EVEN DISTRIBUTION OF ECONOMY BY FINANCIAL INCLUSION

Supposedly the effectiveness of development budget was measurable by Government’s ability to allocate budget in accordance with the set objectives. From various sources of reference it was known that there were some methods to evaluate attainments, i.e. by judging to what extend did the Government allocated budget for public need, and how much of that amount could be benefited to the maximum, and to what extend the maximized public expenditure generated positive chain effect which was beneficial for the people to uplift their welfare.

According to the Regulation of the Ministry of Internal Affairs on the formation of Regional Budget [APBD] that in planning budget for APBD, local Governments were instructed to prioritize public interest [direct spending] rather than the Government’s interest [indirect spending].

               

In allocating and distributing components in the form of capital expenditure it was necessary to observe some points, i.e. to focus capital expenditure for infra-structure building which was supportive to the development in the regions; to evaluate and analyze inventory of goods in terms condition or economic age so procurement on inventory goods could be made selectively according to the need of each respective task force of the regional government.

               

Furthermore to set up Capital Expenditure as high as buying price of asset plus all the purchase related to procurement of fixed asset until ready for use. Based on the Regulation of the Ministry of Internal Affairs, the relationship was clearly visible between the three ways of measuring effectiveness of development budgeting and the Regulation of the Ministry of Internal Affairs.

               

Firstly by seeing to what extent the Government was able to allocate expenditure for the public which was still low in terms of effectiveness. Word was out that most of the regencies/cities had their portion of Capital Expenditure below 20%. With this relatively low proportion, the contractive regional budget policy would stagnate economic development of the region because of limited budget for people’s development.

               

Supposedly the policy needed not be adopted by the regional Government if they managed the Regional Budget [APBD] effectively as financial resource and objective of income distribution.

               

Secondly, to what extend the total amount allocated for the public interest was spent on building public utility to the maximum was also still questionable in terms of effectiveness. The assumption was based on Government’s low capability to allocate budget, including capital spending as part of development expenditure.

               

To illustrate, the state budget for 2002, 2009, 2011 and 2012 which were not absorbed were Rp22.18 trillion, Rp59.81 trillion, Rp80.4 trillion and Rp99.24 trillion respectively because they were hedged by Provincial Governments in various banks.

               

The condition was made worse by funds which were still locked so they could not be allocated for development. In budget year 2012 and 2013 – up to February 2012 and February 2013 there was budget totaling Rp69.9 trillion which were still locked.

               

The capability of provincial governments to absorb budget at only 85% showed that many development plans in the provinces were unaccomplished so the very objective of regional autonomy was hard to realize.

               

Thirdly, spending of development budget had only resulted in realizing exclusive economic growth which was not of high quality.

               

This was based on the fact that 40 Indonesian citizens possessed wealth of Rp 850 trillion, while an other 42.1 million Indonesians shared only wealth of Rp1,450 trillion, index of Gini rose from 0.37 [2009] to become 0.41 [August 2012] and contribution by GDP Java and Sumatra 81% [2011 and 2012] while other 19% [2011 and 2012].

               

Apparently development budget increased year after year, but marked with inter-community and inter-regional widening gap of wealth. Apparently, a condition as such should not be ignored. There must be evaluation by the Government, especially the Ministry of Finance and Ministry of Internal Affairs to overcome ineffectively in budgeting for development.

In fact the Government already had “the right strategy” to evenly distribute economic development in all of the country through the financial inclusion plan. This program had full support by Bank Indonesia through all of the branch offices. Many measures had been taken and many activities run such as seminars, focus group discussion [FGD], fora, launching of the Tabunganku savings account for the Poor, to counseling and technical assistance for micro and small business in the region.

Through the Financial Inclusion Plan it was expected that more and more people would have access to financial institutions like banks, to deposit their money or apply for credit. In the beginning they would deposit their money in banks and with their growing awareness of banking services, they might pull themselves up together to apply for credit, especially at micro and small business level.

With credit in hand, micro and small businessplayers could develop their business. As the population of micro-small-and-small business grew to enliven various lines of business, it would draw the Municipality’s attention so they could take action to promote small business and accordingly absorb budget faster. Fund of the provincial governments deposited at the Regional Development Banks would be liquidated to support development of regional economy.

The number of branch office banks spread out in the regions would motivate provincial Governments to be more creative in spending their budgets for economically productive projects.

Small scale and medium scale projects were starting to roll and contactors would find jobs for themselves. They would need workers as much as they needed raw materials for infra-structure projects. Contractors needed capital from banks as banks actively pipeline productive credit. The communities around the projects would benefit the positive impact by starting their own business.

Employment opportunities were open wide, absorption of labor was massive while urbanization could be prevented. Regional economy was dynamic, resulting in up jump of GDP which indicated strong regional economy. The people were enjoying better income, poverty figure was downsized and unemployment be minimized. Consequently even crime could be minimized to the lowest point. However it takes eagle eyed and intelligent leaders of the regions to make the best of the allocated budget in the most effective way. Through the financial inclusion program, all of the endeavors should be easily attainable. (SS)   

Business News - April 03,2013