Soeharto unveils nation's draft budget for recovery
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.