PoliticsofBudgetinginIndonesia:AQuestforTransparencyandAccountability

Wahyudi Kumorotomo, PhD

Dept of Public Policy and ManagementGadjah Mada University

Indonesia2018

kumoro@ugm.ac.id

TopicsofDiscussion

1. Indonesianbudgetprofiles

2. Reformsandthechangingbudgetpolitics

3. Fragmentedpower,fragmentedpolicy?

4. Transparency:forwhom?

5. Thequestforbudgetingaccountability.

BudgetVolume(2018)

• ExpenditureOutlays:Rp 2,220.7trillion($US165.7bn).à 17.9%oftheGDPNote:GDP:Rp 12,406T

• Revenues:Rp 1,894.7trillion($US141.4bn)

• Adeficitof2.19%• Financing:Rp 325.9Tfrom:borrowings(foreign&domestic)andinvestments.

USbudget:$4,352bn;Australianbudget:$464.8bn

EconomicGrowth(%)

WhathasbeenchangedafterReformasi…

• Underamore”legislativeheavy”and”semi-parliamentary”system,theroleoflegislativesonbudgetismoresignificant.

• Decentralizedbudgeting:around30%ofpublicbudgetappropriationisdeterminedbylocalleaders.

• FromT-accounttoI-account;muchmoretransparentcomparedtotheNewOrderregime.

• Incremental;LawNo.17/2003stipulatesbudgetdeficitmaximum:3%ofdomesticrevenues.

• Challenge:expansionary?(Byconstitution:20%ofspendingmustgotoeducation;subsidiesonfuel; limitedfinancialdiscretion).

FiscalDecentralization:APBNvs.APBD

SignificantportiontransferincreasedtoLocalGovernmentinthestateBudget

2000

2010

TheBudgetCyclesPhase Period Substance

1 January Nationalpolicyandpriority

2 March Resource envelopes

3 May Indicativeplans&budgetceilingsforministries

4 July Technicalconsultationsamongministries

5 August Budget ceilingsappropriation

6 16thAugust PresidentialaddressonBudgetDraft(RAPBN)

7 November Legislativemeetingsonbudgetallotments

8 December Budget documentsratification

TheRoleofBadan Anggaran(BudgetingBoard)

• Badan Anggaran (Banggar)hasbeenintrusiveinmakingstrategicprioritiesintheministries.

• ConstitutionSupremeCourt(Mahkamah Konstitusi)No.35/2013ruling:Banggar shouldnotgointodetailsofSatuan Tiga (budgetdetailing).

• Parliamentaryendorsementon“pork-barrel”budgetallocation:DanaPenyesuaian (contingencyfund),DanaTransfer,etc.

• ThepublicisgenerallyskepticalontheroleofBanggar invariousgovernmentstrategicprojects.

CriticismsDuringSBYPresidency:“Negeri Auto-Pilot”

1. Thenationalbudget(APBN)contributeslittletopeople’sprosperity;onlyabout8,9%iscapitalspending(Radhi,2012)

2. Leakagesandcorruptionatbothsides;revenues andexpenditures.

3. National(APBN)andsub-nationalbudgets(APBD)arenotsynchronized.

4. Muchofthestatebudgetsareallocatedforoperationalexpenditures(salaries,routines).

5. Developmentprioritiesarenottouchedonpeople’sbasicneeds.

6. Manyallocatedfundsaresimplyundisbursed,toomuchmisstargeted programs,accountabilityissues.

3

www.chappyhakim.com

Facts:

Ø ICW: Rp 300 trillion of potential taxes are leaked.

Ø Trials on taxation (2002-2009): 22,105 cases; tax payers won 61% of the trials. What does this mean?

Ø In the last 10 years, tax coverage means accounted only 65%, In 2011 the tax effort was 13.3% of GDP (the lowest among ASEAN five).

Gayus Bahasyim Dhana

Tax Mafia

PoliticalandBureaucraticCorruption

11

Ø The DPR members frequently ask for fee to private companies that would be given a contract.

Ø Governors and district heads uses a portion of the APBD for personal interest with a collaboration with the private “partners”.

Ø The DPRD members ask for kickbacks for any projects approved, ask for “success fee” to the candidates of governors, bupatis and mayors.

GlobalBudgetTransparencyIndex

89

7774

6764

48

40

15

10

10

20

30

40

50

60

70

80

90

100

NewZealand

UnitedStates

Australia

Philippines

Indonesia

India

TimorLeste

Vietnam

SaudiArabia

LocalBudgetParticipatoryChannels

Source:Putra&Farhan,2011

ConcludingRemarks• Althoughtransparencyhasbeenrelativelyimproved,themainissueis

budgetingaccountability.(Openbudgetsurvey2017:transparency-64;oversight-85;publicparticipation-22).

• Aheadstartinperformancebudgeting,butvariousfactorsarehinderingitsfullimplementation.(LackofenforcementonGovernmentRegulation90/2010;NocommonunderstandingsbetweenMoF andtheBappenas;Incrementalparadigminbudgeting).

• Democraticgovernancehasresultedinpublicscrutinyinbudgetmisappropriation.However,morepublicengagementonbudgetingprocessisneededforimprovingaccountabilityandpreventingvariouspatternsofmisappropriationinthefuture.

THANK YOU