T

he Finance Ministry is laying out a new policy of early retirement for public officials in an effort to reduce the high cost of civil servant salaries and allowances.

Agus Supriyanto, the ministry’s director general for treasury, said he would propose an early retirement program for public officials aged between 50 and 55. At present, the retirement age for public officials is 56 years.

“We will give compensation. But this has not been approved. I will present this to the administrative reforms ministry this week... to be discussed by the Administrative Reforms Ministry and the state civil servant administration agency,” he told reporters late on Wednesday.

If approved and implemented by all public officials aged over 50, the Finance Ministry’s proposal will slash the number of active civil servants by 937,147.

State civil servant administration agency data showed that as of December last year, there were 4.6 million civil servants working for the government, 20 percent of whom were over 50 years old.

“We have become burdened by the high spending on civil servants’ salaries. It’s not productive and is wrong,” Deputy Finance Minister Anny Ratnawati told reporters on Thursday.

“It’s not only about the salary, but also pension funds, old age benefits, and more.”

The government allocated Rp 180.8 trillion (US$21 billion) for public official expenditures this year, which is 16 percent of all total state spending, which reached Rp 1,126.1 trillion.

That compares to Rp 135.9 trillion for capital expenditures and Rp 137.8 trillion for goods, the 2011 state budget showed.

“Discussions on such a solution [early retirement] need to be started as one of the alternatives to resolve burdens on the state budget. I think it’s a shared view, because we need a bigger budget for building infrastructure,” Anny said.

Coordinating Minister for the Economy Hatta Rajasa has said that 95 percent of regional budgets were spent on salaries, not development.

Local and international economists, including the World Bank and International Monetary Fund (IMF), have put Indonesian government’s budget management on the spotlight as mounting subsidies and other unnecessary expenditures may hinder Indonesia’s economic growth potential of about 7 percent.

The government planned to gradually remove the fuel subsidy beginning April this year, but the plan was delayed over government fears that the subsidy would cause widespread public protests.

The Finance Ministry’s latest plan may ease strain on the state budget as the government remains indecisive on limiting fuel subsidies.

Finance Minister Agus Martowardojo said Thursday that the plan’s implementation would begin at his ministry. “If we open up that opportunity, [other ministries] would have the option to follow suit,” he added.

Agus highlighted the importance of limiting the amount of civil servants “to increase officials’
productivity”.

“For jobs that could be done by lower officials, civil servants’ productivity will increase,” he added.

The Finance Ministry would also send its employees to the regions to manage regional taxes to make the ministry more efficient as the officials’ productivity and contribution to the ministry are expected to increase, Agus added.

“Regions are still lacking human resources to manage their taxes.”