Jumat, 22 Agustus 2014

JOKOWI EXPECTED TO FIND BREAKTHROUGHS FOR SUBSIDY PROBLEM

By Andi Abdussalam
          Jakarta, Aug 22 (Antara) - President-elect Joko Widodo, better known as Jokowi, has said that the subsidy set by the current government  at Rp433.5 trillion in the Draft 2015 State Budget is too big and needed to be studied.
         "We are still studying it. I think the amount of subsides set in the draft state budget is too big," Jokowi said during the commemoration of Indonesia's 69th independence anniversary at the State Palace last Sunday.
         President Susilo Bambang Yudhoyono, who will end his tenure next October, announced on Friday last week a budget plan for 2015 amounting to Rp2,019.9 trillion, including a subsidy expenditure of Rp433.5 trillion.
         The subsidy in the draft budget consists of Rp363.5 trillion for energy subsidy and Rp70 trillion for non-energy subsidy. The energy subsidy in the meantime comprises Rp291.1 trillion for fuels and Rp72.4 trillion for electricity.
         Compared with this year, subsidy for fuels next year increases by Rp44.6 trillion, or from 46 million kiloliters to 48 million kiloliters.

 
         Thus, fuel subsidy is one of the issue in the next year budget that should be addressed so that it will not burden state budget.
        Former chief economic minister Dr Rizal Ramli  said the next government should find breakthroughs to overcome the subsidy problem so that it will not continue to burden the state budget.
         "The next government should take a number of smart steps to safeguard the state budget without raising fuel oil prices which   will only burden the people,"  Rizal Ramli, chief economic and industry minister during the government of Abdurrahman Wahid or Gus Dur, said on Thursday.
         He said that the Draft 2015 State Budget lacked stimulus, let alone breakthroughs. So, the next government should boldly create breakthroughs. "The next government should not be too busy in handling downstream matters such as labour wages, electricity subsidy and its fuels. This all can be settled by handling their upstream aspects," Rizal Ramli said.
        He said that among steps the Jokowi government could take is fighting against the oil and gas 'mafia' which brought US$1 billion in losses to the state each year. Besides, the government could also build three new oil plants with a capacity of 200,000 barrels per day respectively. This will save fuel procurement up to 50 percent.
         The other step for the government is to increase fuel production efficiency by reducing cost recovery which currently reached US$32 billion per annum.  "It is illogical that oil lifting drops 40 percent but cost recovery rises up to 200 percent," he said adding that with reducing cost recovery by 20 percent, the government could save on US$6.4 billion a year.
         Besides that the government could also improve the business climate in the oil sector, in the exploration sector in particular. So far, there are no new exploration activities. "This is due to the fact that while businesses have yet to do things tax has been imposed. This is why it leaves the impression that oil business in Indonesia is one of the world's worst," asserted Rizal Ramli.
         He said that the next government can also develop energy diversification from fossils to renewable sources such as gas, hydro, geothermal, solar, wind and others.   "If the government takes these breakthroughs I think we will save a lot," the former chief economic minister remarked.
         In the meantime, University of Gajah Mada economist Sri Adiningsih suggested that subsides in the draft state budget needed to be reviewed by the Jokowi government. 
    "The Draft 2015 State Budget needs to be adjusted to the vision and mission of the President-elect. The current government and the House of Representatives (DPR) must give him an opportunity to carry out his adjustment," noted Sri Adiningsih
    According to Adiningsih, the current draft state budget is not sound as it includes heavy subsidy burdens plus annual budget spending such as that for civil servant salaries and for paying state external debts.

         This necessitates some adjustment such as the replacement of subsidies with various programs that have been announced by the Jokowi-Jusuf Kalla pair. The programs included the launch of "Indonesia Healthy", building irrigation for three million hectares of rice fields, the construction of five thousand hectares of traditional markets, and the renovation of sugar mills.
         "The subsidies in the Draft 2015 State Budget should be replaced, so that the Jokowi-JK presidential ticket will have space to carry out its programs and build infrastructures," the economist argued.
         Besides this, adjustment on revenues in the draft state budget should also be made. Revenues from both tax and non-tax incomes should be increased. She further pointed to the need for establishing a state revenue agency, so that tax officials will focus on collecting taxes.
         The other necessary adjustment is to budget the use of renewable energy, for instance, increasing the use of gas. Currently, the use of gas is still relatively low as compared to the use of fuel oils.
         "The budget for luxury activities in the draft should also be reduced or changed such as the venue of meetings at hotels to be moved to meetings in the offices. The days of official trips should well be reduced. So, the budget can be used for things that are given priorities," she remarked.
          Regarding development stimulus, Gajah Mada University economist Mudrajad Kuncoro said that the government should avoid state expenditure on non-productive sectors.  "In order to stimulate development, the budget should not be spent on non-productive sectors," stated Mudrajad on Thursday.
         He said sectors that need to be given attention included development and eradication of poverty while launching efficiency on bureaucracy. Mudrajad argued that so far about 70 percent of the state budget was spent on generating the bureaucratic machine, paying debts and providing subsidies.
        "The allocation for supporting small scale businesses is only about six percent," he said.
        Jokowi said meanwhile that he was studying the current draft state budget as part of effort to carry out efficiency in budget spending.
        He said there were several sectors which could receive efficient budget. As an example, he said, fuel for power generators of the state-owned power firm PLN could be taken from coal, not from natural oil.
        "PLN, for example, could replace its fuels with coals to generate its power generators. This could economize up to Rp70 trillion," Jokowi, who is also Jakarta governor, said.
         He expressed hope that in the next government, the portion of budget for development would be bigger than the one for routine expenditures or for subsidies.***2***

(T.A014/S012)

(T.A014/A/BESSR/Suharto) 22-08-2014

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