms of production, the importation of basic materials and capital goods will rise as a consequence of the rupiah depreciation as also the case with the debt-servicing. In the meantime, domestic market demands will also weaken due to the slowing down of our economic growth.

The revenues from value-added tax rate are expected to continue to go up by 13 percent compared to those of the current fiscal year. Furthermore, all exemptions on value-added tax will be abolished wherever feasible and they are not inconsistent with the prevailing laws.

The land and building tax is predicted to raise significantly, i.e. by 36.2 percent.

By the broader base of tax objects we are discovering as sources of state revenues, we are consolidating the state financial structure in the future.

This means developing funding will increasingly rely on domestic potentials.

Furthermore, the non-tax state revenues will rise to Rp 14.3 trillion or an increase by 74.4 percent. This is quite a meaningful rise. They include revenues from sources which to date are better known as non-budgetary sources. This is our effort to enhance the orderly state financial administration. Law on Non- Tax State Revenues stipulates that all state funds not included in the budget must be incorporated into the state budget within a period of five years will be speeded up to three years at the latest. Whereas the Reforestation Fund will be used solely for its intended purpose, i.e. the financing of the forest replantation program.

As far as expenditures are concerned, the routine expenditures will reach Rp 92.4 trillion or an increase by 48.6 percent compared to the current ones.

In these routine expenditures, the amount of external debt- servicing is quite significant, i.e. Rp 30.2 trillion or an increase by 57.2 percent. This is caused by the higher foreign currency exchange rate, especially the American dollar vis-a-vis our currency. It is also because of a number of loans has matured.

This is indeed a heavy burden to bear. However, we are committed to honor our obligation to repay the loans fully and on time. We try to preserve the confidence of the outside world in our nation and economy.

The other substantially large routine expenditures are fuel- oils subsidies. They are to the tune of Rp 10.1 trillion. As a consequence of these extremely large subsidies, the development funds will decrease very substantially. In addition, the too low fuel-oils price does not stimulate the need to use it economically. Whereas in fact, we have to import some of them. Neither does it encourage us to develop alternative energies, of which we have quite abundant resources. The relatively low fuel- oils price will also stimulate smuggling.

Indonesia is not a country with a big oil reserve.

At the right moment it will indeed be unavoidable that the price of fuel-oils has to be raised, in order to adjust it to its economic value. Similarly with the tariff of electricity which uses great quantity of fuel-oils. The need for energy and fuel- oils for the low income people must always become the prime concern in determining its price.

Apart from fuel-oils subsidies, there is also a new funding for various subsidies in this Draft State Budget. The funding will be incorporated in the segment of miscellaneous expenditures, which will reach a total of Rp 5.3 trillion. It will be used, among other things, for the State Logistics Agency (BULOG) subsidies, fertilizer subsidies, natural gas subsidies, People's Housing Credit interest subsidies, Cooperatives Members Credit interest subsidies, Farmers Credit interest subsidies. These credit interest subsidies are for credit programs with a lower interest rates than the market rates. From now on, all kinds of subsidies are clearly stated in State Budget.

There will only be a small increase in the expenditure for civil servants. In the coming fiscal year, we are still unable to plan any hike of the civil servant salary. Indeed, on account of the present economic situation, we are still unable to raise the civil servant salary. When our economy improves later, when state revenues become larger, we will then be able to ameliorate again the well-being of civil servants like in previous years. Other countries in our vicinity, which are now struggling to overcome the monetary turmoil, are also tightening their belts. There are even those which reduce the civil servants salary. However, it is impossible to reduce furthermore the salary of our civil servants, which presently is already extremely tight.

With the domestic revenues and routine expenditures I have just explained above, the public savings will be Rp 15.3 trillion.

With just that much public savings, we shall need an even greater amount of foreign aid to sustain development programs. Foreign aid is estimated to reach Rp 25.8 trillion, comprising of Rp 6.8 trillion in program aid and Rp 19 trillion in project aid.

Thus, the available funds for development expenditures amount to Rp 41.1 trillion or an increase by 5.6 percent. However, behind this increase we have to pay attention to a number of facts.

