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Govt spending in spotlight
Having achieved lawmakersâ approval, the government must now step up the disbursement of state funds and improve its capacity to channel the money into growth-generating projects, economists say
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Having achieved lawmakers' approval, the government must now step up the disbursement of state funds and improve its capacity to channel the money into growth-generating projects, economists say.
After a month of deliberation, lawmakers and the government finally approved the revised 2015 state budget late on Friday, which, in contrast to previous budgets, has a strikingly high allocation of funds for infrastructure development and social spending.
Atma Jaya University economist A. Prasetyantoko argued that the failure to optimize the disbursement of state funds would lead to the economy growing at a yearly pace of only 5.3 percent compared to the government's target of 5.7 percent.
By tackling infrastructure bottlenecks that range from roads and dams to power plants, President Joko 'Jokowi' Widodo aims for 7 percent economic growth over his five-year term. The economy expanded by 5 percent last year.
'[The government] must improve coordination among ministries as well. That way it can expedite funding disbursement and achieve a faster disbursement rate,' Prasetyantoko said on Sunday.
As much as Rp 290 trillion (US$22.67 billion) has been earmarked for capital spending across ministries and agencies ' more than double last year's allocation ' which includes growth-generating infrastructure projects.
The funds will be used, among other things, to construct roads (Rp 57.82 trillion), to manage water resources (Rp 30.53 trillion) and to develop regional infrastructure (Rp 500 billion).
'[With the new budget], the government is apparently trying to say, 'Hey, we are very serious about developing the economy',' Ari Kuncoro, the dean of the University of Indonesia's (UI) School of Economics, said recently.
However, the massive expansion in funding has also raised new concerns over the capacity of related ministries and agencies to make the best use of the money.
'The next question will be about the implementation because we still need to see whether [the government] can really disburse the huge funds earmarked for infrastructure,' Ari added.
Data from the Finance Ministry reveals that state budget disbursement rates never reached 100 percent between 2010 and 2013, ranging at around 90 percent during that four-year period.
Similar rates were also recorded on the expenditure of ministries that were connected to economic activities. The Transportation Ministry'which is slated to receive more than Rp 20 trillion in additional funds' posted an absorption rate of only 78.9 percent in 2012.
Meanwhile, the Energy and Mineral Resources Ministry posted a rate of 57.5 percent in 2011 and the Public Housing Ministry ' now named the Public Works and Public Housing Ministry ' booked a 67.5 percent disbursement rate back in 2012.
The two ministries stand to receive Rp 5 trillion and Rp 33.31 trillion, respectively, in extra funding, as shown by the revised state budget.
Gadjah Mada University (UGM) economist A. Tony Prasetiantono said that low absorption was not a new issue and that it had been a problem since the era of former finance minister Sri Mulyani Indrawati.
According to Tony, the problem is a Catch-22 situation for the ministries. 'Many of the tender processes are slow because there is an element of fear that they will be entangled in corrupt activities if the processes are carried out in haste,' he said.
He proposed that the government offer more incentives for private investors to attract their participation in the projects, adding that the government should also develop 'a business sense'.
