Business

Regional budgets key to
economic growth

With Indonesia's economy slowing due to the global financial crisis, the regions are being urged to speed up the drafting of regional budgets to prevent even lower growth, according to senior ministry officials.

The government expects regions to accelerate government-led infrastructure projects to stimulate the economy and mitigate the impact of the global economic slowdown, aiming for full-year growth of between 4 percent and 5 percent.

Finance Ministry's director general of financial balance Mardiasmo said Wednesday up to 100 provincial and local government units - out of 510 units in total - had yet to submit their budgets to the ministry.

He expected the remaining 100 units to submit their budget at the latest towards the end of February.

The sooner these regions finish drafting their budgets, the better the economy could cope with the financial crisis, he said.

"*Wrapped-up* budgets will stimulate economies in the regions. If *the drafting of* regional budgets is delayed, regional projects will also be delayed," said Mardiasmo.

He added that the Finance Ministry would not disburse special allocation funds (DAK) to regions that had yet to submit their budget.

While Indonesia has implemented regional autonomy, regions are still dependent on the disbursement of general allocation funds (DAU) and DAK from the central government to finance local budgets.

Of the total government projected budget of Rp 983.2 trillion this year, about 30 percent - or Rp 303.1 trillion - is allocated for the regions.

Home Ministry's spokesman Saut Situmorang said the Finance Ministry and the Home Ministry had urged all regions to immediately finish the drafting of regional budgets.

He acknowledged, however, that there were several constraints, such as the lack of highly-skilled accountants in the regions and problems for regional governments to find time to wrap up budgets with their respective regional legislative bodies.

But the regions had progressed a long way from a year earlier in drafting their budgets, said Saut. "Two years ago, there were regions that hadn't finished drafting budgets in June; now the great majority have completed their budget."

Businesses also doubt that government-led infrastructure projects can be started early in the year.

Sofjan Wanandi, the chairman of Indonesian Employers Association (Apindo), said that in previous years, government-led infrastructure projects were generally started in the second half of the year.

"The implementation is difficult, that's what's important for us. It's like a bottleneck," he said.

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