Wednesday, 28 October 2015


Absorption of capital expenditure in all ministries and institutions by Semester I – 2015 was on the average still below 10%. In Semester II absorption should be 15% reach month. If target was not met, APBN had failed to energize economy.

Change of nomenclature of some ministries was allegedly the cause of low capital expenditure beside poor planning, late auction process and filling of budget expenditure form (DIPA) and over-anxiety among project managers of the possibility of being accused of corruption. Other factors were long dragging bureaucracy, slow land procurement and slow analysis process of environmental effect.

Realization of Government’s capital expenditure by mid June was only Rp.23,22 trillion or around 8% of total capital expenditure of this year at Rp.290.3 trillion. Of the total budget of this year amounting to Rp.290.3 trillion, the allocated amount was for the Ministry of Public Works Rp.105.9 trillion, the Ministry of Transportation Rp.52.5 trillion, the Ministry of Energy and Mineral Resources Rp.5,9 trillion and other ministries Rp.46.4 trillion.

The rest was distributed among infra structure projects Rp.80.5 trillion, special allocated fund Rp.29.7 trillion, additional fund for the Province of Papua and West Papua Rp.3.0 trillion and inclusion of state’s capital Rp.20 trillion.

Admittedly the Government’s had not applied the punishment-and-reward policy on ministries but was still focusing attention on betterment of budget absorption. The Government should not rush to liquidate upfront loading for project not being financed.

This year the find for natural resources projects was high so transfer to province was prioritized. In terms of per-Ministry realization, budget realization of the Ministry of Public Works was only Rp.15.53 trillion or 13,12% of total budget in APBN 2015 at Rp.118 trillion.

Apparently fund absorption of ministries was slow last year because they could only realize expenditure by May. Other cause was change of nomenclature among Ministries and slow filling of Project form. Budget absorption was targeted at 21% by June. The Ministry of Public Works was committed to speed up absorption of capital expenditure per Semester II or July. The strategy adopted was to accelerate auction process and sign a contract of projects already tendered.

So far the contract package already auctioned was only 21% of total contract at the Ministry amounting to Rp.65 trillion. The low realization of capital expenditure was also happening in the Ministry of Transportation who had realized 7% of allocated budget of Rp.52.5 trillion because the budget rose nearly twice against last year.

Somehow budget absorption might increase fast because of some railway project contract. By end Semester 1 absorption of capital expenditure might come to 10%. By Semester II the Ministry of Transportation accelerated it by starting auction and offering of goods through e-procurement.

The Ministry of Energy had only absorbed 7% of total budget of Rp.14.915 trillion. Budget absorption of infra structure projects of the Ministry normally took place in October till year end. Somehow the Ministry of Energy had set up a special team for acceleration of projects. By the role of this team the Ministry was optimistic that budget absorption this year would be 90% against last year which was only 50.6%.

Slow budget absorption was being attended to by the TEPRA Evaluation Team which regularly monitored debottlenecking afield and pinpoint the obstacle. TEPRA would constantly enhance realization of capital expenditure.

Noteworthy was the Government’s statement that this year realization of budget absorption was not any faster than previous year but it would be of better quality. It was predicted that capital expenditure this year would be around 85% - 90% and would soar up by Q III and Q IV.

TEPRA must persuade Ministries to realize capital expenditure as per Semester II to promote economic growth. All ministries must have accomplished project administration up to auction stage by end of June. If infra structure budget of APBN-P budget was absorbed 100% it would contribute 0.6% to economic growth.

For that matter TEPRA must work to the maximum in making decisions to solve project obstacles. TEPRA should more than just monitor and identify obstacles but must also decided if there was any bottlenecking afield. In fact the Government should have known the nomenclature problem, bureaucracy, land clearing and environmental analysis. Still the Government was optimistic about budget absorption.

House circles rated that the Government version of reasoning that change of nomenclature was the cause of slow capital expenditure was unacceptable. Change of ministries’ nomenclature had been proposed since cabinet was formed, meaning there was no problem and operators could start to work.

The reason was that nearly all ministries did not absorb budget to the maximum due to slow process of tender. There was over anxiety among ministries in regard procurement of goods due to more stringent control by BPK or KPK.

So breakthrough was needed to speed up absorption of capital goods. Firstly, transfer of fund to the regions must be made sooner. It would be unwise to make budget liquidation for the provinces more difficult, the most important thing was accountability of spending management. As with ministries programs which was not ready, reallocation of programs was needed but it was advisable to consult the Ministry of Finance first.

Thirdly, ensure legal protection to a program; this was necessary because many mandate holders of budget (KPA) and commitment making officials (PPK) were afraid they could be charged for corruption in case of any fraudulence happening at the downstream. In that case it was necessary to make MoU with the Law enforcers and KPK to clarify the matter. Fourthly in was necessary to put negative appraisal for Ministries who were slow in absorbing budget.

Although not too sizable, only around 13.5% of total APBN-P 2015, the role of capital expenditure was high in propelling economy. If they could be spent on time, slow economic growth could be stopped and growth could be spurred on.

Capital expenditure was meant for financing various infra-structure line dams, ponds and irrigation-and energy like powerhouses. The public had high expectations for the Jokowi administration in making changes. When he increased price of oil in November 2014, one of his reasons was to re allocate funding from consumptive to productive sectors.

To increase oil price means to axe subsidy for oil which was previously enjoyed by the public, subsidy for oil in APBN-2015 nearly touched Rp300 trillion. Having axed subsidy for oil President Jokowi had a little room for financing infra-structure.

Too bad that by June 2015 capital expenditure was posted at only 8%. Among businessplayers there were rumors that President Jokowi was rated as over-promising but under delivery. Acceleration of Government’s budget absorption would be the key factor In uplifting public confidence in the Jokowi Government.

In spite of the global factor and low performance of the business sector, negative sentiment from marketplayers on the Government was not to be ignored. Most of the Ministries of the Working Cabinet was rated as not capable of performing. They normally did the Blusukan for its own sake but failed to come up with any effective strategy that brings results.

To spur on economic growth, Provincial governments must be encouraged to liquidate budget sooner. Today, most of the Governors had not liquidated fund for projects and tender was not even staged. Fund for the Central Government transferred to the province were piling up in provincial banks. Like the central Government, the provinces were rushing for fund for Q-4 projects.

Chances for Indonesia’s economy to grow above 5% this year was great. The Government held the key. The Government was resolved to keep people’s purchasing power high by “Keep buying strategy” supported by fiscal as instrument. The strategy included tax cuts and incentives for investment to balance economic slowdown.

The measure was taken to cope with global economic slowdown and domestic griefs due to negative perceptions of Government performance. By jacking up domestic consumption, national economy could be expected to grow.

What’s more, the Government had to make sure that funding realization could be made sooner in the second half of this year. Sound infra structure would not only help to keep economy rolling, but it would open employment opportunities for the people.

Not less important, was that realization of infra structure could mean operation facelift for the Government to regain public trust. (SS)

Business News - July 8, 2015

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