Govt to boost capital spending to ease infrastructure bottleneck
Esther Samboh. The Jakarta Post, Jakarta - 18/08/2011
The government will boost capital spending next year to solve infrastructure bottlenecks and spur growth, investment and create new jobs amid fears of a global economic slowdown.
President Susilo Bambang Yu-dhoyono said in Jakarta on Tuesday that capital expenditure would be increased by 19.3 percent, or Rp 27.2 trillion (US$3.18 billion), in 2012 to Rp 168.1 trillion to support the government’s target to increase the gross domestic product (GDP) to 6.7 percent from the projected 6.5 percent this year.
“We want to balance infrastructure development throughout Indonesia,” Yudhoyono said in his annual state of the nation address to a joint plenary session of the House of Representatives and Regional Representatives Council as part of the Independence Day celebration.
The President said the infrastructure projects would include development of 14 airports, 150 kilometers of railway, 4,005 kilometers of road, 7.68 kilometers of bridges, dams and other projects aside from the existing infrastructure expansion plans to connect the thousands of islands throughout the archipelago.
The government has allocated Rp 54.6 trillion to fund those infrastructure projects, the proposed 2012 budget shows. Yudhyono said he expected that the projects would provide jobs and, in turn, reduce poverty in Southeast Asia’s largest economy.
Public Works Minister Djoko Kirmanto, whose ministry will be the largest recipient of the infrastructure spending, pledged to closely monitor the budget disbursements.
While more than 50 percent of the economic drivers is still dominated by domestic consumption, investment is increasingly taking a larger portion, Bank Indonesia (BI) Governor Darmin Nasution said on Tuesday.
Therefore, Darmin added, slowing global demand due to rich countries’ stalling economies would likely have a limited impact on growth, though exports might be disrupted.
According to Yudhoyono, major risks for the country’s economic acceleration included overheating and inflation in India and China, as well as the debt burdens of Europe and the United States that “could affect our country’s economy”.
“While economic developments in Europe and the United States are not good news for the world, we have enough confidence to tackle such uncertainty,” he said, highlighting Indonesia’s perseverance through the 1997/1998 and 2008/2009 global crises as lessons it had learned in adapting and avoiding another potential crisis.
“All policy instruments to tackle a crisis are in place and are ready to be used at any time,” Yudhoyono added, citing the government, central bank and state firms’ commitment to stabilize bond prices at times of sudden funds outflow to stabilize the economy.
The President called for all lines in the government to work hard in maintaining and accelerating the current momentum so that Indonesia could be one of the world’s 10 largest economies “in the next two or three decades”.
“Now, a lot of people call Indonesia an emerging economy, not a third-world economy, which, for more than 60 years, was associated with our country.”
While developed nations are cutting spending to tackle debt troubles, Indonesia is increasing state spending by 7.4 percent to Rp 1,418.5 trillion while state revenues are seen jumping 10.5 percent to Rp 1,292.9 trillion, leaving the budget deficit at Rp 125.6 trillion or 1.5 percent of the country’s gross domestic product (GDP).
That compares with the 2.1 percent deficit projected for this year and more than 10 percent budget deficits in large economies, the President said.
“Increasing state revenue is the key to our independence in funding development,” Yudhoyono said, adding that total budget expenditures would increase by 7.4 percent to Rp 1,418.5 trillion.