First, the rupiah funding decreases by 14.7 percent. This is primarily attributed to program aid, namely foreign aid that can be converted into rupiah to finance development. Otherwise, the rupiah funding that merely comes from public savings will decline by 41 percent. The last time we received program aid was during the 1992-1993 fiscal year.

Second, for the first time since 1989-1990, the public savings are once again smaller than foreign aid. The public savings this time around are 37.2 percent of the total development budget.

This balance reflects our present economic condition which will continue to affect the next fiscal year. Compared to the plan for REPELITA VI, the public savings for 1998-1999 will reach about half.

Third, because the rupiah budget becomes very tight, as a consequence the rupiah budget of all sectors decreases. Obviously, its decline cannot be generalized. There are projects that will be subjected to greater reduction and some are smaller.

Fourth, the increase in the development budget is the result of an increase in the rupiah value of project aid, i.e. 46 percent. This increase is primarily caused by a significant change in the exchange rate of the American dollar against the rupiah. Whereas in terms of the American dollar, the project aid in reality is declining, namely from US$ 5.2 billion in 1997-1998 to US$ 4.7 billion in 1998-1999.

Such are the conditions on which the development budget for 1998-1999 is prepared.

Despite the budgetary tightening, the poverty alleviation and equitable development programs must be continued and prioritized. For this reason, priority is also given to the development budget for the regions which serves as a means for poverty alleviation and equitable distribution.

The rupiah budget for the regions amounts to two-thirds of the total public savings and constitutes more than 45 percent of the entire rupiah budget. This figure shows the consistent stand of the government to continue the attainment of equitable distribution. This policy is aimed, at the same time, to minimize the negative impacts resulting from the current monetary turmoil. On the other hand, the regions will be able to maintain the development momentum and economic activities of the community.

Most of the budget for the regions will be channeled through various INPRES programs. A budget of Rp 477 billion is appropriated for the Village INPRES. There is an increase because of the growing number of villages. This INPRES covers the Family Welfare Promotion (PKK), children and youth, as well as development of the poor communities.

The funds allocated for the Least-Developed Village INPRES or IDT decreases to Rp 204.6 billion. There are two reasons for this.

First, because of the declining number of villages which receive direct assistance as working capital for the poor communities. This assistance will only be provided to 3750 villages which have not received it three times. With one more IDT funds, all least-developed villages will have received their due assistance. The next efforts will be to see to it that the funds will continue to revolve properly.

Second, to speed up the development of infrastructure and means in the rural areas, the funding sources are expected to come from foreign aid.

In the 1998-1999 fiscal year, infrastructure development in the rural areas will cover almost 7000 villages.

This INPRES will only accommodate the complementary rupiah funding, while the foreign aid portion will use its own mechanism. Therefore, although the IDT funds are declining, there will be substantially greater activities. A budget totaling Rp 1 trillion is allocated for the development of infrastructure in the rural areas.

The priority is placed on villages which are the sources of seasonal or occasional workers who seek job in big cities, particularly Jakarta. Usually outside the planting and harvest seasons they come in droves to the cities to seek temporary jobs. Basically, the development of infrastructure in the rural area is carried out by the rural community with the guidance provided by the related technical authorities.

Next, the Level-II Region INPRES will get a budget of Rp 3.2 trillion. The size of this budget shows the concrete steps to make the Level-II Region as the focal point of regional autonomy.

The funds earmarked for the Level-I Region INPRES amounts to Rp 1.6 trillion. The basic criteria for the assistance has not changed significantly.

For the Primary School INPRES, funds totaling Rp 594.9 billion are allocated. The direct assistance provided to each school will be further raised to Rp 850,000. These funds will be used for completing and replacing school implements.

Presently, a number of Primary School programs has been completed. For instance, the need for 241 million text books has been fulfilled for all Primary School children. These books are "handed-over" from former to new students. After being used for 3 years, these books are generally replaced or renewed.

The following INPRES is for Health with funds amounting to Rp 570.9 billion.

