Hans David Tampubolon, Jakarta – The International Monetary Fund (IMF) has called on the government to be more serious about its commitment to developing infrastructure.
IMF Asia and Pacific Department chief Sanjaya Panth said in Jakarta on Friday that one of the main factors hindering Indonesia from accelerating its infrastructure deveopment was the lack of capacity among public officials.
"On the public side, there are capacity constraints... implementation has always been very low. Therefore, further efforts should be undertaken," Sanjaya told reporters.
For example, Sanjaya said the private sector had been waiting far too long for the implementation of the Land Acquisition Law. The law cannot be practically implemented because the government has yet to issue a presidential regulation on it.
The law basically provides more certainty for land acquisitions to support government-backed infrastructure projects. Land acquisition is the most vital element in developing infrastructure. Businesses have said that acquiring land is equal to between 75 and 85 percent of an infrastructure project's completion.
Based on the law, disputes over land acquisitions must be resolved within a 436-day timeframe at the most. This is considered one of the more progressive elements in the law because previously, disputes over land acquisitions sometimes took several years to resolve.
The government itself has pledged to accelerate infrastructure development and has launched the Master Plan for the Acceleration and Expansion of the Indonesian Economy (MP3EI).
On May 29, the then National Land Agency (BPN) head, Joyo Winoto, promised that the regulation would be issued before the end of June; however, so far, no regulation has materialized.
Sanjaya said the government really needed to be aware that they had to do more about infrastructure development because it would serve as a crucial long-term factor for Indonesia to maintain its economic growth amid the deepening global crisis.
Partly due to the slow realization of infrastructure projects, as well as the slowdown in the global economy, the IMF has revised the country's economic growth to 6.1 percent this year, lower than the government's target of 6.5 percent.
IMF's senior resident representative in Indonesia, Milan Zavadjil, said the Indonesian government also had to be more willing to provide larger portions from the state budget for infrastructure spending.
"While the overall 2012 budget stance is consistent with the government's firm commitment to fiscal sustainability and strong public finances, increasing fuel subsidies is distorting the structure of the budget," Milan said.
"Therefore, fiscal policy needs to be reoriented away from poorly targeted subsidies, which could be replaced with cash transfers to the vulnerable. This would also free up resources to increase necessary infrastructure and social spending," he added.
The Finance Ministry estimates this year's energy subsidy will swell to Rp 305.9 trillion (US$32.43 billion), or 51 percent above the initial allocation of Rp 202.4 trillion in the revised 2012 state budget, due to the increase in the Indonesian Crude Price (ICP) from US$105 per barrel to $110 per barrel, plus the depreciation of the rupiah against the US dollar to Rp 9,250 from the projected Rp 9,000 per dollar.
Of the total energy subsidy, the fuel subsidy will reach Rp 216.8 trillion, 57.8 percent higher than the initial allocation of Rp 137.4 trillion. Meanwhile, the subsidy for electricity is expected to reach Rp 89 trillion, 37 percent higher than the initial allocation of Rp 65 trillion.
The government proposed to the House of Representatives in March to raise the price of subsidized fuel to help reduce subsidy spending, but it was rejected.
The House only allowed an increase in subsidized fuel price if the ICP rose by 15 percent on a six-monthly average basis from its assumed $105 per barrel rate.