State Budget Targets More Projects in Regions

The government expects a stronger role for regional administrations in expediting development as it aims for at least a quarter of regional budgets to be spent on infrastructure for the first time in history.

The 2017 state budget recently approved by lawmakers has set a 22 percent spending increase, up to Rp 387.3 trillion (US$29.6 billion), for infrastructure. The transfer of funds to regions and villages was held level at Rp 764.9 trillion, of which Rp 336 trillion has been specifically earmarked for infrastructure projects.

At the same time, the two ministries that are at the forefront of infrastructure development — the Public Works and Public Housing Ministry and the Transportation Ministry — saw smaller budgets than previously proposed because both the government and the House of Representatives agreed that regional administrations should play bigger roles in infrastructure and have less dependency on the central government.

“The special allocation for infrastructure through the transfer of funds to regions is a new policy that we didn’t see last year,” Deputy Finance Minister Mardiasmo said recently, adding that the government wants regional administrations to set aside at least 25 percent of their budgets for infrastructure developments in their regions.

The focus on regional administrations came as Finance Minister Sri Mulyani Indrawati wanted the spending in the “expansive” 2017 state budget to be more balanced between the central and regional governments.

This is in line with President Joko “Jokowi” Widodo’s introduction of a new budget allocation model called “money follows function” that determines budgets based on purposes and priority projects instead of the traditional way of starting with a budget and then determining the projects and targets for the budget.

“We can no longer say that spending in ministries and institutions is the main priority because the role of regional administrations has become very important, if not critical,” Sri Mulyani said.

Some regions already comply with the 25 percent budget requirement for infrastructure spending, such as Surabaya. However, the North Sumatra provincial administration, for one, is proposing to earmark Rp 1.52 trillion for infrastructure spending, which is less than the required 25 percent allocation, although it acknowledges the need to focus on infrastructure spending. While the size of North Sumatra’s regional budget for 2017 remains unclear, this year it was almost Rp 10 trillion.

Still, next year the administration intends to focus on the construction of roads and bridges that will facilitate interregional transportation and improve connectivity on the westernmost island of the archipelago.

“Construction of roads and bridges that connect regions in the province is our priority for the 2017 fiscal year,” Fitriyus, the province’s head of communications and information technology agency, said on Sunday.

More than half of the infrastructure spending, Rp 871 billion, will be spent on building 227.7 kilometers of road, while Rp 233 billion will be allocated to construct 918 meters of bridges and the remainder will be used for maintenance.

Regional Autonomy Watch (KPPOD) urged the central government to tighten supervision over regional governments to boost their involvement in infrastructure development to avoid common problems like inefficient spending and corruption.

“In many cases, most of the expenditures are inefficiently spent just to record a high budget use,” KPPOD executive director Robert Endi Jaweng said, challenging regional administrations to make their budget data, including budgeting, planning and procurement, accessible online.

“The central government should not force regional governments to build infrastructure only. Some regions are in dire need of developing human resources in a bid to spin the economic wheels in their respective areas.”

The Organisation for Economic Cooperation and Development (OECD) noted in its latest report on Indonesia that the rise in spending for government-led infrastructure projects had provided recent fiscal stimulus, but the central government should strengthen public sector governance and capacity, notably at the regional level, as they remained weak in some regions.

Overall, central government spending on infrastructure would be used to build and repair 815 kilometers of roads, 9.4 km of bridges, 550 km of railway, 55 seaports and 13 airports, said the Finance Ministry’s director general for budgets, Askolani. (wnd/fac)

--- (Source The Jakarta Post – Monday, October 31 2016) ---