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o ensure subsidies reach the right targets, an expert suggested that the government change the current form of subsidies to “cash for work” or direct cash assistance (BLT) for those who need the assistance the most.

Chatib Basri, a University of Indonesia economist, said in Jakarta on Wednesday that, with the sharp rise in global food and oil prices, the government had to control its spending and reduce unnecessary expenses such as excessive subsidies to allow it to finance more essential projects such as infrastructure.

“Excessive subsidies, particularly for fuels, will close the door on the government’s ability to build important infrastructures,” he said at a seminar held by the Center for Strategic and International Studies (CSIS) in Jakarta on Wednesday to commemorate the one year anniversary of the death of prominent economist Hadi Soesastro.

Chatib estimated that, with the Indonesian Crude Price climbing to around US$120 per barrel, the
government’s fuel subsidy would jump from the target of Rp 95 trillion to Rp 211 trillion ($24.7 billion) in 2011.

The 2011 state revenue and expenditure budget shows that the government has allocated Rp 184.82 trillion to subsidize goods such as fuels, liquefied petroleum gas (LGP), electricity, fertilizers and seeds this year. The total budget for the subsidy is far higher than those allocated for capital expenditures, which total Rp 121.66 trillion.

To boost the government’s ability to finance developmental projects, Chatib also suggested that it increase loans from other countries or international financial institutions and allocate the funds to the development sector.

“The government can expand this year’s budget deficit up to 3 percent by borrowing money from other countries or international banks, but it has to ensure that the funds must be used to finance development projects,” he said.

“The government shall also make the country more attractive for foreign investors by making investor-friendly regulations.”

National Development Planning Minister Armida Alisjahbana, who also attended the discussion, reported that on May 20, the government would launch a master plan for the country’s economic development in the medium term.

Trade Minister Marie Elka Pangestu said that, as the upward trend in the prices of food and energy would likely continue, the government should improve the country’s food and energy security.

Efforts to boost the country’s food security would be very difficult considering several problems on national, regional and global levels which hinder investments in the agriculture sector, she continued.

“There are some problems constraining investment in agriculture such as subsidies in developed
countries, price fluctuation and sluggish research and development activities,” Marie said at the
discussion.

She claimed that the government was committed to ramping up the country’s food production, not only by increasing seed and fertilizer supplies, but also by improving the quality of warehouses to keep longer-term food stocks.

“China can keep its food stocks in warehouses for almost two years, but in Indonesia, we can only keep food in warehouses for between six and twelve months,” she said.