Crucial public works projects in limbo after budget cut

The Jakarta Post, Jakarta | Business | Tue, June 17 2014

Although the budget cut imposed on the Public Works Ministry has been downgraded from the initial figure, it still threatens to affect some of the ministry’s priority programs, including maintenance work on Java’s northern coastal highway (Pantura).

The budget cut will also disrupt some of the government’s programs under its Master Plan for the Acceleration and Expansion of Indonesian Economic Development (MP3EI) and the Millennium Development Goals (MDGs).

“The budget cut will disrupt some of the ministry’s priority projects, including maintenance on the Pantura highway, the construction of roads in regions outside Java and the flood mitigation projects,” Public Works Minister Djoko Kirmanto said on Monday at a hearing with lawmakers from the House of Representatives’ Commission V overseeing public works.

Previously, President Susilo Bambang Yudhoyono had instructed lawmakers to cut the ministry’s budget by Rp 22.7 trillion (US$1.9 billion) as part of the government’s budget-efficiency efforts.

Following a series of discussions, the ministry and lawmakers ultimately agreed to cut the ministry’s budget by only Rp 9.62 trillion. As a result, the ministry’s budget is to be downsized from Rp 84.14 trillion to Rp 74.52 trillion.

Djoko said the ministry could raise additional funding from leftovers from tenders as well as by reducing the money spent on business trips, which could save the ministry up to Rp 4.7 trillion in total.

Meanwhile, Yoseph Umar Hadi, a member of Commission V from the Indonesian Democratic Party of Struggle (PDI-P), rejected the budget cut, saying the decision to impose the cut in the first place underlined the government’s failure to collect taxpayers’ money.

“The budget cut is a result of the government’s failure in meeting its taxation target. It is also a result of the government’s inability to control the steep depreciation of the rupiah,” Yoseph said during the meeting.

“On top of that, the government is still reluctant to increase the price of fuel, even though subsidy spending keeps on rising,” he continued.

As previously reported, the fiscal tightening was undertaken in response to the increase in subsidy spending and lower-than-expected tax revenue.

It was revealed that Indonesia would see its fuel subsidy spending soar to Rp 285 trillion by the end of this year, Rp 74.3 trillion higher than its initial allocation, as the weakening rupiah drove up the cost of fuel imports.

With regard to revenue, the total amount of tax collected is expected to stand at about Rp 1,232 trillion this year, 3.8 percent lower than earlier estimates, as the economic slowdown puts pressure on local companies’ earnings.

Democratic Party lawmaker Mulyadi argued that the budget cut should not be revised, as it would result in budget cuts in other ministries.

“We appreciate the budget committee’s effort to lower the budget cut from the previous Rp 100 trillion to Rp 43 trillion. But the cut should not go ahead unless the government faces a special situation,” Mulyadi said.

Those attending the meeting also decided that the Transportation Ministry would have its budget cut lowered from the previous Rp 10.1 trillion to Rp 4.3 trillion.

Transportation Minister EE Mangindaan said that even with the revised budget cut, the ministry would have to cancel several projects that had not yet been opened for tender. He added, however, that the ministry’s 2014 targets would not be significantly affecte

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