The assistance for medicines to sustain public health increases to approximately Rp 302 billion. Out of this amount, the assistance for vaccine is rising by almost 24 percent. Other undertakings include the expansion of auxiliary public health centers in the developing areas. In accident-prone roads, a number of public health centers will be equipped with emergency rooms. The funds for human resources development (HRD) in health sector will be increased, whether for the doctors, nurses and traditional midwives. This HRD is the backbone of the entire health development program.

The last INPRES is the supplementary food program for school children as a joint activity between mothers of the PKK, parents and the school, under the guidance and supervision by the rural authorities. This program has been a great success. The learning enthusiasm of the school children concerned has been enhanced. The economic activities in the least-developed villages have intensified because the program helped the marketing of local food products. This program covers 8.8 million school children spread in 49,500 Primary Schools and Islamic primary boarding schools.

Next, I shall explain about the broad lines of development budget in accordance with the respective sectors. To compare the current development budget of these sectors with the next, it is realistic if we look at the figures of the rescheduled development budget.

The first sector is industry. The budget for this sector is allocated to around Rp 595 billion. The priority lies in raising the competitive edge of national products.

The second sector is agriculture and forestry. It has a budget of Rp 1.6 trillion. The priority is placed on quality improvement of the intensification program, development of agro business and promotion of farmers group within the cooperatives, especially the Village Unit Cooperatives (KUD). Development in the forestry sector will include the continuation of consolidating the ecological function and enhancement of the economic and social functions of our forests.

The third sector is irrigation, with a budget of Rp 2.8 trillion. It is for the development of water resources and irrigation. It ranks as the fifth largest development budget. The restoration and upgrading of the function of networks will also be carried out and the construction of new irrigation networks will be continued.

The fourth sector is manpower, with a budget of Rp 281 billion. The main activities will be institutional trainings at the job training workshops designed for young job-seekers and workers who want to upgrade their skills. Priority will also be given to labor-intensive activities through the development or rehabilitation of infrastructures and means. This is an important endeavor to cope with the unemployment problem, especially in drought-stricken areas, such as I have said earlier.

The fifth sector is trade, national business promotion, finance and cooperatives. The budget reserved is Rp 693 billion. It will be used, among other things, for the continuation of developing small and medium enterprises, as well as the cooperatives. It is prioritized to the improvement of professionalism, business networks and consolidation of cooperatives institution, and development of saving-loan cooperatives.

The sixth sector is transportation, meteorology and geophysics. This sector receives a budget to the tune of Rp 7 trillion. This is the second largest budget allocated after the rural development sector. Most of the budget will be used to build road infrastructure. The road and bridge maintenance and rehabilitation are planned, especially in the eastern part of Indonesia.

The seventh sector is mining and energy. Its budget amounts to Rp 4.7 trillion. An important undertaking is to continue the construction of power stations -- especially outside Java --, transmission and distribution networks, inclusive its related equipments. The development of rural electrification will also be continued, that will provide electricity to 2530 villages or 97 percent of the REPELITA VI target.

The eighth sector is tourism, post and telecommunication. The budget amounts to Rp 982.7 billion. It will be used, among other things, for tourism promotion both at home and abroad, for HRD on tourism and other tourist destinations.

The ninth sector is rural development and transmigration, with a budget of Rp 7.9 trillion. This is the largest budget compared to other sectors. I have already elaborated earlier about most of the undertakings of this sub-sector when I touched on the INPRES programs.

The transmigration sub-sector will have a budget of Rp 1 trillion. It will be used to build 150 transmigration settlement units, spread over in 21 provinces. The majority of them will be located in the eastern part of Indonesia. The settlement will accommodate 42,500 heads of transmigration family. Including 12,500 heads of family will be settled in the peat development locations in Central Kalimantan.

The tenth sector covers the environment and spatial spacing, with a budget to the tune of Rp 694.4 billion. The important undertaking will be in the enhanced surveillance and control over the environment impact. The ability of the Regional Environmental Impact Agency will be upgraded.

