FITRA Raises Seven Issues Relating to the 2017 State-Budget Plan

  
Marcell Sihombing, Fitri N. Heriani
 

Minister of Law and Human Rights (Yasona H. Laoly), Minister of Finance (Sri Mulyani) and Minister of National Development/Head of National Development Planning Board (Bambang P.S. Brodjonegoro). Photo by: RES

The government and the House of Representatives (House) have finally reached agreement on the 2017 state-budget plan. Indeed, the Bill on the State Budget for the 2017 Budgetary Year (Bill) sets out a state budget for 2017 amounting to some IDR 2080 trillion. This represents an IDR 1o trillion increase over the 2016 state budgetary total of IDR 2070 trillion.
 
Commenting on this issue, the Indonesian Forum for Budgetary Transparency (FITRA) asserted that the administration of President Joko Widodo hadn't been able to successfully carry out the objectives of the so-called Nine Agenda (Nawacita) which were established by both President Joko Widodo and Vice-President Jusuf Kalla.
 
In response to the newly agreed state-budget plan, FITRA have already addressed seven opinions and issues relating to the 2017 budget. Firstly, there is the matter of the tax-revenue target, as addressed by the 2017 state budget, which has been set at IDR 1498 trillion. This figure is lower than the 2016 target of IDR 1539 trillion. FITRA is therefore of the opinion that there has been no strategic breakthrough as regards increasing state revenue, in spite of the establishment of the tax-amnesty program.
 
“The tax-amnesty program has failed to improve the state budget, which means that the program ultimately only benefits the elites,” asserted Apung Widadi, Head of the FITRA Advocacy Division, during a discussion event which was held in Jakarta last Monday.
 
The second issue raised by FITRA is that the government seems to be continuing with its extravagant spending behavior, this time up to a figure of IDR 1315 trillion. Moreover, Ministry spending is way higher than regional spending. Mr. Widadi firmly believes that this asymmetric distribution of funds is causing an imbalance between central government and regional-level government and reflects an interest-based cabinet (kabinet rente).
 
Thirdly, the country’s state budget is still primarily focused upon economic growth instead of public welfare, specifically in the form of mandatory spanning and increasing employment opportunities. Mr. Widadi asserts that every last rupiah should be channeled into increasing employment opportunities, much like America’s strategy.
 
“[Thus] the commitment of President Widodo and Sri Mulyani, the Minister of Finance, has resulted in nothing definitive,” asserted Mr. Widadi.
 
Fourthly, a reduction in public subsidies has been set out in the 2017 state budget. Indeed, the 2017 state-budget plan stipulates that the subsidy budget be set at IDR 174.9 trillion, which is slightly lower than the 2016 state-budget subsidy figure of IDR 177.8 trillion. According to Mr. Widadi, the government appears to be scaling back its efforts to improve public welfare. Instead, this reduction in subsidies is clearly aimed at letting the market decide the price of public commodities and, by extension, generating this more profit for the private sector.
 
Fifthly, the calculation of foreign debt will still be based upon gross domestic income instead of foreign exchange (devisa) and state-budget competence (kemampuan APBN) next year. As a result, the debt interest rate will amount to almost 25% of the state budget, as it usually does.
 
“It’s like selling out the country,” asserted Mr. Widadi firmly.
 
Sixthly, the budget allocation for village funding has yet to conform to the provisions set out in Government Regulation No. 22 of 2015,which amends Government Regulation No. 60 of 2014 on Village Fund Allocations from the State Budget. Indeed, this regulation stipulates that 10% of the state budget should be allocated for village funding, however the 2017 state-budget plan only allocates IDR 60 trillion for village funding.
 
Seventhly, there are also dilemmas to address regarding the management of state-owned enterprises, state-equity capital (penyertaan modal negara) for state-owned enterprises without initial public offerings, and the reduction of non-tax state revenue (PNBP) generated by state-owned enterprises to just IDR 40 trillion, as stipulated under the 2017 state-budget plan.
 
Based on an assessment of the various issues raised above and recent form as regards the 2017 state budget, Mr. Widadi is of the belief that the country’s state budget will again be saved by foreign debt, with little efficiency in government spending being demonstrated. Thus, the administration of President Widodo is believed to be failing in its mission to carry through its so-called mental revolution and break the budget-deficit regime. Furthermore, most ongoing infrastructure projects are being channeled towards economic acceleration purposes and conglomerates, while public infrastructure such as housing, roads and irrigation systems only amount to some 5% of total infrastructure spending, as stipulated in the 2017 state-budget plan.
 
“Thus, we [FITRA] are currently raising support in a bid to revolutionize the agreed state-budget plan and ultimately produce an alternative plan, which will be drafted by the general public,” Mr. Widadi concluded.
 
Commenting on this issue, Abdullah Rusli, a researcher from the Institute for Development of Economics and Finance (INDEF), asserted that the 2017 state-budget plan was being purposely drafted in order to be expansive, with a widened deficit assumption. Moreover, debts are rendered ineffective, according to Rusli, because their settlement is generated from other debts.
 
“However, the government appears to be realistic enough to realize that there will be a reduction in tax revenue,” Mr. Rusli concluded.

(cd/sp)