Saturday, August 25, 2012

2013 BUDGET TARGETS INFRASTRUCTURE DEVELOPMENT FOR SUSTAINABLE ECONOMIC GROWTH By Fardah

    Jakarta, Aug 25, 2012 (ANTARA) - President Susilo Bambang Yudhoyono recently revealed while presenting the draft state budget of 2013, that the proposed infrastructure spending for next year has been raised to Rp194 trillion or US $20 billion, up from the expenditure target of Rp169 trillion set for 2012.
     "We need to support national efforts aimed at accelerating infrastructure development, which will ensure sustainable growth," the head of state had said during his annual address on the draft state budget before Parliament on August 16.

      He however, has also admitted earlier that the greatest challenge posed to infrastructure development is the acute need for infrastructure growth across all provinces of Indonesia, the funds for which are relatively limited.
     "Although we have increased our capital and infrastructure development budget in the past few years, our state budget funds are still inadequate," the president said.

Coordinating Minister for Economic Affairs Hatta Radjasa said on August 14 that almost Rp200 trillion or over US $20 billion in funds are being made available for future infrastructure projects. This capital expenditure will be higher than the Rp168.7 trillion provisioned for the same purpose in the 2012 revised budget.

Radjasa explained that the augmented budget will boost economic growth to the between 6.8 percent and 7.2 percent growth rate target, that has been proposed in the draft budget for 2013.

The draft state budget of 2013 also lays down six targets for infrastructure development, the first of which include the construction of a double-track railway network stretching 383.37 kilometers and the procurement of 92 diesel railway locomotives, electricity railway, tram trains and a rail bus.

The second target outlines the expansion and renovation of 120 airports, as well as the constructions of 15 new airports, while the construction of electricity transmitters with a total length of 3,625 circuit kilometers, electricity relay stations with 4.740 megavolt amperes (MVA) power, and the expansion of electricity capacity to 188 megawatt is the third target.

Improving a 35,017 kilometers-stretch of road as well 247,692 meters of bridges has been proposed as the fourth goal in the state budget. The fifth target proposes the construction of 110 modest rental apartment buildings, 1,088 special houses and other 65,000 modest houses that will include public facilities and utilities.

The last target includes the development of irrigation networks for farming areas spread across 107,302 hectares, the expansion of irrigation networks over 524,084 hectares of land, and the constructions of 164 big and small dams.

An official pointed out that developing railway infrastructure in Indonesia will be quite a challenge, as the country will need at least Rp9 trillion a year to do that.

Therefore, the government is constantly seeking funds to ensure the smooth implementation of all infrastructure projects aimed at boosting the country �s economic growth, Dedy S Priyatna, the deputy for means and facilities at the Ministry of National Development Planning noted.

He added that the President is devoting special attention to the acceleration of infrastructure development in Indonesia, and to do that he has asked the nation to review its subsidy bill and use its savings.

The government`s current target for subsidy spending is Rp316.09 trillion, which includes Rp274.74 trillion for energy subsidies and Rp41.35 trillion for non energy subsidies. The energy subsidy consists of an oil fuel subsidy worth Rp193.8 trillion and an electricity subsidy worth Rp80.93 trillion.

The President also noted that many investors are unhappy with Indonesia`s poor infrastructure.

"We should admit that our domestic infrastructure is still poor, so the government is inviting investors to jointly build new infrastructure, for which we need to set up joint technology, research and development centers that will help in the expansion of our manufacturing industry," he stated.

In addition to the about Rp200 trillion in funds allocated in the draft state budget, the government also plans to collect additional funds amounting to Rp12 trillion for the development of infrastructure projects, by increasing the electricity tariff.

"Assuming that the electricity tariff is raised by 3 percent to 4 percent every quarter starting January 2013, additional funds of up to Rp12 trillion a year can be made available," Finance Minister Agus Martowardojo told reporters recently.

He pointed out that the Rp12 trillion in funds that will be collected on account of the appreciation in electricity tariffs, has not been included in the capital spending budget of Rp193.83 trillion yet.

The minister added that the government has also had to set aside sizable funds for subsidies at the expense of social and infrastructure spending.

The association of Indonesian Young Entrepreneurs (HIPMI) has also urged the government to immediately set aside 5 percent of the state budget for infrastructure to ensure that the economic growth target of 6.8 percent to 7.2 percent can be achieved in 2013.

HIPMI treasurer Bayu Priawan Djokosoetono also asserted that infrastructure plays a vital role in the country�s economic growth.

In 2012, the fund set aside Rp36.7 trillion or 2.37 percent of the total state budget of Rp1,548.3 trillion for infrastructure projects.

Poor infrastructure has discouraged foreign investment in the country, especially because of the global economic slump, which has been marked by slow growth, falling commodity prices and shrinking trade.

The global crisis and the resulting recession have also hurt the Indonesia economy, Djokosoetono said, adding that �The International Monetary Fund (IMF) has also cut its target for world economic growth.

"Indonesia, therefore, should also be prepared for a potential setback, and the development of infrastructure including roads, bridges, ports, electricity and the energy sector should be given high priority," he added.

He also noted that infrastructure projects have a multiplier effect, which is significant in boosting the economy by adding more jobs, which will reduce the pressure of unemployment and poverty.

The urgency for carrying out infrastructure development aimed at improving goods distribution and export production has also been stressed upon by the Indonesian Businessman Association (APINDO).

"We have already built the infrastructure, but the government does not have enough money to execute its plans. Moreover, the Private Public Partnership (PPP) program is stuck," APINDO Chairman Sofyan Wanandi said recently.

He said the government must provide enough financial support for the development of necessary infrastructure. However, there were many reasons why the PPP program is not as effective as it should be, Wanandi added.

"The land exemption problem is one of them, and it hasn`t been resolved by the government yet," he noted.

However, in early August this year, the President signed a long awaited regulation, that sets a maximum time limit of 583 days for the completion of land acquisition and details steps that need to be taken for handing over the acquired land for public projects.

The president`s regulation is necessary for implementing Article 56 of Law No. 2/2012 on Land Acquisition for the Development of Public Facilities, which was passed by the House of Representatives (DPR) on December 16, 2011 and has been in effect since January 14 this year.

Problems faced during the acquisition of land for infrastructure projects have been considered as the main stumbling block for developing a number of toll roads, bridges and railroads across Indonesia. ***2***

(f001/INE)

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