The eleventh sector is education, national culture, belief in the One and Only God, youth and sports. The budget allocated is Rp 4.9 trillion, and it ranks the third largest. I have already described some of the activities when I touched on the Primary School INPRES. Apart from it, the educational budget will continue to be prioritized on sustaining the implementation of the 9-year compulsory education.

The twelfth sector is population and prosperous family that has a budget of Rp 525.2 billion. The undertakings will not only involve the family planning, but also to support the smooth implementation of the Prosperous Family Savings (TAKESPRA) and the Prosperous Family Business Credit (KUKESRA) Programs.

The thirteenth sector is welfare, health, women's role, children and teenagers. The budget is Rp 2.1 trillion. In terms of the rupiah budget, this sector ranks the fourth largest. It demonstrate that we continue to pay serious attention to address the issues of public health and other social activities. This sector also covers Health INPRES and supplementary food for school children (PMT-AS) INPRES, as I have explained above.

The fourteenth sector is housing and settlement with a budget of Rp 1.6 trillion, It will be used primarily for supporting the construction of simple and very simple housing.

The fifteenth sector is religion, with a budget of Rp 326.4 billion. It will be used to support the provision of religious infrastructures and means, to improve religious teaching and to expand educational opportunities at the Islamic Secondary Boarding School in the framework of the 9-year compulsory primary education.

The sixteenth sector is science and technology. This sector has a budget of Rp 1 trillion. Activities in this sector will hopefully stimulate technological progress that reinforces the growth of our economy and society in entering the 21st century.

The next sector is law, which has a budget of Rp 176.3 billion. It will be used for, among other things, the continuation of crash program to finalize outstanding cases at the appeal stage. The majority of the budget of this sector is intended for the construction and rehabilitation of legal infrastructure and means, so as to gradually fulfill the substantially unmet needs.

The eighteenth sector belongs to the state apparatus and supervision, with a budget of Rp 813.9 billion. It will be used for the enhancement of the effectiveness of state apparatus and implementation of development supervision.

The nineteenth sector is politics, foreign relations, information, communication and mass media. The budget set aside is Rp 321.7 billion. This budget is intended, among other things, to sustain the operational activities of information.

The last sector is defense and security. It has a budget of Rp 1.9 trillion. The provision of sophisticated equipments must still be imported that requires foreign funds. The development of the Indonesian Armed Forces (ABRI) also makes use of many types of equipment produced locally. In addition to other programs, the rehabilitation of slum-like and uninhabitable houses in ABRI military bases will be continued.

Indeed, the development budget is very limited. We use it with the intention to ensure that our economy continues to move.

Our nation's development budget is mostly handled by the public at large and with both domestic and foreign investments.

In the midst of the current economic difficulties, there is still a bright light, i.e. the investment. The depreciation of the rupiah has different impacts on investment projects: some are disadvantaged, some are unaffected and some benefit from it. During 1997, the government has approved 718 projects with a value of Rp 120 trillion for domestic investment and 790 projects with value of US$ 34 billion. These figures show that there was an increase from the previous year.

What is also encouraging is that our struggle against poverty has brought results. The number of poor people has declined dramatically. A few months ago people in the Province of Bali have freed themselves from the Prosperous-II Family category. Initially, it was predicted that it would have taken 5 to 7 years to accomplish this. But the Balinese people managed, in fact, to shorten it to just 3 years. We all extend our warmest congratulations to the people in Bali. This is a proof that by mutual assistance we are able to tackle difficult problems.

Starting this year, we are moving one step further. We are launching a new kind of credit, i.e. Business Partnership Promotion Credit or KPKU. It carries low interest rate and is available in every District and Municipality. The credit is provided for the partnership between small & medium enterprises and cooperatives with small enterprises which are members of the Prosperous Family Program (PROKERSA). Hopefully, the provision of this credit will keep alive the grass-root economy, especially in the midst of the current monetary turmoil.

Window A: The primary goal of this economic and financial reform and restructuring program is to restore confidence in our currency, in our financial institutions and in our economic prospects.

Window B: At the right moment it will indeed be unavoidable that the price of fuel oils has to be raised.