Government expects additional revenues for infrastructure

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Finance Minister Agus Martowardojo is hoping more revenue will be allocated to infrastructure spending next year following the recent agreement between the House of Representatives and the government on optimization of state
income.

“Based on recent meeting results with the House, infrastructure spending could stand at more than Rp 200 trillion (US$20.9 billion) in 2013. It could even reach around Rp 210 trillion,” Agus told reporters at his office in Jakarta on Friday.

The government initially proposed Rp 193.8 trillion ($20.2 billion) of infrastructure in the 2013 state budget (RAPBN).
Under the current 2012 revised state budget (APBN-P), infrastructure spending stands at Rp 174 trillion this year.

In the last few weeks, the government had been deliberating with the House on potential income and financing optimization. They then agreed to increase state revenues by Rp 22.72 trillion in the 2013 state budget by raising revenue target from tax and non-tax sources.

About 50 percent of the additional funds will be used to finance routine spending needs, such as paying state apparatus’ salaries and the rest for infrastructure spending.

Finance Ministry’s fiscal agency interim head Bambang Brodjonegoro said that about Rp 14.06 trillion of the additional funds are expected to come from tax sources and the rest from non-tax sources.

Finance Ministry budgeting directorate general Herry Purnomo said that the additional funds would be mostly utilized for capital spending needs, particularly to finance infrastructure development.

According to Herry, the ministry has been conducting research and analysis on how to determine the criteria to distribute the additional funds for ministries and state institutions.

Based on the analysis, Herry said that the funds could be distributed to at least seven ministries, such as the Transportation Ministry, the Public Works Ministry and the Energy and Mineral Resources Ministry.

“Basically, the distribution should be focused on financing infrastructure development,” Herry said.

Indonesia’s economy has managed to record robust growth amid the global crisis. However, critics and economists believe the government needed to accelerate infrastructure development to reach long term sustainable growth.

As of now, growth in Indonesia is still mainly driven by domestic consumption due to the massive demographic profile of the country. To reach long-term and sustainable growth, the government has been told to intensify its spending, particularly on infrastructure.

To accelerate infrastructure development, President Susilo Bambang Yudhoyono has issued an ambitious blueprint called the Acceleration and Expansion of Indonesia’s Economic Development Master Plan (MP3EI).

Under the master plan, the government plans to develop infrastructure to improve connectivity throughout the archipelago. The development is to take place in six economic corridors — Sumatra, Kalimantan, Java, Sulawesi, Bali and Nusa Tenggara and the Papula-Maluku. The MP3EI requires more than Rp 3,000 trillion in financing.