Hans David Tampubolon, Jakarta – Finance Minister Agus Martowardojo admits that there is still a lot of work to be done to ensure efficient budget spending, which has been considered a crucial factor in mitigating the impact of the global crisis by the World Bank.
"In the last six to 12 months, we have been hearing far too many stories regarding ineffective practices within the budget spending process," Agus told reporters on Friday.
"What has been happening regarding budget spending has taught us a lesson to improve our system. Human resources quality must also be improved to prevent future ineffective spending," he added.
World Bank managing director Sri Mulyani Indrawati said she believed Indonesia's near-term financial position looked relatively well placed to weather future market tightness. She went on to say, however, that further work in preparing a fiscal stimulus plan was required, in case domestic conditions deteriorated sharply.
Sri Mulyani said that budget execution challenges remained, particularly for capital expenditure, limiting its ability to be used to support near-term demand. According to her, Indonesia should direct its spending to more effective and productive measures, such as developing infrastructure and improving the social welfare system.
During a meeting at the Finance Ministry on Friday, the former Indonesian finance minister said that she and her successor Agus agreed that the Indonesian government had to make infrastructure development the main priority to mitigate the impact of the current global crisis.
"The government [of Indonesia] has confirmed its commitment to improve connectivity throughout the archipelago. This means that there will be a growing need on a massive scale for infrastructure development projects, such as ports, highways and other means of transportation," Sri Mulyani said.
Sri Mulyani said that the World Bank was prepared to assist the Indonesian government to develop its infrastructure needs.
"What is most important for the World Bank now is to support the government's infrastructure projects by providing sufficient assistance in the preparation phase so that the projects can be properly executed. We also need to establish a better mechanism to attract private funds so that the government can optimize its budget for other purposes," she said.
The latest quarterly report from the World Bank shows that Indonesia has been showing resilience in weathering the current global crisis, but at the same time, the country still needs to remain aware of its volatile portfolio.
Indonesia's capital outflows and equity markets portfolio show that its economy is not yet totally immune from the economic uncertainty of the eurozone. "While Indonesia still enjoys robust growth compared to other emerging economies, thanks to the strength of domestic consumption and investment, it will not be spared from the impacts of a global downturn, especially if global commodity prices and demand from economies such as China were to take a hit," World Bank Indonesia country director Stefan Koeberle said in the report.
The price rates of key Indonesian commodities have dipped by almost 20 percent, weakening exports. The rupiah has also continued to depreciate by around 10 percent against the US dollar since August 2011.