Infrastructure development will continue

JAKARTA. Senior officials have expressed their confidence that the latest cuts in their operational budgets will not disrupt the progress of infrastructure projects, which Southeast Asia’s largest economy desperately needs to realize its fullest potential.

Deputy Public Works Minister Hermanto Dardak said on Wednesday that he would cope just fine with the fiscal tightening in the revised 2014 state budget, despite the fact that his office would experience the biggest cut of Rp 22.7 trillion (US$1.9 billion) — almost one-third of its initial allocation of Rp 84.1 trillion.

Hermanto said that several important projects — such as the maintenance of Java’s northern coastal highway (Pantura) — would see their earmarked funds stay at the same level, with the budget cut going to the ministry’s other fund allocations instead.

Infrastructure projects that had already undergone tenders would also go ahead as planned and, thus, should be unaffected by the budget cut, Hermanto added.

The National Development Planning Board (Bappenas) has estimated that Indonesia needs to secure $550 billion worth of investment for infrastructure projects between 2015 and 2019 to fill the infrastructural gaps that are impeding some of the country’s economic activities.

Economists have reiterated several times that building roads, ports, bridges, railways and the like would lead to economic growth of between 6 and 7 percent in the world’s 10th-largest economy.

“We will try to raise additional funds from leftovers from our tenders. For example, if we have budgeted one project at Rp 100 billion, but in the tender we settle at Rp 85 billion, then we can use the remaining Rp 15 billion [for other infrastructure projects],” he said in an interview in Jakarta.

Meanwhile, Transportation Minister EE Mangindaan said he fully supported the budget cuts as the move was necessary to retain a healthy fiscal balance.

Mangindaan, whose ministry will see its operational budget shaved by Rp 10.1 trillion from the originally allocated Rp 40.4 trillion, said he would carefully decide which allocations in his office would be cut.

The minister pledged to prioritize infrastructure projects in the transportation sector, which promised multiplier effects for the country’s connectivity and economic growth.

“We may cut travel expenses, delay the procurement of cars or halt the construction of a new building intended to hold training for our human resource department,” he told The Jakarta Post on Wednesday.

“We will not cut the budget earmarked for seaports, for instance, as we cannot afford to see any disruption to the country’s logistics,” Mangindaan added.

The Public Works Ministry and the Transportation Ministry are the biggest losers in the fiscal tightening performed by President Susilo Bambang Yudhoyono, who released a presidential instruction (Inpres) this week requiring 86 ministries to cut their budgets to produce total savings of Rp 100 trillion.

In a worst-case scenario, one in which the government neither performed fiscal tightening nor revised the 2014 state budget’s macroeconomic assumptions, the budget deficit could swell up to 4.6 percent of gross domestic product (GDP), from the previous estimate of 1.7 percent, Finance Minister Chatib Basri told lawmakers on the House of Representatives budget committee on Wednesday.

Also at the House meeting, Bank Indonesia (BI) Governor Agus Martowardojo warned that the failure to perform fiscal tightening might raise concerns among foreign investors about Indonesia’s budget sustainability, thus triggering capital outflows that could destabilize the economy. (Satria Sambijantoro)