Jakarta – Indonesia's new Government unveiled its first Budget yesterday with pledges to reform the bankrupt banking sector. But it shied from granting the country's independence- minded regions more control over their finances.
The budget forecasts the first significant economic growth since 1998, when the Asian financial crisis devastated Indonesia's corruption-ridden economy.
President Abdurrahman Wahid, who took office in September, expressed confidence in the economic recovery. "We expect this will become the stepping stone for higher growth in the coming years," he told MPs. "I am confident that Indonesia will be able to play a key role in the world's economy."
The budget did not provide expected increases in revenues for the provinces, although future moves to give the regions greater control over how they spend their own funds as well as money received from the central government have been flagged.
Several provinces, especially the oil-rich western region of Aceh, have demanded a greater share of the revenues generated on their territory.
In a bid to appease separatist tensions, the Government earlier said it would eventually allow provincial authorities to keep up to 75 percent of their earnings. This would first be done with the resource-rich provinces of Aceh, West Papua, Riau and East Kalimantan.
Vice-President Mrs Megawati Sukarnoputri, who presented the budget to parliament, said gross domestic product would grow by 3.8 percent in 2000. No increase was recorded last year, and the economy contracted by 14 percent in 1998.
The $US25.4 billion budget forecasts a deficit of 5 percent of GDP, down from an expected shortfall of 6.8 percent for the current budget year.
Higher government revenues will be driven mainly by greater oil and domestic tax incomes. The higher oil prices are a mixed blessing for Indonesia, because they raise the cost of energy subsidies.
The International Monetary Fund has asked Indonesia to phase out its generous system of subsidies. But the IMF has not made this a priority because a sudden cut could spark unrest.
Ms Sukarnoputri said revenues from oil and domestic taxes and asset sales would be used to finance the burden of restructuring the banking system, which collapsed during the economic crisis. Bankrupt banks have been taken over by the state restructuring agency, which is gradually recapitalising and selling them.
Indonesia's National Family Planning Board (BKKBN) has reportedly staked a claim to part of the millions of dollars held in the coffers of a charitable foundation set up by former president Soeharto.
The Jakarta Post quoted BKKBN chief Mr Khofifah Indar Parawansa as saying that at least one billion rupiah ($21.5 million) was owed to the board's field workers under the charter of the Dana Sejahtera Mandiri Foundation.
Mr Soeharto willed the Mandiri Foundation – and several others he set up during his 30-year rule – to the Government after he stepped down in May 1998.
In the Soeharto years companies and individuals and companies with after-tax annual earnings of more than 100,000 rupiah were required to donate 2 percent to the foundation. The rupiah was then 2,400 to the US dollar, compared to about 7,000 today. In 1999 the foundation was reported to have collected revenues of some 1.5 trillion rupiah ($324 million).
"It is clearly stipulated in the memorandum of agreement which was signed in 1996 that the foundation should donate half of the 6 percent interest that was imposed on its customers to the field workers," Mr Parawansa said.
"But so far the foundation has not fulfilled this obligation." BKKBN research and development chief Mr Pujo Raharjo said: "Maybe we will have to seek legal action if the foundation keeps ignoring our demand." But he added that the 1996 agreement did not include a time frame for the payments to the board's field workers.
The BKKBN has been working to reduce the high birth rate in Indonesia, the world's fifth most populous country, through programs promoting safe sex, family planning education and vasectomies.