Editorial: Budget Priorities Must Plan for Future

After several failed infrastructure conferences, Indonesia again has a chance to show investors it is serious about improving the country’s creaking infrastructure. President Susilo Bambang Yudhoyono will today address a major conference on his government’s plan to improve infrastructure. It comes at a crucial stage of the country’s economic development. If investors are persuaded to pour funds into infrastructure projects, it will ensure sustainable growth for the future.

The government, however, must lead the way. It must be willing to commit a substantial portion of its budget to improve infrastructure, especially in large projects that are beyond the capacity of the private sector. In the draft budget for 2013, it has allocated Rp 193.8 trillion ($20.4 billion) for capital goods and infrastructure, a 15 percent rise from the 2012 figure, but it is still far below the total allocated for energy subsidies and supporting an already large bureaucracy.

At Rp 274.7 trillion, energy subsidies account for 18 percent of the total budgeted spending in 2013. The energy bill will be 36 percent higher than in this year’s budget.

The country also needs to move toward a more efficient and effective bureaucracy if it is to free up funds for more vital areas such as education and health care. In the proposed 2013 budget, the government plans to allocate Rp 241.1 trillion for civil servant expenses, including salaries, allowances, overtime, pensions and acquiring new recruits in 2013, 14 percent higher than in 2012.

The country needs to re-prioritize the use of state funds if it is to make the most of the current economic environment. We cannot afford to allocate more funds to wasteful energy subsidies than to much-needed infrastructure if we want to move the economy to the next level.