INSIGHT: Draft budget disconnects visions from actions

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Once again, President Susilo Bambang Yudhoyono has proven himself to be a man capable of seeing the “big picture”. Standing before the House of Representatives on Aug. 16, he delivered an impassioned speech on his administration’s proposed budget for next year. He talked about the need to eradicate corruption, reform the bureaucracy and develop the country’s backward infrastructure.

All good stuff. And certainly important when taking into consideration Indonesia’s need to prepare itself for keeping the economy on track in the midst of a global slowdown.

Take corruption, for example. Malfeasance is not only a moral issue; it is also a problem with widespread economic implications because it results in a severe misallocation of resources. More than just illicit money lining the pockets of crony politicians and being parked in overseas bank accounts, imagine the additional economic and social benefits if the same money were spent on wealth transfers to the poor. Likewise, there are tremendous economic benefits if Indonesia manages to streamline its government and substantially increase spending on infrastructure.

Unfortunately, there seems to be a massive disconnect between what the President says are his main priorities and the numbers behind the national budget. National budgets are, after all, a reflection of a government’s stance on how a country’s resources should be distributed. And if one looks at the latest draft budget, you can’t help but scratch your head in disbelief and wonder how the President has come to the conclusion that it bolsters the grander visions he ostensibly harbors in terms of how to make Indonesia’s economy more vibrant with greater benefits for everybody.

When looking at the budget, the first disconnect one notices between the President’s words and actions is the budget for the civil service. Somehow, Yudhoyono’s vision on bureaucratic reforms has been translated into a bloated budget for the bureaucracy and politicians. In fact, only 22 percent of the budget is targeted at capital and development spending — the rest will be spent on civil servant salaries, benefits and travel expenses for bureaucrats and politicians, and for debt service payments.

The most egregious example of public money being wasted is for travel, which amounts to around US$2 billion for the next fiscal year (almost four times the amount that was budgeted in 2004, Yudhoyono’s first year in office). This is not only a colossal waste of money, but also a reflection of Yudhoyono’s bad judgment. Is there really a need for so much travel by government officials in this golden age of the Internet? If nothing else, the budget for travel should be decreasing over time and reallocated for productive uses in the real economy.

After all, Indonesia could build a new national airliner company every year for the same amount the Yudhoyono administration spends on buying luxury cars for pampering its government officials and sending them off on expensive overseas junkets.

Then there is the question of modernizing Indonesia’s infrastructure. There has been much talk ever since the beginning of Yudhoyono’s presidency about kick-starting investments in developing the country’s road networks, airports, railroads, bridges, seaports and public utilities. But sadly, we have been talking for eight years and practically nothing has been achieved. One only needs to look at the progress of the planned 1,300 kilometers of new roads for north Java — this was supposed to take a few years to complete, but since 2004 a paltry 60 kilometers have been completed. Compared to other emerging economies, such as China, Brazil or even Malaysia, our track record in infrastructure development has been pitiful at best.

For the 2013 budget, Yudhoyono is proposing a boosting in infrastructure expenditure to $20 billion. Not only is this amount too small when you consider the amounts needed to modernize our creaking infrastructure and the level of capital expenditure on a per capita basis that is being spent in other economies of similar size to Indonesia.

If you look at Yudhoyono’s track record, there is also no guarantee his administration is capable of spending the entire amount budgeted. This is due, in part, to a poorly conceived law on procurement and a slew of business regulations that act as a huge drag on investment. And until now, even after Yudhoyono is more than half way through his second term as president, nothing has been done to remove these barriers.

Finally, there is the issue of corruption. For a president whose own political party sits in the eye of the corruption storm, he certainly needs to spend more time and place more constructive effort on removing the rot from Indonesian politics. But much like his talk about reforming the bureaucracy and improving the country’s infrastructure, visions have not been followed by action.

Yudhoyono has always enjoyed painting himself in public as a paragon of virtue. The fact is, he has not been willing to use his presidential powers to oust corrupt ministers from the Cabinet or even remove scandal-ridden figures from his Democratic Party. Since that is the case, then why would anybody take Yudhoyono seriously when he says he wants to eradicate corruption?

Meanwhile, as the President continues to talk the talk and fails to walk the walk, Indonesia’s economy manages to grow. At some point, however, there will be a price that needs to be paid for years of bad governance and underinvestment in infrastructure. We only wish that Yudhoyono would do a better job of aligning his visions with actions. Until he does, we will remain a nation that continues to miss out on meeting its true potential.

The writer is a former coordinating economic minister.