Satria Sambijantoro, Jakarta – The slow disbursement of the state budget for infrastructure development may further threaten growth in the country's gross domestic product (GDP) that has been mired by the decline in the country's exports in recent months.
Deputy Finance Minister Anny Ratnawati said in Jakarta on Thursday that, in the first quarter this year, the government only disbursed 5.6 percent from Rp 194 trillion (US$20 billion) of funds allotted for capital expenditure, which comprises spending for assets and infrastructure projects needed to solve distribution bottlenecks, create jobs and propel economic growth.
She said that the realization was around 2 percent worse than last year's figure, signaling little progress in the government's efforts to accelerate budget disbursement, such as by simplifying the tender system and cutting bureaucratic red tape.
In 2012, the government only managed to disburse 79.6 percent from Rp 176 trillion allocated for capital expenditure.
Anny said that the low realization of capital spending might cause "downward correction to growth" considering the huge multiplier effects of infrastructure spending to the economy.
"We have summoned 20 ministries to identify why their disbursement was slow," Anny told reporters in the Office of the Coordinating Economic Minister in Jakarta.
"Capital spending is labor-intensive, that's why it is important to expedite its disbursement. There must be progress on this; our concern is that the ministries should be pushed to have a better budget disbursement," the deputy minister added.
The government targets economic growth to top 6.8 percent this year, but Anny acknowledged that Indonesia might only expand by 6.6 percent, looking at how recent developments have unfolded, including the low realization of capital spending.
By the end of 2012, the amount of idle and non-disbursed funds (SILPA), stood at Rp 34 trillion. The President's National Economic Committee (KEN) previously warned that for every Rp 100 trillion of state funds that was not disbursed, the economy had lost the opportunity to grow by an additional 0.7 percent.
Indonesia posted only 6.2 percent of annual economic growth last year, lower than its initial target of 6.5 percent.
The failure to meet the economic growth target was attributed to weak exports and modest contribution from government spending, with the latter contributing only 0.1 percent to Indonesia's annual economic growth in 2012, according to data from the Central Statistics Agency (BPS).
Bank Mandiri economist Leo Putra Rinaldy predicted that Indonesia might fail to meet its growth target of 6.8 percent in 2013, citing slow global economic recovery that would continue to drag its exports, coupled with soaring domestic inflation that might curb the people's purchasing power and, consequently, undermine household consumption.
He warned that investments – touted by Finance Minister Agus Martowardojo as the main growth driver in 2013 – are now "showing a moderating trend", suggesting policymakers should push up government spending to propel growth.
The fact that the realization of capital spending saw little improvement each year showed that Indonesia had an underlying problem, with some ministries apparently lacking the human resources capacity in budget planning, according to Latief Adam, an economist with the Indonesian Institute of Sciences (LIPI).
"This happens because some ministries are yet to eliminate the regulations and red-tape bureaucracy, preventing their funds from being disbursed quickly," Latief said on Thursday.
Economists have warned that Indonesia, which has enjoyed a six-plus percent economic growth year-on-year for nine consecutive quarters since October 2010, must accelerate its spending in infrastructure areas such as roads, railways, ports and power plants, if the country wants to make its present growth level sustainable.